MREJ May 2019 by REjournals

VOLUME 35, NUMBER 5

By Liz Wolf

oday's office tenants are demanding more than a basement treadmill and some vending machines. They’re seeking modern, must-have amenities like fitness centers, shared conferencing space, tenant lounges, outdoor patios and accessible food options as well as open, collaborative workspaces.

Then there are those added perks that create “wow” experiences like rooftop decks, food trucks, outdoor yoga classes, wine tastings and espresso carts. Tenants – whether in downtown or the suburbs-are more focused on the experiences of the building than the class of the building, says Brent Erickson, a senior managing director in Newmark Knight Frank's Minneapolis-St. Paul office. “We rarely see people saying, ‘We need to be in a

May 2019

Class A or Class B building’ -- the sort of nomenclature that we use in identifying buildings,” he says. “Instead, tenants want to know is there a conference center in the building?” he says. “Is there a tenant lounge? Is there bike storage, locker rooms and showers, and a fitness center? Do the elevators work well? Do the mechanical systems work well? What’s the cell coverage like in the building? All those things are attributes of an experience.” Tenants to page 14

Doran Cos. Founder and CEO Sells Majority Ownership to Two Doran Executives By Liz Wolf

eteran Twin Cities real estate developer Kelly Doran, who founded Bloomington-based Doran Cos. in 2007, has stepped down as chief executive officer and majority owner. Doran, 61, has sold a majority interest in the company to two of its long-time executives. Chief Operating Officer Anne Behrendt acquired a 51 percent stake and

is now serving as president and CEO while Chief Financial Officer Ryan Johnson acquired a 24.5 percent stake Behrendt, 40, joined Doran Cos. as general counsel in 2011 and became COO in 2015. Johnson, 37, joined the firm in 2008, serving as CFO since 2015. Doran has no plans to retire. He’s retaining a 24.5 percent stake in the firm and his real estate holdings and also will continue to develop exclusively with the company.

However, Doran says he began thinking about succession planning after dealing with a bout of earlystage lung cancer in 2017. “This really started when I had a health scare a few years ago, and we started talking about what’s the future of the organization and what’s that going to look like,” Doran tells MREJ. “Anne and Ryan have been my partners during our Doran to page 12

May 2019

Minnesota Real Estate Journal

Featured Stories

MAY 2019 • VOLUME 35, NUMBER 5

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Departments PEOPLE ON THE MOVE 4 BREAKING GROUND CLOSINGS

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Minnesota Real Estate Journal (ISSN 08932255) Copyright © 2019 by the Minnesota Real Estate Journal is published monthly except combined in March & April for $85 a year by Jeff Johnson, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369. Monthly Business and Editorial Offices: 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369 Accounting and Circulation Offices: Jeff Johnson, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369. Call 952-885-0815 to subscribe. For more information call: 952-885-0815. Periodical postage paid at Maple Grove and additional mailing offices. POSTMASTER: Send address changes to Minnesota Real Estate Journal, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369

WHAT DO TENANTS REALLY WANT IN THEIR OFFICE SPACE? DORAN COS. FOUNDER AND CEO SELLS MAJORITY OWNERSHIP TO TWO DORAN EXECUTIVES

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7767 Elm Creek Boulevard, Suite 210 Maple Grove, MN 55369 For information call 952-885-0815

President | Publisher Jeff Johnson jeff.johnson@resummits.com Vice President | Publisher Jay Kodytek jay.kodytek@resummits.com Chief Financial Officer Todd Phillips todd.phillips@resummits.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Conference Manager | Art Director | Graphic Designer | CE Specialist Alan Davis alan.davis@resummits.com

EDITORIAL ADVISORY BOARD JOHN ALLEN JEFF EATON MARK EVENSON PATRICIA GNETZ TOM GUMP CHAD JOHNSON BILL WARDWELL JEFFREY LAFAVRE WADE LAU JIM LOCKHART DUANE LUND CLINT MILLER DR. THOMAS MUSIL WHITNEY PEYTON MIKE SALMEN

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Suntide Commercial Realty Welcomes Christy Lewis Industry Veteran Hired as New Vice President, Business Development Suntide Commercial Realty recently named Christy Lewis its new Vice President of Business Development. Lewis is responsible for leading and driving all business development efforts in collaboration with the Suntide leadership Lewis team and stakeholders to maximize the growth trajectory of the company. Lewis comes to Suntide from the Opus Group where she spent several years as the Director of National Business Development. Prior to that she worked for Doran Companies as Director of Marketing and Business Development, and as a regional sales executive for Hallmark Building Supplies, Inc. “Christy’s energy, enthusiasm and ability to think outside the box makes her the perfect fit for us here at Suntide,” says Barb Schuba, Principal and Chief Financial Officer at Suntide Commercial Realty. “Her extensive experience in the industry, wide network and innovative ideas will help us uncover new opportunities to grow in the marketplace.” Lewis will look to grow all aspects of the business, including property management, asset accounting, redevelopment and construction. Particular focus areas are those where Suntide already excels: office, industrial and retail. Lewis will also focus on brand awareness externally, as well as brand continuity within the organization. “I’m excited to join a forward-thinking leadership team with a stellar reputation in the market that operates with integrity and quality above all,” Lewis says. She also appreciates the fact that Suntide is comprised of 50 percent women. “Helping advance other women in the industry is important to me,” she says. Lewis holds many volunteer positions in the community that help her achieve those goals. She is currently Secretary on the Board of Directors at MNCREW where she received the Empowering Women award in 2018. She also serves

on the Board of Directors at the Economic Development Association of Minnesota, or EDAM, where she plans to help launch a mentoring program.

