VOLUME 30, NUMBER 4
Š2014 Law Bulletin Publishing Co.
April 2014
In Memory
Gerry Rauenhorst, founder of Minneapolis’ The Opus Group, passes away W
Gerry Rauenhorst and his wife, Henrietta, who preceded him in death.
hen Tim Murnane first began working at Minnetonka-based The Opus Group in 1984, he didn't have to look far to find a pro on which to model his own commercial real estate career. Gerry Rauenhorst, the founder of Minneapolis-based The Opus Group, was right there, after all. "I've had a chance to be part of the Opus family for a long period of time. Gerry was always the best role model any of us could have," Murnane said. "He was a unique individual. He had the benefit of a construction background and he was an extremely talented developer. He was very entrepreneurial. You couldn't have asked for a better role model in the commercial real estate business." Murnane is far from alone. Members of the commercial real estate industry in and around the Twin Cities remember Rauenhorst, who passed away on April 24 at the age of 86, as a leader not just in his profession but in his community, too. Rauenhorst spent countless hours, working for charitable and professional organizations, helping to make the Twin Cities a better place. "Gerry was passionate about his communities," Murnane said. "He was always giving back to the communities in which he did business. It was something that set the culture for his company." As an example, Murnane pointed to April 25. That day is Founder's Day at Opus, in memory of the day on which Rauenhorst back in 1953 signed his first real estate contract. During this day, Opus employees perform volunteer work. On April 25, workers spent their time tackling construction projects for Habitat for Humanity. "It's our way of giving back to the community. And it's something that Gerry really emphasized when he built Opus," Murnane said. Rauenhorst, in addition to his charitable work, long had the entrepreneurial spirit, too, forming his own real estate business, which eventually became Opus, in 1953. The breezeway of his home served as the company's first headquarters. From these small beginnings, The Opus Group has grown into a family of commercial real estate development, construction and design comRauenhorst to page 20
BankFinancial ready to become key player in Twin Cities’ apartment market By Dan Rafter, Staff Writer
T
he Twin Cities' apartment market is a strong one, with investors targeting the downtown hearts of St. Paul and Minneapolis for a variety of new multi-family real estate investments. The challenge for many investors? Financing. Fortunately, investors in the Twin Cities have another option for financing: BankFinancial.
Bryan Haines, Vice President of Apartment Lending for BankFinancial, told Minnesota Real Estate Journal that his company is now ramping up its apartment lending in the Twin Cities. This means that investors have another real choice as they search for the dollars they need to purchase new buildings or refinance existing properties. "BankFinancial has been doing apartment lending in Minnesota out of our Chicago office for seven years," Haines said. "I've been hired to be on the ground here in Minneapolis. We now have a physical
presence in the Twin Cities. I've lived here my entire life. I've worked for banks in the Twin Cities for the last 16 years. I know this market, and I'm eager to make an impact in it." Haines began working with BankFinancial in late 2013. Since then, he's steadily built the relationships that he says will help his company make its mark in the Twin Cities' apartment market. Haines points to a recent Minnesota Wild hockey BankFinancial to page 22
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April 2014
Contents
Minnesota Real Estate Journal
Departments
APRIL 2014 • VOLUME 30, NUMBER 4
1
Page 3
GERRY RAUENHORST, FOUNDER OF MINNEAPOLIS’ THE OPUS GROUP, PASSES AWAY
PEOPLE
4
NEWS
6
RESOURCE GUIDE
22
BANKFINANCIAL READY TO BECOME KEY PLAYER IN TWIN CITIES’ APARTMENT MARKET 14
NAIOP’S MINNESOTA CHAPTER GRABS NATIONAL ATTENTION, MAJOR AWARDS FOR ITS PUBLIC POLICY AND COMMUNICATIONS
16
PROVIDING AN ALTERNATIVE TO COSTLY CONCRETE REPLACEMENT: TWIN CITY OUTDOOR SERVICES HELPS BUILDINGS LOOK THEIR BEST WHILE SAVING THEIR OWNERS MONEY
18
MARCUS & MILLICHAP REPORT: PEOPLE STILL NEED TO STOW THEIR STUFF IN SELF-STORAGE UNITS
The Minnesota Real Estate Journal (ISSN 08932255) is published monthly for $85 per year by Law Bulletin Publishing Company, 13400 15th Ave North STE C, Plymouth 55441. Phone: 952-885-0815. Periodicals postage paid at Minneapolis, MN. POSTMASTER: Send address changes to Minnesota Real Estate Journal, 415 State Street, Chicago IL 60654. Lanning Macfarland, Jr. chairman; Sandy Macfarland, CEO; and Brewster Macfarland, president. Back issues $10.00. Subscriptions are non-refundable. For more information call 952-885-0815. ©2014 Law Bulletin Publishing Co. No part of this publication may be reproduced without the written permission of the publisher.
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Minnesota Real Estate Journal
April 2014
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13400 15th Ave North, Suite C Plymouth MN 55441 For information call 952-885-0815
Publisher | Managing Editor Jeff Johnson jjohnson@rejournals.com Associate Publisher Jay Kodytek jkodytek@rejournals.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Conference Manager Alan Davis adavis@recg.com
EDITORIAL ADVISORY BOARD JOHN ALLEN Industrial Equities ROBERT ANGLESON Navigator Real Estate RICK COLLINS Ryan Cos. US Inc. JEFF EATON Cushman & Wakefield/NorthMarq MARK EVENSON ULG Equis PATRICIA GNETZ US Bank TOM GUMP TAG Consulting JON HEMPEL Hempel Properties DAVID JELLISON Liberty Property Trust CHAD JOHNSON Hellmuth & Johnson BILL WARDWELL Colliers International GEORGE KLUEMPKE Braun Intertec
Ackerberg Hires Schlitter as CFO The Ackerberg Group announced that Mark Schlitter has joined the firm as Chief Financial Officer, where he is responsible for management of the finance and accounting divisions of the company. Most recently, Mr. Schlitter was Vice President of Finance for Carlson Real Estate Company where he was responsible for the overall management of the accounting, finance and IT areas of the company which had owned and managed over 6.7 million square feet of industrial, office and retail commercial real estate in Minneapolis, Phoenix and Charlotte. Mark was a key member of the executive team that developed strategy and executed and implemented the company’s plans and initiatives. He held several accounting and finance related roles during his 20 year tenure with the company, including Controller and Senior Director. Mark attended the University of Northern Iowa where he received his bachelor’s degree in accounting and began his career as an auditor with the public accounting firm Arthur Andersen, LLP in Minneapolis, MN. Following Arthur Andersen, Mark joined Carlson, the privately-held hospitality and travel company in Minnetonka, Minnesota, where he held several accounting and finance related roles in the company. Mark is a member of the Minnesota chapter of NAIOP and is a former National NAIOP Forum member for the Capital Markets Team.
JEFFREY LAFAVRE CBC Griffin Companies WADE LAU Founders Properties MIKE LE JEUNE Fabcon JIM LOCKHART WIPFLI DUANE LUND Exchange Realty PATRICK MASCIA Duke Realty Corp. CLINT MILLER Cushman & Wakefield/NorthMarq DR. THOMAS MUSIL University of St. Thomas WILLIAM M. OSTLUND CBC Griffin Companies WHITNEY PEYTON CB Richard Ellis MIKE SALMEN Transwestern STEWART STENDER Stewart Capital Partners
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CSM Corporation Promotes Brian Averbeck to Director of Commercial Properties CSM Corporation today announced the promotion of longtime CSM Regional Commercial Property Manager and ProTech Operations Manager Brian Averbeck to director of commercial properties. In his new role, Averbeck will formalize long-term strategies for properties within the CSM commercial portfolio. This will include defining and analyzing tools and issues that support collaborative decisions regarding the direction of the portfolio. He also will use his extensive knowledge and experience with CSM’s real estate portfolio and information systems in working with Leasing and Property Management
to further the long-term forecasting and property strategy goals in conjunction with CSM initiatives. “Brian’s experiences and ability to work with many different aspects of property management, construction and our systems made him a natural fit for this position,” said Andy Deckas, president of commercial properties, CSM. “Over the course of nearly 20 years, he has shown great commitment to CSM and, in his new role, will help us take big strides towards commercial property management and development in 2014 and beyond.” Averbeck has spent the past 17 years in several different roles at CSM. He began his career with CSM as a commercial property manager in 1997 and most recently served as the operations manager for ProTech Maintenance Solutions and as a regional commercial property manager. As operations manager for ProTech Maintenance Solutions, he was responsible for tremendous revenue growth and job expansion within the maintenance portion of CSM. Averbeck’s diligent commitment to efficiency and cost savings led to higher success in the competitive real estate market. “It has been extremely rewarding to be a part of the CSM family, and I am very excited for the opportunity to play a new role as our companycontinues to grow,” said Averbeck. “I’ve learned so much during my time at CSM and feel I can use that knowledge and experience to advance the operations of the commercial properties team.”
Larkin Hoffman is pleased to announce that Patrick J. Cole and Molly T. Eichten have been elected as shareholders of the firm. Molly focuses her practice in the areas of trademark and copyright law, intellectual property and technology transactions including licensing, outsourcing, and development. She has real-world experience in solving issues related to technology as she worked in the IT field prior to law school, managing complex software implementations and corporate infrastructure projects. Patrick advises businesses and health care providers in a variety of matters, including mergers, acquisitions & divestitures, complex business transactions, compensation arrangements, and
compliance matters. Patrick has significant experience in a broad range of corporate and transactional legal matters, including real estate, shareholder relationships and disputes, private debt and equity financings, organizational and choice of entity, succession planning and governance issues.