John Boich Promoted to Managing Director of Property Management at CBRE Minneapolis John Boich has been promoted to Managing Director of Property Management for the CBRE Minneapolis market. “John is a selfless leader who cares deeply about both his clients and his colleagues,” said Jeff Jiovanazzo, Managing Director of CBRE Minneapolis. Boich “John is extremely deserving of this promotion and I am excited to partner with him as he takes CBRE Property Management to even greater heights.” Boich joined CBRE in 2009 as a Senior Real Estate Manager and was promoted most recently to Director earlier this year. In his role, he has been directly involved in providing local market insight, specialized commercial real estate expertise and exceptional property management outcomes to clients. Over that time, he has been recognized with several awards, including the 2010 CBRE Minneapolis Cornerstone Award, the 2013 CBRE Minneapolis Integrated Services Award and the 2018 CBRE Minneapolis RISE Award. “I’m very humbled and grateful to be selected for this promotion,” said Boich. “Ever since I’ve joined CBRE, I’ve had the privilege of working with a great group of real estate professionals and I’m very excited to continue as Managing Director of Property Management.”

Doran Companies promotes Rosanne Wolfe to Controller Doran Companies today announced the promotion of Rosanne Wolfe to the role of controller, a new position for the growing real estate development organization. “As Doran Companies continues to evolve and grow, Rosanne’s role as controller will be key to guiding our future,” said Doran Companies Chief Financial

May 2019

Officer and Principal Ryan Johnson. “Rosanne has built an experienced team in our accounting department and is recognized by her peers as a trusted leader and creative problem-solver.” With offices in Minnesota and Colorado, plans to expand into other geographic locations by year’s end and annual volume reaching $500 million a year, ensuring systems for sound accounting and financial reporting is key to the company’s growth. “I believe in Doran Companies and am thrilled to be part of its continued growth,” said Wolfe. “As we have grown, our processes have become more complex and this will allow me to direct the talent of our accounting team where it is most needed.” Wolfe joined Doran Companies in 2016, serving as the director of property management accounting. She has been a vital part of the accounting department in that role and was responsible for all accounting functions, including overseeing all property management functions. Now, as controller, Wolfe will lead the accounting team in developing and maintaining accounting processes and procedures to ensure accurate and timely financial statement reporting across the enterprise.

Sara Peterson joins Avison Young Seasoned Research Analyst joins Avison Young Mark Evenson, Avison Young, Principal and Managing Director of the firm’s Minneapolis office, announces the hiring of commercial real estate Peterson professional, Sara Peterson. Effective immediately, Sara Peterson will become head of Research in the Minneapolis office. In her role, she will work with the Minneapolis team in providing superior client services, with a focus on expanding AY Minneapolis’ research capabilities. “Sara brings a tremendous amount of talent and experience to Avison Young Minneapolis.” remarks Mark Evenson.

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ACKERBERG & Partners Acquire and Break Ground on MN46 ACKERBERG and partners are pleased to announce that they have acquired and begun construction on MN46, a mixed-use, 54-unit, microapartment community with 1,835 square feet of first floor retail in the greater Longfellow/Hiawatha community of Minneapolis. The acquisition is a Joint Venture with Left Lane Corporation, Hayes Harlow, Twin Cities Home Rental, and Trew Capital. MN46 is located on the corner of 46th Street and Minnehaha Avenue. The pedestrian-friendly community is a short walk from the new urban format Cub Foods, the 46th Street Light Rail Station and Minnehaha Falls Park, Twin Cities bike trail system, Minnehaha Avenue shops, retail, dining

Minnesota Real Estate Journal

and the Mississippi River. The MN46’s apartment units will range from 390 - 410 square foot studios, 420 – 650 square foot one bedrooms, and 760 - 905 square foot twobedrooms. Apartment finishes will be top-of-market. Building amenities will include a fifth-floor community room with fireplace and patio, bike lobby, package room and covered parking. “Located near some of the best parks, lakes and riverside trails in the Twin Cities, as well as transit options just steps away, we feel this location is a fantastic blend of the built environment and the natural,” said Stuart Ackerberg, Chief Executive Officer of ACKERBERG. “We love urban real estate, and this project couldn’t be a better fit. We are excited to provide a community-oriented project that will benefit both the residents and the

neighborhood alike. Michael Pink of Left Lane Corporation, and Sean Sweeney of Hayes Harlow, had the perfect vision for this site, and we are excited to partner with them.” "We were attracted to this site for its fantastic proximity to both the 46th Street Blue Line light rail station and Minnehaha Falls,” said Sean Sweeney, Founder of Hayes Harlow. "We continue to remain very bullish on microunits as a niche and on the Longfellow neighborhood in general. The lack of new apartment product in the area was also a big factor in our decision to develop this site." "Ackerberg is one of the most prominent and well-respected developers in our market," said Michael Pink, Founder of Left Lane Corporation. "When the opportunity presented itself to partner with them on this project,

May 2019

Sean and I agreed they would be a great addition. We designed and entitled a great project and having the strength of the Ackerberg team as partners adds tremendous value to the construction and lease up of the project." Construction of MN46 is expected to be completed in May of 2020. The project was designed by Collage Architects and the general contractor is Yellow Tree Construction Services.