Doran Companies adds Corporate Controller Doran Companies, the Bloomington, Minnesota-based commercial development company, has announced the hiring of Seazon Patterson as corporate controller. Patterson, who formerly held positions at the pharmaceutical company Upsher-Smith and Minnesota Limited, Inc., a Big Lake based pipeline construction company, will work across the Doran family of businesses to oversee and administer the accounting functions of their development, construction and residential property entities. Kelly Doran, principal and founder of Doran Companies, said Patterson is a “key addition needed to accommodate the accelerated growth of our construction company and other businesses under the umbrella of Doran Companies. We are especially pleased that Seazon has specific construction industry experience in addition to the benefit of working in a large scale corporate environment.”
Dominium Promotes Ross Stiteley to Senior Development Associate Dominium, a leading apartment development and management company, today announced that it has promoted Ross Stiteley to senior development associate at the home office in Plymouth, Minn. Stiteley will be responsible for new project development, acquisition, and financing. In addition, Mr. Stiteley will have day to day involvement with financial modeling, legal document negotiation, and the sourcing of equity and debt. Previously, Stiteley was a development associate, where he was responsible for assisting the project partners and developers with new project development, acquisitions, and financing. The promotion was effective on February 23.
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Minnesota Real Estate Journal
April 2014
News Fredrikson & Byron Among Top 10 Best Law Firms for Female Partners by Law360 Fredrikson & Byron was named a member of Law360’s inaugural class of “2014 Ceiling Smashers,” which ranks the top 25 U.S.-based law firms for having the highest percentage of female partners. Ranked number 10 nationally, Fredrikson is the only Minnesota headquartered firm on the list and the largest full-service firm to appear in the top 10. Law360’s article noted that in 2014, “The Glass Ceiling Report” found that while women make up 43 percent of the nonpartner ranks at U.S. law firms, they comprise only 21 percent of partnerships. At Fredrikson, women make up 39 percent of the total U.S.-based attorney head count, and 33 percent are shareholders. According to its website, “Law360 surveyed U.S. law firms in early 2014 and received responses from roughly 380 firms with male and female attorney head count information. Only U.S.-
based law firms were surveyed, and only head count numbers for U.S.-based attorneys were included in the results. For the purposes of this ranking, “partner” includes both equity and nonequity partners for firms that use a multitier partnership structure. Head count numbers are as of Dec. 31, 2013. Only firms with more than 50 domestic attorneys — roughly 98 percent of respondents — were considered for the Ceiling Smasher designation.” “We are pleased that this latest honor recognizes our long-standing commitment to the success of women at our firm, said Mary Ranum, Chair of the Firm’s Board of Directors. “We have strong female leaders who are role models for our younger attorneys. In large part, we feel that has enabled the firm to achieve success in developing a culture where women thrive.” Law360 is an American online news source that covers the entire spectrum of legal practice areas daily. For more information, visit www.law360.com.
Kraus-Anderson selected to build Roseville distribution center for IRET Kraus-Anderson Construction Company (KA) has been selected as general contractor to build a 211,322-squarefoot warehouse and distribution center project for Investors Real Estate Trust (IRET) in Roseville, Minn. Groundbreaking ceremonies are scheduled for 9:30 a.m., Thursday, April 24 at the site, located at 3075 Long Lake Road. The project includes the demolition of approximately 200,000 square feet of the existing structure, leaving 17,553 square feet of contiguous space remaining in operation by Hood Packaging, a tenant of IRET. The demolished warehouse will be replaced with a new 203,004-square-foot precast shell warehouse with 31 dock doors and a 32-foot clearance roof. Construction will also include elevating the existing roof for Hood Packaging to a 32-foot clearance without disruption to its existing operations within the facility.
KA is also retrofitting the Hood Packaging facility to accommodate new equipment. Construction begins at the end of April and is expected to be completed in November 2014. The architect is Wayzata, Minn.based Mohagen Hansen Architectural Group. KA’s project manager is Paul Carlsted and IRET’s project manager is Doug Johnson of Oliver Real Estate Services. IRET Properties is a North Dakota limited partnership headquartered in Minot, N.D. with additional offices in Eden Prairie and St. Cloud, Minn. IRET is a publicly held real estate investment trust which owns and manages over 10 million square feet of commercial real estate and 10,725 apartments.
Larkin Hoffman Moving to Normandale Lake Office Park Larkin Hoffman announces today that the firm will relocate to the 8300 Tower
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of the Normandale Lake Office Park in Bloomington, Minnesota by January 1, 2015. The firm has been at its present location in the nearby Wells Fargo Plaza for over four decades. The move to Normandale Lake Office Park is part of the firm's long-term strategic plan. "Larkin Hoffman has always set its course based on what our clients tell us they want in a law firm.” said firm president, Bill Griffith. "Of great importance is the easy access we provide clients in our suburban location. We are excited to be moving to a nearby location that will allow us to grow, provide comfortable space for our employees and continue to offer the efficient service appreciated by our clients." In addition to its convenient location, the firm's new offices will provide many amenities for clients including numerous restaurants, substantial parking and spacious conference rooms overlooking Normandale Lake. "Our attorneys will be in modern workspaces that work well with the highly technical tools we now use to serve our clients," said Dick Knutson, the firm's chief operating officer. "By
Minnesota Real Estate Journal
eliminating obsolete space and rethinking our use of all spaces, we have found a way to maximize the number of attorneys we can support in our new space with only a modest increase in the size of the facility. These offices will allow our attorneys to work very efficiently while keeping our clients' costs low."
bat obesity and to help people develop healthy lifestyle habits by incorporating the fat-burning, strengthening and endurance building aspects of competitive martial arts training into a course for regular people who aren’t interested in sparring or contact drills. CWN’s Tricia Pitchford represented Farrell’s eXtreme Bodyshaping in the transaction.
Cushman & Wakefield | NorthMarq Represents Farrell’s eXtreme Bodyshaping in Lease with OP Stillwater LLC
First Concrete Deck Poured for the new Multi-Purpose Stadium
Cushman & Wakefield | NorthMarq (CWN) www.cushwakenm.com represented Farrell’s eXtreme Bodyshaping in a lease for 7,000 sq. ft. with OP Stillwater LLC at 5801 Neal Avenue North, Oak Park Heights, Minn. The new fitness center will open in July. OP Stillwater LLC was the landlord. With locations in nine states, Farrell’s eXtreme Bodyshaping is a results-based fitness program for participants of any age, lifestyle, sex or athletic ability. The program was developed by Lance Farrell — a long-time taekwondo competitor and teacher — specifically to com-
The Minnesota Sports Facilities Authority announced the successful pouring of the stadium’s first deck today. The deck will form part of the ceiling or “lid” of the loading dock. The 277 cubic yards of concrete poured today is the first horizontal concrete in the new stadium. For video and still images of today’s horizontal concrete pour please use the attached instructions for the Vikings media-only ftp site. These images can be located in a folder titled “New Vikings Stadium,” which contains a second folder titled “4-11-14 New Stadium
April 2014
Construction.” Other construction milestones in the next few weeks: • The final pieces of Metrodome walls that are below grade on the west side of site will be demolished • A part of the main concourse and other deck levels will be poured • A third tower crane will be erected • Elevator pits will be excavated Construction on the new Multi-Purpose Stadium is on schedule and will open in July 2016. The new stadium will host Vikings football games as well as baseball, soccer, concerts and a variety of community and civic events.
Marcus & Millichap ARRANGES THE SALE OF a 228-ROOM HOSPITALITY PROPERTY Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Dells Island Resort & Conference Center, a 228room hospitality property located in Wisconsin Dells, Wisconsin, according
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to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $1,200,000. Jon Ruzicka, Gordon Allred and Chris Gomes, investment specialists in Marcus & Millichap’s Minneapolis, Ontario and Dallas offices (respectively), had the exclusive listing to market the property on behalf of the seller, a bank/financial institution. The buyer, a limited liability company, was secured and represented by Jon Ruzicka and Gordon Allred, investment specialists in Marcus & Millichap’s Minneapolis and Ontario offices (respectively). Matthew Fitzgerald, Regional Manager and Broker of Marcus & Millichap’s Milwaukee office, assisted in closing this transaction. Speaking with Mr. Ruzicka, “Dells Island Resort & Conference Center is located at 655 North Frontage Road in Wisconsin Dells, Wisconsin. It was a Wisconsin Dells hospitality hot spot in the 1990’s and 2000’s but, unfortunately, had been shuttered for the past 3 years after it had gone back to the lender as an REO property. The lender maintained a relationship with a member of
Minnesota Real Estate Journal
Marcus & Millichap’s National Hospitality Group out of Dallas, Texas, who then leveraged the nationwide presence of the firm’s National Hospitality Group to include a local member out of the firm’s Minneapolis office for support in the marketing of the asset. Multiple offers were generated including interest brought from the Texas area by a member of the marketing team, but the eventual buyer was local and familiar with the area. The buyer immediately began renovating the hotel and will be operational in time for the busy Wisconsin Dells summer season.”
NorthMarq Capital finalizes $34.5 million refinance for 7west Apartments located in Minneapolis, Minn. Dan Trebil, senior vice president/senior director of NorthMarq Capital’s Minneapolis based regional office arranged the $34.5 million refinancing of 7west Apartments, a property consisting of 218-units located at 1800 Washington Avenue South, Minneapolis, Minn. The transaction was
structured with a 15-year term and 30year amortization following two years of interest only. Financing was arranged by NorthMarq for the borrower through its relationship with a correspondent life company. The borrower’s objective was to lock in a long-term interest rate as early as possible. This loan allowed them to achieve that goal early in their lease-up period and well in advance of fully stabilized occupancy.
April 2014
Jim Leary, Steve Lysen, Jeff Budish and Mindy Rietz of CBRE’s Minneapolis Private Capital Group represented the seller in the transaction. The CBRE Minnesota Private Capital Group specializes in the disposition of single-tenant and multi-tenant office, industrial and retail properties throughout the Upper Midwest. Mound Marketplace is the third Minnesota location in the LS Capital portfolio alongside Rogers Retail Plaza in Rogers and Winnetka Commons in Minneapolis.