United Properties and Greco's Sable offers condominiums in North Loop Condos already 70 percent reserved; available units hit MLS this week United Properties and its partner Greco announced today that Sable, the residential component of The Nordic, will now be offered as for-sale condoBreaking Ground to page 8

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miniums. These residences were originally planned to be rental units. Sable has a total of 57 units and more than half of them have already been reserved without any formal marketing campaign. The remaining units will be available on the MLS this week. Sable is located on the Third Street side of The Nordic project, United Properties' modern warehouse-style mixed-use development located at 729 Washington Ave. N. "Sable is a unique opportunity to own a piece of downtown Minneapolis," said Gordy Stofer, vice president, office development, United Properties. "We're pleased to offer the first new construction condominiums available in the North Loop in 10 years and have seen strong interest from prospective buyers so far." Units will be ready for occupancy in June 2019. Sable's model of ownership offers residents owner-occupied living with more flexible HOA terms than others on the market. "Sable is poised to fill a gap in the market, offering increased flexibility and affordability for owners. Because of

Minnesota Real Estate Journal

this, Sable has been especially attractive for millennial buyers who have been previously priced out of the market," said Stofer. Condos range from $250,000 to $975,000 with spaces beginning at 450 sq. ft. to more than 1,500 sq. ft. While the majority of units are offered as studio and one-bedroom units, seven larger two-bedroom units are also available. Sable features a rooftop deck with two outdoor fireplaces, two outdoor kitchens and uninterrupted views of downtown Minneapolis. Other features include a first-floor members' lounge, fitness center, same-level parking for each floor and loft-style aesthetics, including 10.5ft. exposed concrete ceilings and polished concrete floors. "In addition to its loft-style aesthetics, Sable offers buyers the flexibility to rent their units out on a short-term basis in one of the most desirable neighborhoods in Minneapolis," said Josh Brandsted, president, Greco. "Sable will strengthen the neighborhood by providing new opportunities for ownership." The Nordic will feature an active pub-

lic plaza intended for outdoor seating, lawn games, winter ice curling and food trucks, in addition to condominiums and office space. Ovative is the first tenant to occupy The Nordic; spaces for WeWork, Galley Group and Thr3 Jack are all currently under construction with expected completion this summer.

40+ Year-old The Schuett Companies, Inc. on track to deliver its 18th property, Flourish Senior Living The Schuett Companies, Inc. has been a longtime developer and property management company in the region, and is now opening its first market-rate assisted living community, Flourish, located in Golden Valley this fall. Flourish’s 102 units feature a new model of Assisted Living designed to deliver comfort, independence and peace of mind—all with that special feeling of “home.” According to Tom Schuett, President of the 40+ year-old company, Flourish will appeal to what industry sources call “the forgotten middle,” by offering more transparent and customized pricing

May 2019

through its Forever Home Policy* and menu of individualized CompassionCare services. “As senior living and the healthcare industry has grown, affordable marketrate apartments and studios have trended out of reach into the luxury end of the spectrum for many people,” Schuett notes. “Plus, many seniors and their families and caregivers can no longer understand exactly what they’re paying for. Greater transparency and the Forever Home Policy ensures that even as physical and financial needs change, their home won’t have to. This means seniors can continue to flourish within the stable, enriching lifestyle that they deserve.” Schuett’s position is reflected in a recent edition of The SeniorCare Investor, which estimates that “there may be more than 14 million boomers that will not be able to afford senior housing plus their healthcare needs. The largest unmet need in senior housing is the bulging middle income cohort, which some researchers have defined as Breaking Ground to next page

May 2019

between the 40th and 80th percentile in terms of financial resources. In other words, the largest cohort.” “The interest so far has been great and we already have depositors building a wonderful community. We believe Flourish is an ideal senior living option that will appeal not only to Golden Valley residents but also those in adjacent suburbs and greater Twin Cities area,” Schuett adds. “We are taking the mystery out of what residents are paying for when they come to live at Flourish, and we look forward to welcoming our new community members this fall when we open.”

Stahl Completes Prairie View Elementary and Middle School Expansion Stahl completed the addition and renovation of Prairie View Elementary and Middle School for the Elk River Area School District. Prairie View serves children ranging from early childhood through eighth grade, and it is the first Independent School District (ISD) 728 facility designed to instruct such a diverse age range of students.

Minnesota Real Estate Journal

Due to recent substantial population growth in the area, the District added a classroom wing, gymnasium, support spaces, and an exterior storage building to the facility to accommodate the community’s expansion needs. The addition added approximately 42,000-square-feet to the existing 124,000-square-foot school and cost roughly $9.6 million to construct. Construction began in April of 2018 and was completed in March of 2019, with the expanded facilities being open to students for the remainder of the 2019 school year. Additional interior renovations in the existing space and site work were also completed in May 2019. Wold Architects and Engineers designed the project in collaboration with the District and Stahl as the construction manager. “Over the past five years, Stahl has had the pleasure of supporting the growth and vision of the Elk River Area School District,” said Lane Schoening, Vice President of Stahl. “It is extremely rewarding to see the community benefit from the creative use of

the expanded facility. Stahl is grateful to have had the opportunity to build on our strong partnership with the district and Wold to create an environment that fosters advanced education and student development.” The occupied construction project is the latest major endeavor financed by the $98M bond and operating levy referendum that voters approved in the 2014 general election. “We're excited to use our building the way it was envisioned by our communities - serving early childhood through eighth-grade students,” said Kari Sampson, Principal of Prairie View Elementary and Middle School. “I’ve enjoyed working with both Stahl and Wold over the past 2.5 years. The teams from both companies have been responsive in meeting our needs and receptive to our input for the addition.” Stahl and Wold Architects and Engineers have partnered to serve the District over the past several years, completing additions and renovations at the Elk River High School, Zimmerman Elementary School, and Zimmerman Middle/High School, and on the new

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construction of Prairie View Elementary and Middle School.