CALIFORNIA INVESTMENT COMPANY ACQUIRES GROCERY ANCHORED RETAIL CENTER IN MOUND, MINNESOTA
Record 110 buildings join Kilowatt Crackdown
Minnesota developer, PBK Investments, sold Mound Marketplace, a 57,642-square-foot retail property, to California investment company, LS Capital. Located at the corner of Lynwood and Commerce Boulevard in Mound, Minnesota, Mound Marketplace was built in 2003 and is anchored by grocery tenant, Jubilee Foods. Other retail tenants include Verizon, Great Clips, Subway and Carbone’s.
Contest participants save enough electricity to power more than 650 homes for a year The Building Owners and Managers Associations of Greater Minneapolis and Greater Saint Paul, together with Xcel Energy, today announced the winners of the third annual Kilowatt Crackdown, an energy conservation initiative. Awards were presented at a ceremony this morning by Minneapolis Mayor
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Betsy Hodges and Saint Paul Mayor Chris Coleman. Minnesota Senator Al Franken also endorsed the Kilowatt Crackdown, saying, “This year’s cold weather makes it all the more clear how important energy efficiency is, especially for buildings, which use over 1/3 of our energy. Retrofitting buildings saves money for owners and tenants, it creates jobs in manufacturing and the building trades, it’s good for the environment and it creates better spaces to live and work in.” The year-long Kilowatt Crackdown contest challenged Twin Cities area commercial building owners to improve their buildings’ efficiency. A total of 110 buildings in the Twin Cities participated, representing 41 million square feet of space. Collectively, these companies saved 9.8 million kilowatt-hours of electricity. Using the Environmental Protection Agency’s equivalency tool, the savings equate to a reduction of 6,910 metric tons of carbon dioxide, or taking 1,440 vehicles off the road. It’s also enough electricity to power more than 650 homes for a year.
Minnesota Real Estate Journal
“BOMA members are already recognized as industry leaders in sustainable building efforts,” said Kevin Lewis, executive director of BOMA Greater Minneapolis. “This is yet another example of forward thinking collaboration to achieve extraordinary energy and cost efficiencies.” “This is an incredible, proven program and opportunity to further leverage expertise and funding sources to create even greater energy savings for our buildings and our tenants,” said Pat Skinner, chair of the Greater Saint Paul BOMA board. Companies implemented changes such as retrofitting lighting, upgrading motors and variable frequency drives, buying higher efficiency heating or cooling equipment and conducting building tune-ups. Xcel Energy distributed roughly $800,000 in rebates. Xcel Energy provided assistance by helping building managers to determine a list of suggested improvements and locating stimulus funding and rebates to help offset the cost of improvements. “We thank BOMA for developing this
program and recognizing conservation achievements,” said Dave Sparby, president and CEO of Northern States Power Company – Minnesota, an Xcel Energy company. “We also congratulate every building owner who participated in the Kilowatt Crackdown. Taking advantage of our energy efficiency programs makes a lot of sense. It saves money, helps the environment and affects everyone’s bottom line.”
Marcus & Millichap ARRANGES THE SALE OF a 46-UNIT APARTMENT BUILDING Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Douglas Drive Terrace, a 46-unit apartment property located in Crystal, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $2,750,000. Mox Gunderson and Dan Linnell, investment specialists in Marcus & Mil-
April 2014
lichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a private investor. The buyer, a limited liability company, was secured and represented by Dan Linnell, Mox Gunderson and Josh Talberg, investment specialists in Marcus & Millichap’s Minneapolis office. According to Mr. Linnell, “The seller had competed, and ultimately won the bid, on an asset we sold them in 2013. They valued our aggressive marketing campaign and process for qualifying buyers (as they had experienced it first hand), so when the decision was made to sell Douglas Drive Terrace, they hired Marcus & Millichap as the exclusive listing agents.” Said Mr. Gunderson, “Any apartment owners teetering on whether now is the correct time to sell should contact Marcus & Millichap for an evaluation of their property(s) as the Twin Cities remains one of the most lucrative apartment markets in the country.” Douglas Drive Terrace is located at 3300 Douglas Drive North in Crystal, Minnesota. The 46-unit property is
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Minnesota Real Estate Journal
April 2014
NAIOP’s Minnesota Chapter Grabs National Attention, Major Awards for its Public Policy and Communications By Duane Arens Director of Public Policy NAIOP Minnesota, The Commercial Real Estate Development Association
T
he Minnesota Chapter of NAIOP, the commercial real estate development association, has long been hailed as a national leader for its public policy agenda on behalf of its 750 members, their thousands of business tenants, and Minnesota’s commercial real estate industry. The Chapter’s outstanding track record was cited and honored again recently when it received the 2014 National Merit Award of its parent organization, NAIOP Corporate, for its outstanding Legislative/Government Affairs programs in 2013, and another for Chapter Communication Tools, recognizing the “Universe This Week” enewsletter to members. Commenting on the chapter’s receipt of the award—the second time it has won in the past three years—Brandon Champeau, chair of the chapter’s Public Policy Committee for 2014, said he
was hardly surprised at the announcement that Minnesota had won again. “As chair of the committee, I witness almost daily the time and effort our members contribute to the well-being of our commercial real estate industry,” he said. “The work they do often goes without recognition of any kind, because—for the most part—it occurs behind the scenes, in committee meetings, in the halls of the Capitol, or on the phone with our legislators.” National NAIOP Chair Jean Kane, CEO of Welsh/Colliers International and a past chapter president, called the awards a “big win” for the Minnesota Chapter. “The awards are highly coveted and very competitive. Other chapters across the country were strong as well, but Minnesota won because of its outstanding grassroots efforts,” she said. “The chapter’s energetic advocacy programs—led for years by Kaye Rakow, former director of public policy, who stepped aside at the end of the year--is what sets us apart. We did all of the fundamentals well--the blocking and tackling--that go into a successful grassroots effort. Kaye got the membership engaged in our public