Brick & Bourbon Opening Soon at Elevate at Southwest Station Apartments in Eden Prairie Timberland Partners, a privatelyowned real estate investment, development and management firm, has announced that Brick & Bourbon has signed a lease at Elevate at Southwest Station Apartments, a mixed-use project currently under construction in Eden Prairie. Elevate anticipates opening late August, with Brick & Bourbon hoping to open by the end of the year. This will be the fourth location for the popular "craft bar & eatery". It originally opened for business in Stillwater in 2017, and then launched a second location in Maple Grove the following year. A third location in St. Cloud is slated to open this summer. Branden Warner, Adam Dreher and Gary Sivyer are the visionaries behind the concept. The trio of restauranteurs has 65 years of combined hospitality Breaking Ground to page 10

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Breaking Ground from page 9

experience. Brick & Bourbon features polished comfort foods with a twist and handcrafted cocktails. The elevated eatery and craft libation venue believes in using the freshest domestic and imported ingredients. Entrees arrive on cast iron-style plates, and are as casual as burgers and mac and cheese or as formal as beef medallions. Unique offerings include the candied bacon flight, chocolate cigars and Reuben soup in a crock, along with more traditional fare such as sandwiches, ribs and wings. The goal is for guests to leave their worries at the door. The space will include a spacious outdoor patio offering the perfect spot for families and friends to enjoy the summer with views overlooking Purgatory Creek Park. “Our focus is to be a great neighbor to our accompanying business’s and a staple anchor for the Elevate project” Warner said. “We will be ambassadors of hospitality and servers to the community of Eden Prairie”.

Minnesota Real Estate Journal

“The town and the community have been more than supportive to us; we are extremely privileged to have the opportunity to work with the City of Eden Prairie and Timberland Partners on a project of this scale and distinguished caliber.” Warner said. “We feel very privileged to be part of the community.” Gary Sivyer, who heads the beverage portion of the business, wanted to craft cocktails with a high level of detail and excitement to match the craft food. Brick and Bourbon is making a name for itself on social media with photos of cocktails served to the table under a glass cloche filled with smoke. “On the food and beverage side, they run a parallel” Sivyer said. “You get the drink first and you are excited to get something balanced and fresh followed by polished handcrafted eats that wow the eye and complete the stomach” said Warner. We use only fresh squeezed juices and house made syrups.” Sivyer said they wanted to keep guests excited and created the menu that included foods that “wow” - from burgers to

brunch to sharable small plates. “We want to keep that energy level going so that guests have an overall elevated and great dining experience with us,” Sivyer said. “Southwest Station is currently lacking a full-service restaurant option. Brick & Bourbon fills this need and will be an exceptional addition to the City of Eden Prairie,” said Ryan Sailer, Vice President of Development with Timberland Partners. “In addition, what a great amenity and unique concept to be able to offer our residents.” Elevate offers studio, one-, two-bedroom, and penthouse apartments, located steps away from the SouthWest Station Metro Transit Center and the planned LRT stop for the Green Line extension. The project also includes 13,000 square feet of retail space, offering a variety of restaurants, retailers and services. Elevate features a rooftop courtyard with pool, outdoor kitchen and bocce court. Additional amenities include a community room, yoga studio, fitness center, game room, co-working space, indoor parking with

May 2019

bike storage, dog run, and pet spa. Apartments feature high-end stainless steel appliances, quartz countertops, luxury wood plank flooring, walk-in closets, and full-size washers and dryers. The $63.7 million, 222-unit mixedincome project was designed by Kaas Wilson Architects and is being constructed by Frana Companies, both based in Minneapolis.

Stahl Named Construction Manager for Dual-Branded, Downtown Minneapolis Hotel Lake City Hospitality LLC, comprised of Eagan-based JR Hospitality and Iowa-based Hawkeye Hotels is partnering with Stahl to convert the vacant office tower and the surrounding site located at 317 Second Avenue South in downtown Minneapolis into a dual-branded Hilton hotel. The eight-story, neo-classic building will undergo an $18.8 Million renovaBreaking Gound to next page

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tion and 41,129-square-foot addition. The newly transformed space will feature 201 Tru by Hilton and Home2 Suites by Hilton guestrooms, and ground level and skyway public activations. Originally built in 1900, the existing 76,000-square-foot building was previously known as the William E. McGee Building. The skyway-connected facility was occupied by Hennepin County’s Office of the Public Defender for over 20 years, but the property has been vacant since 2012. JR Hospitality originally acquired the structure in 2017 before evolving the ownership group to Lake City Hospitality LLC in late 2018. “We will be building in and around a historic building on a really tight downtown Minneapolis site, so of course I wanted to find a way to make this project work for Jay,” said Jessie Houlihan, President of Stahl. “Over the last few years, urban adaptive reuse, hospitality projects have become an area of specialization for our team and we’re excited to be aligning or multi-

Minnesota Real Estate Journal

family team with the strength behind Lake City Hospitality LLC.” Stahl has completed over 1,500 wood-frame units, totaling over 1.2 million-square-feet, and nearly $140 million of multi-unit construction projects in the past 10 years. The Lake City Hospitality team has developed a number of hotels across the Twin Cities suburbs, with this project being their first venture in downtown Minneapolis. “We are focused on unique expansion opportunities and this development is no exception,” said Jay Bhakta, Managing Partner at JR Hospitality. “After successfully navigating a number of obstacles associated with the project, we are eager to revitalize this 1900s building and bring the Hilton dual brand concept to the market. With their widespread experience in hospitality and adaptive reuse projects, and their innate motivation to positively impact the communities in which they work, Stahl has been a key partner in making this project a reality.” Stahl and Lake City Hospitality LLC have partnered with architect firm

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Ramaker & Associates, Inc. for the hotel project. Construction will start spring of 2019 and is scheduled for completion by May 2020.

Exclusive Luxury Condo Planned for North Loop; Features Twin Cities First Mass Timber Residences Developer Unveils Plans for Glass and Terracotta Structure with Sustainable Features The North Loop in Minneapolis will soon play host to a Minnesota first. Todd Simning and Colin Oglesbay announced that they will break ground on a 10-story, 7,500 square foot retail, 79-unit LEED Gold luxury mixed-use condominium building, TMBRTM, this fall with completion early 2021. Simning is president of Excelsiorbased luxury homebuilder Kroiss Development and Oglesbay is managing principal of Minneapolis-based D/O Architecture. Simning and Oglesbay are developing the project under newly formed TMBR Development, LLC.

TMBR, planned for a half-acre parcel located at 100 North Third Avenue, will feature the Twin Cities’ first residency constructed using mass timber frame. Mass timber construction creates an efficient, sophisticated and durable post-and-beam system while incorporating minimal steel and concrete. It is also sustainable, renewable, durable and uses the least amount of energy to build and contributes to lower greenhouse emissions. TMBR, the vision of Oglesbay, will be a showcase of sustainable features, including a partial green roof and gardens, high performance thermal windows and electric car charge stations. The design features a singular mass of glass and terra cotta paneling resting upon a base of black steel. Residents will be treated with expansive views of the Minneapolis skyline and the Mississippi River, within easy walking distance of the North Loop retail shops, grocery and restaurants. Reservations for this new residence are limited to 79, with options for one, two, three-bedBreaking Gound to page 13

DISTINCTIVE DETAILS. DIFFERENTIATED RESULTS.

DRIVEN TO DELIVER.™

Dave Menke 952.656.4565 dave.menke@opus-group.com Matt Rauenhorst 952.656.4681 matt.rauenhorst@opus-group.com

DEVELOP DESIGN BUILD

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Minnesota Real Estate Journal

May 2019

Doran From page 1

record growth and we simply wouldn’t be where we are without their leadership and involvement in the organization,” Doran said in a statement. “Partnering with them is a no-brainer and, in many ways, this is simply formalizing what the reality has been for some time.” The company, which opened a Denver office three years ago, does more than $500 million a year in development and construction volume across its businesses in Minnesota and Colorado. Doran has grown from 20 employees to more than 200 employees. The company has built approximately 6,000 residential units – either completed or under construction -- with another roughly 2,000 units in various stages of planning. Doran operates development, architecture, construction and property management businesses. Doran says Behrendt and Johnson have been “hugely instrumental” in helping the company grow to what it is today. “There just really weren’t two better people to take it forward than Anne and Ryan,” Doran says. “So as we talked this through and talked about different alternatives and ways of doing it, we ulti-

Kelly Doran

Anne Behrendt

Ryan Johnson

mately came to the conclusion that they should be leading the organization going forward. “I’m not going anywhere,” Doran adds. “I’m still going to be hanging around as long as they’ll let me. I want to do more developing and continue to look at development opportunities, predominantly in the multifamily area. “I want to focus my attention on that part of the business that I love so much. I love the design side. I love the development side, and I want to really spend more time on that,” he continues. “And I’ll work not only with Anne and Ryan but the whole team, including my sons.” Doran’s two sons, Evan and Kramer Doran, joined the company in the past

year. “So it’s just freeing up the ability to really contribute to the organization in a different way, and leaving the organization and the day-to-day affairs in Anne’s and Ryan’s very capable hands,” he notes. Behrendt says she’s proud of the company and believes it’s well-positioned to continue to grow. “We will continue to focus on the areas of development that we’ve focused on for the past few years, so primarily multifamily, looking at all of our development opportunities as long-term hold properties,” she says. Behrendt also notes that the company will likely expand beyond the Twin

Cities and Denver. “We’re looking at other markets right now and will continue to explore that,” she says. “Our expectation is we will have one project under control in a market other than Minnesota or Colorado by the end of this year.” Another key piece of this transition, Behrendt adds, is the company will become certified as a woman-owned business. “We view that as an additional tool in our toolbox that will, I think, position us well for continued growth, particularly on the construction and architecture sides of our business,” she notes.

May 2019 Breaking Ground from page 11

room and penthouse units, starting at $450,000. “TMBR will appeal to those seeking a boutique style luxury home but who also want more than just another condo. They are seeking something different, something smarter, more ecological, sustainable and with high end finishes.” said Simning “We’re starting a new revolution in development.” Simning believes TMBR will do for residential construction what T3 did for office buildings. In 2016, T3 became the first mass timber construction office building in the Twin Cities.

The Opus Group® Announces Start of Construction on the Iversen Center for Faith, University of St. Thomas The Opus Group (Opus) announced today the start of construction of the University of St. Thomas’ Iversen Center for Faith, an expansion of the 100year-old Chapel of St. Thomas Aquinas on the St. Paul campus.

Minnesota Real Estate Journal

The Iversen Center for Faith is a 25,000-square-foot, multi-faith worship center built into the foundation and surrounding grounds of the existing chapel. The work will preserve the iconic architecture and footprint of the chapel while updating and expanding the space to better support students of all faiths, campus ministry and special events. The building will include campus ministry offices, a bridal suite and groom suite, new restroom facilities and an elevator to improve handicap accessibility in the chapel. “We are excited to support the University of St. Thomas in the renovation and enhancement of this important landmark that has graced the campus for a century,” said Jeff Mertens, senior project manager at Opus. “We recognize the significance of the chapel to the university and the core of its function: to bring students, faculty and the community together in worship. We’re proud of the design of the chapel’s new addition, which strives to uphold the rich traditions of the university while creating a functional and complimentary space for future needs.”