Kaye Rakow policy agenda to a greater degree than ever before, motivated individual members to become involved and take personal action, worked aggressively to build statewide media support for our issues and initiatives, coordinated a collaborative effort with our business coalition members, and made sure that we connected effectively with legislators.” Kane cited several key initiatives as
being important in the judges’ considerations, among them the chapter’s continuing efforts to curb commercial property tax increases and prevent expansion of fiscal disparities. Especially significant were NAIOP Minnesota’s proposed legislation calling for greater transparency in local government budget reporting, which she describes as a “quantum leap” in its grassroots activities, and its aggressive work to overturn the ill-considered business-to-business sales taxes passed in the last days of the 2013 legislative session—“including a sales tax on warehousing services that was a huge, gut issue for us and a threat to our industrial customers,” she said, “as well as to the tax bases of many local communities.” Champeau said that for NAIOP’s Minnesota members, “winning in the public policy arena is often times measured by ‘not losing,’ or at least by maintaining what we have. However, constant defense and endless promotion and media publicity for our cause is necessary to make sure that our client companies and tenants can operNAIOP to page 20
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Minnesota Real Estate Journal
April 2014
Company Profile
Providing an alternative to costly concrete replacement: Twin City Outdoor Services helps buildings look their best while saving their owners money By Dan Rafter, Staff Writer
K
ai Milota, director of sales with Plymouth, Minn.-based Twin City Outdoor Services, says his company has a simple goal: It wants to save the owners of commercial buildings money. And the company does this through its surface-restoration division. It's less expensive for Twin City Outdoor Services to restore cracked and crumbling concrete than it is for another company to replace this same damaged material. In today's economy, building owners and managers are looking for ways to cut their expenses. That's why it's important for them to consider restoring the cracked concrete in their parking lots and patios rather than replacing it. According to Twin City Outdoor Services, the company's surfacerestoration services can save business-
es 40 percent when compared to concrete replacement. Businesses and building owners can save 70 percent by paying Twin City Outdoor Services to restore block-and-brick surfaces instead of shelling out the dollars to hire another company to replace them. "At the end of the day, restoring concrete instead of replacing it saves money and is less intensive," Milota said. "In a retail environment, if you replace concrete, if you're ripping out materials, you might have to shut your doors for some time. With restoration that doesn't have to happen. It's less disruptive on business and customer traffic." Rich Byrne, the owner and vice president of Twin City Outdoor Services, says that his company originally focused on commercial snow-removal services, a facet of the business that was active during the Twin Cities' particularly harsh winter. The company still provides snowremoval services, and is still adding
new customers. But its surface-restoration business has also become a big one, largely because many of the driveways, parking areas and concrete columns that developers have installed outside buildings are getting older. This means that many of these structures are in rough shape, Byrne said. Companies and building owners then face an important question: Should they completely replace concrete or brick-and-block surfaces? Or should they go with the less expensive restoration of these surfaces? "A lot of these surfaces are dramatically deteriorating," Byrne said. "The weather, the sun, road salt, it can all degrade these surfaces. We saw the big building boom here in both corporate and retail spaces 10 to 20 years ago. All of those facilities are starting to show their age now. The businesses are now realizing that they have to spend money to maintain their reputations and their curb appeal. Building owners want to keep their tenants happy. They
need to do something. And often, restoration makes the most financial sense." Businesses and property owners don't have the option of ignoring their cracked or fading outdoor surfaces. As Milota says, exterior spaces can make a huge first impression on clients or customers. What will potential clients think if they pull up to a business only to find a parking lot dotted with potholes or concrete steps that are missing big chunks? "Curb appeal matters," Milota said. "Business owners need to refresh the look of their facilities. For the same amount of dollars that business and property owners will pay to replace a panel of concrete here and there, they can have their entire outdoor surfaces restored. We can make them look like all-new concrete." Byrne says that he expects business at Twin City Outdoor Services to continue to boom in the coming years. TCOS to page 22
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April 2014
Marcus & Millichap report: People still need to stow their stuff in self-storage units By Dan Rafter, Staff Writer
P
eople have a lot of stuff. They often have more stuff than space in which to stow it. Don’t believe us? Check out the recent series of semiannual self-storage reports released by Marcus & Millichap. The first-half 2014 reports show that in cities across the United States, self-storage facilities are on the rise. Consider Minneapolis. Marcus & Millichap predicts that self-storage unit vacancies will drop 70 basis points to 12.3 percent by the end of 2014 in the Minneapolis market. Asking rents for climate-controlled units here climbed 1.9 percent to $141 a unit on climatecontrolled facilities in 2013 and 4.1 percent to $115 a unit on facilities that lack climate control. And Minneapolis is just one market in which rents will rise and vacancies will fall when it comes to self-storage units. Then there's St. Louis. Marcus &
Millichap reports that steady employment growth and population gains mean that the demand for self-storage units in the St. Louis market will jump this year. Because of this, the company predicts that self-storage vacancies will decline 50 basis points this year to 13.3 percent. Operators here will also be able to lift asking rents at climate-controlled and non-climate-controlled facilities 2.9 percent and 2.3 percent respectively. This means that the average asking rent for a climate-controlled St. Louis self-storage facility will jump to $126 a unit, while this figure will increase to $85 a unit for non-climate-controlled facilities. Marcus & Millichap predicts another 70-basis-point drop in vacancies for Detroit-area self-storage facilities. Vacancy rates in this sector should fall to 14.5 percent by the end of 2014. Rents for climate-controlled facilities in the Detroit market should rise 3.2 percent to $130 a unit, while those at non-climate-controlled facilities should rise 0.7 percent to $93 a unit.