The Iversen Center for Faith will include a large space for special events, including wedding receptions and funeral luncheons, and a new location for alumni and other guests of the university to host on-campus gatherings. The space will hold up to 300 guests for a seated dinner and can be partitioned into three smaller conference-style rooms. Additionally, a sacred art gallery, a multifaith meditation room and two outdoor gathering areas will be created. A long corridor extending from the north to south ends of the building will include a pedestrian pathway with skylights that will connect the Chapel via underground tunnel to Murray Herrick Hall and the planned first-year dorm. The addition will primarily be constructed of glass and architectural precast accents to emulate the chapel’s Indiana limestone exterior. It will be open for use in February 2020 with final landscaping and site work completing in July 2020. “The chapel’s aesthetic and historical significance is profound and personal to our community. This renovation will preserve the original structure while cre-

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ating gathering spaces that are welcoming, functional and accessible for today’s users,” said Dr. Victoria Young, University of St. Thomas art history program chair and a member of the project planning team. The chapel will be closed from May 6 to August 28, 2019, for the renovation and remodel of the chapel’s interior. Opus is leading the interior remodel, including upgrading light fixtures, painting and replacing pews. Opus has a long history with the University of St. Thomas, including the recent construction of the Anderson Athletic and Recreation Complex, Anderson Student Center and the renovation of Murray Herrick Hall. This project is rich with opportunities for Opus to leverage its unique design-build model. See how and follow along for updates at opusgroup.com/Iversen-Center-for-Faith. Opus is the design-builder, the architect and engineer of record, and interior designer on this project.

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May 2019

Tenants From page 1

Landlords are stepping up their game to provide those amenities that people will use, because they’re finding that it “really makes a difference and tenants are demanding it,” Erickson says. “If you’re a building that doesn’t have those elements, all of a sudden, your universe of tenants that are potential prospects shrinks because enough buildings do provide them now,” he points out. Many Twin Cities landlords are revamping their buildings’ common areas and adding outdoor spaces and collaborative spaces. They’re trying to differentiate their space with amenities, experiences and technology that sets them apart from another office building or co-working space in their submarket. This also means that building owners can often push rental rates. “As landlords are spending money to create these sorts of amenities, they’re increasing their rental rates across all building types – suburban and downtown,” Erickson says. “And if tenants need to pay an extra couple of dollars [per square foot] in rental rates, it’s worth it when your challenge is hiring employees.”

Brent Erickson For companies, it’s about the ‘war for talent’ Many tenants are willing to pay more as they focus on these experiences in their building to attract and retain top talent in a very competitive hiring environment. “With the Twin Cities unemployment rate being just 3.5 percent, tenants are focused on creating experiences, not only from a building standpoint, but from their space standpoint that will really resonate with potential employees,” Erickson explains. The more amenities in their work-

Tom Hoffman space and in and around the building, the more likely their employees will be happy and stay at their jobs. That comes at a price as construction costs continue to rise. Ten years ago, it might have cost $35 or $40 per square foot to build out office space, and today it could be $65 or $70 per square foot. This capital required to build out space has tenants looking at longer lease terms-- often five-, seven- and 10-year deals. Longer deals mean that tenants can obtain a larger tenant improvement allowance to make their space more attractive and create various experi-

Mark Evenson ences inside their space. Erickson has even been seeing 12-year leases. Not everybody’s a fan of long-term leases “In my opinion, construction costs got so high over the last few years that we started seeing an uncomfortable amount of 10-year leases to offset those construction costs,” says Tom Hoffman, a senior vice president in tenant services for Colliers International | Minneapolis-St. Paul. “Personally speaking, I don’t like 10-year leases,” he continues. “You never know what could happen with Tenants to next page

May 2019

the economy. These construction costs really played a pivotal role in driving those [lease terms] higher. I do think that the 10-year trend is slowing down. It’s easier to have that conversation with our tenants on a five- or sevenyear deal. Most of our clients – predominantly tenants under 5,000 square feet – get nervous on five-year deals and want to do a three-year option.”

Co-working’s impact; not all tenants want long-term commitments “Co-working is becoming popular, because in the same vein of businesses needing to put their best foot forward in hiring employees, sometimes they can’t sign a long-term lease, yet they still need space that looks good and they want flexibility,” Erickson says. Driving the growth of the co-working trend are not only freelancers, entrepreneurs and small start-ups, but increasingly corporate users. Big companies are taking advantage of space that’s ready for quick occupancy and has flexible lease terms that support growth or contraction without a long-term commitment. To get in on the action, traditional building owners are creating their own flexible, shorter-term space. The “bar has been raised on the level of amenities and services tenants expect, and pressure is on for more flexible lease

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terms,” according to NGKF’s Third Quarter 2018 Office Market Trends report. Owners are competing by upgrading building common areas and amenities in addition to offering “speculative suites,” or spaces that are built out and ready for tenants to move in. “I think landlords just thought coworking was going to be the "onseytwosey-person” offices, and all of a sudden, it’s the 10-, 15-, 20-employee offices and they’re going, ‘Those are tenants that would have been going in to our space,’” Erickson says. There’s 992,000 square feet of space leased to co-working providers in the Twin Cities, which is 0.8 percent of the total office inventory -- an increase from 0.5 percent in 2016, reports NGKF. In the Minneapolis CBD, the co-working space increased from 0.4 percent to 1.2 percent during the same time period.

Spec suites are growing trend Through partnering with design firms and furniture companies, landlords are building turnkey suites that provide easy, immediate and contemporary space, Hoffman explains. These suites have the look and feel of highend space without the hassle of a potential year-long, design-build process. More traditional landlords are

becoming open to flexible lease terms for tenants that are dealing with the challenges of growth or uncertainty. “A lot of landlords are taking longtime vacant floors and finally just saying, ‘Let’s slap up a 6,000-square-foot suite and make a deal with a furniture company,” Hoffman notes. “They’re doing a mixture of offices and breakouts, and they’re leasing them up as fast as they’re building them.” Hoffman is seeing some smaller companies opting for spec suites over co-working spaces. He says the tenants like the ease of these suites. They say, “’All I want to do is put my laptop down and go to work, and that’s what I want my staff to do,’” he says. “’I don’t want to have to worry about TI allowances. I don’t want to worry about long-term leases.’ For a lot of companies that are either in startup mode or change mode, they have this ability to move quickly into these speculative suites. “Furthermore, landlords are being smart and savvy,” Hoffman adds. For landlords not taking such action, he says, they’re going to “lose out to the WeWorks of the world.”

Leasing space used to be simpler process Today’s office tenants have significantly more questions than in the past, points out Mark Evenson, principal and

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managing director at Avison Young’s Twin Cities office. “I think back on 30 years and a tenant basically would share with you how many offices they needed, how big a conference room. [The would say], ‘Here’s where I want to be. Here’s what I am looking for.’ Buildings were much simpler. Amenities were parking. It was all about where do I park and where’s hot food? “Now they come to you with questions like where do I want to work geographically? What kind of building do I want to be in? What do I want the building to provide in terms of amenities? How important are those amenities? How do I want to work?” Evenson notes. More tenants are considering whether they want an open-office environment as they’ve heard both the positives and negatives. “Do I want to go to free address? Do I want to go to big private offices, small private offices? How much collaborative space is enough? Do I want bigger conference rooms or smaller conference rooms?” Evenson adds. He says that’s one reason that tenants are starting the space search very early, because it takes a lot of time to “get there.” Tenants to next page

Page 16 Tenants from previous page

It’s a lot of discussions with architects and designers, Evenson notes. “And we do commuting times. We add up the total number of commuting hours based on their employees’ addresses and park those against certain geographical areas and submarkets.” Evenson says the process is all about attracting and retaining employees, which is critical for today’s companies.

What are must-have amenities? Shared conference facilities are probably at the top of the list followed closely by exercise and food service, Evenson says. This is where many suburban office markets struggle in that they have to have critical mass to have a hot food service, he notes. Grab-and- go food options are getting better and more sophisticated, which is helping, he adds. Evenson also says that particularly in the suburban markets, paying attention to employees’ work hours is important for building owners. “My experience is that because of the ability to work remotely and virtually anywhere, the workday is much different,” he explains. “It’s compressed into what I call the 9-to-3 window. You have a lot of young

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families with parents working that need to figure out daycare and school,” he explains. “They have a lot of stuff going on in the morning. And a lot of them are out of the office as early as 3 p.m., because they have children duty or go to an exercise facility. “I think it’s important how we support them in a workspace from 9 to 3,” he emphasizes. “It’s the community of the break area. It’s creating a really great experience from 9 to 3, so they can be very productive and feel like they’ve accomplished a fair amount, and then they will finish the day at home.” The millennial group is driving this trend, and millennials will make up 70 percent of the global workforce by 2025, reports the Brookings Institution. Evenson says downtown Minneapolis has an advantage over many suburban office markets since fitness and food are easy because of the critical mass. “All of these downtown buildings can co-support the amenities that these tenants really appreciate,” he notes. “The Minneapolis [office market] is 30 million feet, and we still have another 70 million feet around the Twin Cities that needs to also attract tenants.” Tenants are expecting big tenant improvement allowances but are also willing to pay for it.

“I’ve seen rents go up significantly over the last several years,” Evenson notes. “For a good A or B building, you’re in the $16.50 to $22 net range. Tenants don’t even blink with these higher rates. [They say], ‘I got my allowance. If it’s $18, it’s $18. That’s what the building is worth. That’s where we want to be. They’re giving us enough money to build out the space the way we want to build it out. Let’s go.’”

How much space do tenants need and how does space look today? In 1985, landlords built out offices at 250 square feet per person, Hoffman says. Five years ago, tenants were asking how much can we stretch that down. Some companies were as low as 135 square feet per person. “We saw that start to recoil pretty quickly to today where it’s probably 175 square feet – give or take – and also a hybrid of collaborative, breakout and individual offices,” Hoffman points out. Decision-makers are finding that they still need individual offices for private conversations, and what was happening in open office environments is they were constantly getting up and moving to private breakout rooms, Hoffman notes. Now oftentimes decision-makers are

May 2019

lining up private offices on an interior wall and giving the open, collaborative space to the windows because it helps with recruiting and morale. “If I’m going to recruit younger millennials -- and I want them to stay in my office -- and I show them that their bench station is closer to daylight, windows and something exciting to look at every day, they’re going to be pretty motivated,” Hoffman says. “They’re going to be pretty excited to come to work.” The private offices often will have glass doors for daylight, and executives can see the hustle and bustle but also have privacy. Companies are also finding that their employees need quiet space. “With the open collaboration workspace, it was sort of counter-intuitive,” Hoffman notes. “You would see employees sitting with their Bose headphones on at their desk, not collaborating but shutting out the noise around them because they needed to work.” He says the trend has evolved to more of this hybrid where there’s a mix of open space and quiet space.