The news was good in the Chicago market, too, with vacancies at self-storage units expected to fall 130 basis points to 11.2 percent by the end of 2014. In 2013, rental rates for climatecontrolled space jumped 2.4 percent to $150 a unit and 4.9 percent to $112 a unit for non-climate-controlled spaces. In Columbus, self-storage vacancies should drop to 12.3 percent by the end of the year. Rents on climate-controlled facilities in 2013 slipped 0.9 percent to $109 a unit, though they jumped 2.5 percent to $83 a unit for non-climatecontrolled facilities. What's the behind the growth of selfstorage facilities in the Minneapolis market? Marcus & Millichap points first to employment growth. Employers in the Minneapolis area are expected to boost hiring for the fifth year in a row in 2014. This year, payrolls will be expanded by 42,000, keeping with a 2.3-percent increase recorded in 2013, according to Marcus & Millichap researchers. When people have jobs, they're more likely to keep their stuff and store it
than they are to sell it or get rid of it. At the same time, the population in the metro Minneapolis area is growing. On an annual basis, the area's population has grown at an average rate of 1.1 percent since 2008, Marcus & Millichap reports. During the next five years, the Minneapolis market will gain 180,000 individuals, representing growth of 1 percent a year, Marcus & Millichap reported. Not surprisingly, when a metropolitan area has more residents it also experiences a greater demand for selfstorage units.
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Rauenhorst From page 1
panies headquartered in the Minneapolis area with eight additional locations. The Opus Group boasts hundreds of employees and millions of square feet of completed real estate projects across the country. Rauenhorst was a pioneer of the design-build method. That construction method is common today, but was an innovation when Rauenhorst first started relying on it. "The word gets used so much, but I do look at him as a visionary figure in our industry," Murnane said. "He really
Minnesota Real Estate Journal
was one of the pioneers of the designbuild process. He brought in architects and engineers. He created this designbuild approach, bringing in all this expertise in one place. It really was revolutionary for the industry. Today, it's a model used by a lot of people." Companies that Rauenhorst founded developed corporate headquarters for Best Buy Corporation, ConAgra and Gavilon, among others. His companies also developed the Nic on Fifth, the first luxury high-rise apartment community to hit downtown Minneapolis in 30 years, and more than 50 buildings on university campuses across the nation. Rauenhorst was known, too, for his philanthropy. He founded a group of
family philanthropies that include the GHR Foundation, the Better Way Foundation, Enkel Foundation, Opus Foundation and Opus Prize Foundation. These grantmaking organizations invest in closing the achievement gap through Catholic education, providing early childhood education and investing in community revitalization. Rauenhorst was a founding member of the Minnesota Keystone Program and the Papal Foundation and a leader of the Minneapolis Suburban Serra Club, Serra International and the Knights of Columbus. He was also an advisor to Sogang Jesuit College in Seoul, South Korea. Rauenhorst also opened the doors of the world to his family through trips
April 2014
across the American South in the family station wagon and to see the great artistic masterpieces of Europe. He enjoyed creating pottery, exploring new gadgets and spending time at the lake with his grandchildren. Rauenhorst is preceded in death by his beloved wife Henrietta Schmoll Rauenhorst; parents Henry Theodore Rauenhorst and Margaret Keltgen Rauenhorst; his seven siblings William, Muriel, George, Jerome, Henry, James, Robert, and his infant son Gerald Anthony Rauenhorst Jr. He is survived by his seven children, Judith (Lee) Doerr, Mark (Karen) Rauenhorst, Neil (Becky) Rauenhorst, Joseph Rauenhorst, Michael (Margaret) Rauenhorst, Susan (Jeff) Turner, Amy (Philip) Goldman, 21 grandchildren and four great grandchildren.