May 2019

The Habitat Company Acquires 3 Midwest Rental Properties Grows Portfolio by 1,263 Units Acquisitions mark first Habitatowned property in Minnesota and expand presence in Michigan Chicago-based The Habitat Company, a leading U.S. multifamily property developer and manager, today announced it has acquired three new rental properties: The Village of Hyde Park, a development of 43 townhomes in Detroit; Harbour Club, a 1,112-unit market-rate property in Bellville, Mich.; and Cedarvale Highlands, a 108-unit market-rate community in Eagan, Minn. Habitat’s total acquisition value was approximately $100 million for all three properties. Funding is in place for significant upgrades and renovations at each property. “These acquisitions align perfectly

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with our forward-looking goals for the company, which include remaining dedicated to identifying and acquiring value-add properties that have longterm potential,” said Matt Fiascone, president, The Habitat Company. “All three of these properties not only meet that requirement and expand our ownership to new markets like Minneapolis, but also support our ongoing commitment to growing the number of communities we serve.”

Harbour Club Habitat added Harbour Club to the company’s growing presence in the southeast Michigan market when it closed on the acquisition last month. With this acquisition, Habitat’s portfolio of residential units under management in Michigan tops 2,500. This 1,112-unit market-rate property is located just outside of Ann Arbor, Mich. and is approximately 15 minutes

from the Detroit International Airport and features studio, one-bedroom/onebath and two-bedroom/two-bath units. Habitat has an extensive renovation plan for Harbour Club, which includes a multi-tiered unit renovation program, clubhouse expansion, common area renovations, and a new name and brand identity along with external enhancements to highlight the property’s magnificent setting on Lake Belleville and its own 9-hole golf course, which is open to both residents and the general public. Community amenities include a swimming pool, boat docks and boat launch, spa, fitness center, business center, and a clubhouse with a demonstration kitchen and fireplace. Additionally, the landscaped outdoor amenity space includes a family-friendly courtyard and three playground areas, tennis court and sand volleyball court.

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The Village of Hyde Park The Village of Hyde Park is situated immediately outside of Detroit’s vibrant downtown and offers 43 twobedroom, 1½-bath market-rate townhomes. The rental townhomes feature 16foot ceilings, private patios with views of either the park or city, in-unit washer and dryer and extra storage. A full renovation program will take place over the next few years, updating unit interiors with granite counters, stainless steel appliances, wood plank flooring, and new lighting and plumbing fixtures. The Village of Hyde Park is a gated community surrounded by lush grounds and is a short drive from downtown Detroit with easy access to the freeway. Habitat acquired the property in February 2019, which is within walking distance from another Habitat property, Pavilion Apartments. Closings to next page

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Closings from page 17

Cedarvale Highlands The Cedarvale Highlands acquisition meets Habitat’s strategic growth plans in the Minneapolis market. Located on Cedar Grove Parkway in Eagan, Minn., Cedarvale is located steps away from the popular Twin Cities Premium Outlets and provides immediate access to highways and a significant employer base. This market-rate community offers 108 studio and one-bedroom rental units. Habitat will continue with a unit renovation strategy that includes new kitchens and baths along with enhancements to the common areas and shared spaces (both indoor and out). Other property amenities include an outdoor gated pool, grilling area, detached garages, on-site bus stop, laundry rooms and storage lockers. Habitat closed on this acquisition in March 2019. Habitat is also handling leasing and property management for all three

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communities.

SUMITOMO CORPORATION OF AMERICAS TAPS TRANSWESTERN TO MANAGE 3.1 MSF U.S. PORTFOLIO Transwestern Commercial Services (TCS) today announces it has been selected to provide property management services on behalf of Sumitomo Corporation of Americas (SCOA) for its entire U.S. portfolio, including managing assets, valued at more than $800 million and totaling 3.1 million square feet of Class A office properties in five metropolitan markets. With a commitment to deliver best-in-class property management services and return on investment, TCS oversees the following assets: • SPS Tower, a 31-story, 655,070-square-foot office tower at 333 S. Seventh St. in downtown Minneapolis. • Atlanta Financial Center, a three-building, 914,774-square-foot

office complex at 3353 Peachtree Road in Atlanta’s Financial District and the largest property SCOA has purchased to date. • 203 N. LaSalle, a 27-floor, 625,221-square-foot office tower in Chicago’s Central Business District. • Miami Tower, a 47-story, 619,084-square-foot office tower at 100 S.E. Second St. in Miami’s Central Business District. • 450 B St., a 20-story, 283,786square-foot office tower in San Diego’s Downtown Core District. For the past six years, TCS has provided investment advisory services to SCOA including sourcing, property evaluations, operational assessments, and market assessments. TCS continues to serve in that capacity as SCOA seeks to further expand its U.S. portfolio and will provide asset services for new acquisitions in the 34 cities in which TCS operates. “Transwestern has a long-standing relationship with Sumitomo across our national portfolio, and we’re honored

May 2019

to be chosen to represent them in the dynamic Minneapolis market,” said TCS Vice President Jim Montez. “SPS Tower is a high-quality asset that provides tenants with an amenity-rich environment.” In addition to providing investment advisory and asset services, TCS is also the leasing agent for SPS Tower, Atlanta Financial Center, 203 N. LaSalle and Miami Tower. "As part of our account management strategy, we ensure that our asset services teams work in concert with leasing to create a cohesive tenant experience,” said Andi Lopez, TCS Senior Vice President and asset manager for SCOA. “Our unified approach allows us to maximize efficiencies and apply financial acumen at every level.”