NAIOP from page 14
ate in a competitive landscape.” “That’s why being recognized for all the work we did during the past year is a big deal for us. We’re proud to be on the frontlines, fighting for our industry and especially for our thousands of tenant businesses. We’re equally proud to set a high standard for other NAIOP chapters around the nation to emulate and follow.” Winning the two Merit Awards, although a recognition of the chapter’s achievements, hardly puts the cap on our legislative affairs and communications activities. Already in 2014—just a couple of busy months into the year—we are continuing and expanding the chapter’s consistent approach to informing and guiding public policymakers on every issue which affects-directly or indirectly--our members, their business tenants, and Minnesota’s commercial real estate industry. Our effort to repeal the onerous new business-to-business sales tax on warehousing services has been an overwhelming success, with the tax –and the negative impact it would have had on the competitiveness of Minnesota’s businesses— completely overturned. Our aggressive effort in opposition to this and other new business-to-business taxes and increases in property taxes gives us confidence that our tenants and clients will not have to consider drastic measures to remain competitive regionally, nationally and globally.
Page 22
BankFinancial From page 1
game he attended at the Xcel Energy Center in St. Paul. The man sitting next to him at the game was a familiar face, an apartment broker for CBRE, with whom Haines had a conversation about the Twin Cities' multi-family market. This, Haines says, is one of the primary benefits of having a physical presence in the Twin Cities. "BankFinancial wouldn't have had that conversation a year or two ago when I wasn't on the ground here," Haines said. "We want to make sure that BankFinancial is being talked about out there. When conversations
Minnesota Real Estate Journal
about apartment lending come up, we want to be at the forefront." Haines began his financial career in 1997, when he went to work at an area bank. It was at his second stop, a community bank in Minnesota, that he got his first taste of commercial lending. In 2001, he moved on to another bank, where he opened a new branch office for the company. Eventually, after moving up the corporate ladder, management asked Haines to develop the bank's commercial lending portfolio. When he started working on the bank's commercial division, it was a small department, just Haines and a loan assistant. "We did everything," Haines said. "We started doing small apartment lending, too. I got a taste of apartment
lending. And I enjoyed the work." When Haines first started with this commercial division, it had a portfolio of approximatley $17 million of commercial loans. At its peak the department had grown to approximatley$150-$160 million of commercial loans. Haines is now excited about building BankFinancial's apartment lending business in Minneapolis/St. Paul. He's especially excited about working in a multi-family market that is thriving today. "Depending on what periodical you look at, our multi-family market is ranked anywhere from second to fourth. It depends on their criteria, but everyone agrees that our market is one of the strongest in the nation," Haines said. "There is a shortage of multi-fam-
April 2014
ily units available today. There is new inventory coming on the market. But still, the vacancy rate in the Twin Cities multi-family market will be well below the national average. Our unemployment rate, our economy and our workforce are all positives. It makes the perfect mix for having a strong asset base." Haines said that the big push he is making on behalf of BankFinancial is already paying off. "The brokers are aware of us," he said. "They are talking to me about potential deals. When deals come up, I am in the conversation. People are learning about us. They are getting to know me better."
TCOS from page 16
Part of this is the change in construction materials that developers and construction companies have used across the Midwest, Byrne said. Starting about 15 years ago, companies began using fancier stone materials that would look more appealing in office and retail environments. Today, though, these fancier materials are starting to show wear-andtear. These materials are regularly sprayed with road salt in the Midwest
and in Minnesota. They regularly face harsh weather that swings violently from high temperatures to low. The resulting damage to these materials -- which hold up better in more temperate climates -- has opened up increased business opportunities to surface-restoration companies, Byrne said. Byrne said that his company can usually restore even these more exotic materials at about 40 percent of the cost of a normal tear-
and-replace job. At the same time, Twin City Outdoor Services is being called upon more frequently to restore vertical surfaces, such as decorative concrete pillars, outside walls and facades, Byrne said. Business and property owners look at these projects and immediately worry that they'll have to spend $50,000 or more to replace them. But, as Byrne says, Twin City Outdoor Services, can tell owners that, no, they might only have to pay $17,000 to restore these surfaces instead of replacing them.
"Every dollar that these companies are spending together is being scrutinized," Byrne said. "We are in a nice spot. We have the ability to say, 'Of the three bids you received to redo your front entrance, we are the people who are only going to replace half of it and on the other half do our restoration fixes.' We are always going to be the lowest bid. It's a bang-for-yourbuck thing."
Christopher Dolan
REAL ESTATE SERVICES Continental Property Group, Inc. 1907 Wayzata Blvd, Suite 250 Wayzata, MN 55391 Tel-952-473-1700 www.leasespace.com
Monroe Moxness Berg 8000 Norman Centeer dr. #1000 Minneapolis, mn 55437 952-885-5999 www.mmblawfirm.com
REAL ESTATE EDUCATION MN Real Estate Exchangors Henry votel 651-426-1610 Www.mree1031.com Info@mree1031.com