Mrej January 2015 by REjournals

VOLUME 31, NUMBER 01

January 2015

Diverse employment base, pent-up demand behind Twin Cities booming apartment market

By Dan Rafter, Editor

diverse employment base. That’s what Thomas O’Neil credits for the ongoing boom in apartment construction in the Minneapolis/St. Paul mar-

ket. And O’Neil should know. He’s the vice president of Midwest FHA operations for Minneapolis-based Dougherty Mortgage, LLC and the author of the company’s latest Market Viewpoint report analyzing the Twin Cities’ multifamily market for 2014 and 2015. O’Neil’s report details just how many new apartment units have hit the Twin Cities’ market in recent years. According to O’Neil’s numbers, since the beginning of 2010, developers have built more than 110 apartment projects with

roughly 13,300 units in the Minneapolis/St. Paul market. O’Neil told Minnesota Real Estate Journal that this is a trend that has been taking place for a long time in the Minneapolis/St. Paul market. O’Neil cites low unemployment and a variety of employer types as the primary reasons why so many young people want to rent in the Twin Cities area. As O’Neil says, the Minneapolis/St. Paul region boasts 18 Fortune 500 companies. “We are strong in banking. We are strong in medical technology and the food industry,” O’Neil said. “Our top employers represent modern industries that are attractive to potential residents. I think that employment strength underpins so much of the construction activity that goes on here.” A diverse employment base, though, isn’t the only reason for the apartment Apartment to page 16

United Properties’ Eva Stevens: A teacher at heart By Dan Rafter, Editor Eva Stevens considers herself a teacher at heart. That’s fortunate: As the new executive vice president and chief operating officer of Minneapolis-based United Properties, Stevens will have plenty of opportunities to teach. That suits this commercial real estate veteran well. Stevens said one of her most important goals at United Properties is to develop the next generation of leaders at the development company, a task that she’ll rely on her teaching skills to accomplish.

“It gives me pleasure to see other people begin to more thoroughly understand what they are doing in this business,” Stevens said. “I like that part of my job. I like mapping out a path for the people working here, to help people understand where their strengths are, to help them sort out how to succeed.” This approach -- mentoring oth- Stevens ers -- has been a successful one for Stevens, helping her to build a successful career in the competitive

world of commercial real estate. She has worked at United Properties alone for 14 years, previously serving as executive vice president of asset management for the company. When Paul Hawkins, executive vice president and chief financial officer of United Properties, announced that he would retire in June, Stevens became an obvious choice for someone who could take on more responsibilities at the company. United Properties also promoted Eric Skalland, who Stevens to page 18

January 2015

Contents

Minnesota Real Estate Journal

JANUARY 2015 • VOLUME 31, NUMBER 01

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Departments PEOPLE

NEWS

RESOURCE GUIDE

UNITED PROPERTIES’ EVA STEVENS: A TEACHER AT HEART

The Minnesota Real Estate Journal (ISSN 08932255) is published monthly for $85 per year by Minnesota Real Estate Journal, 13400 15th Ave North STE C, Plymouth 55441. Phone: 952-885-0815. Periodicals postage paid at Minneapolis, MN. POSTMASTER: Send address changes to Law Bulletin Publishing Co, 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.

CASSIDY TURLEY/DTZ MERGER: MIDWEST CRE PROS EXCITED ABOUT INTERNATIONAL REACH

HOW ‘SMALL CHANGE’ DELIVERS BIG RESULTS FOR BUSINESS PROPERTY TAXPAYERS AT THE CAPITOL

AN INTERVIEW WITH CUSHMANWAKEFIELD| NORTHMARQ’S SONJA DUSIL, 2015 PRESIDENT OF THE MINNESOTA CHAPTER OF NAIOP

DIVERSE EMPLOYMENT BASE, PENT-UP DEMAND BEHIND TWIN CITIES BOOMING APARTMENT MARKET

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Minnesota Real Estate Journal

January 2015

People a division of Law Bulletin Publishing Co.

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 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

a division of Law Bulletin Publishing Co. 13400 15th Ave North Suite C Plymouth MN 55441 For information call 952-885-0815

Dougherty Funding LLC Mourns Passing of Executive Vice President Jerome A. Tabolich Dougherty Funding LLC announced today that Jerome A. Tabolich, 63, its Executive Vice President and Chief Operating Officer, died suddenly on December 31, 2014. Tabolich joined Dougherty Funding in 2004 and had over 30 years of experience in the commercial finance and lending industry. At Dougherty Funding LLC, Tabolich helped lead the development of the commercial loan participation and syndication business for the Community Bank market place, where he directed originations exceeding $5 billion. Jerry proudly served in the US Marine Corps and was a Vietnam Veteran. He graduated with a Master's Degree from the University of Minnesota. Jerry will be greatly missed by his family, friends and colleagues.

Ryan Companies US, Inc. Promotes Anders Pesavento to Vice President, Capital Markets Ryan Companies US, Inc. is pleased to announce that Anders Pesavento has been promoted to Vice President, Capital Markets. Since joining Ryan in 2009, Anders has been involved in over $900 million in capital transactions. In his role as Vice President, Anders is responsible for acquisitions and dispositions, raising debt and equity, and arranging development joint ventures. He also plays an important asset management role for the Ryan real estate investment vehicles. “Anders has done a terrific job building our relationships with capital providers,” said Dan Levitt, Senior Vice President, Capital Markets. “He has been the point person on several of our most significant capital transactions including the refinancing of W Minneapolis - the Foshay and the sale of Shutterfly, Inc. Anders is skilled at blending the analytical side and the sale side of a transaction which allows him to be more effective. He is known for his communication skills, attention to detail and strong work ethic. His expertise in the underwriting and analysis of complex real estate transactions allows him to effectively “tell the story” of real estate. Anders received a Bachelor of Sci-

ence in Business in both Real Estate and Urban Land Economics, and Finance from the University of Wisconsin Madison. He is a member of NAIOP, the Commercial Real Estate Development Association’s Deal & Investment Concept Forum, the Wisconsin Real Estate Alumni Association (WREAA), the Minnesota Shopping Center Association (MSCA), Ryan Companies Emerging Leaders Group (ELG), and he is a graduation coach for Achieve Minneapolis.

StuartCo Welcomes Back Kim Webster as Regional Executive Director of Senior Living Services StuartCo, one of Minnesota’s largest apartment management firms, announced that it has hired Kim Webster as Regional Executive Director of Senior Living Services to oversee the company’s Shepard Park Senior Housing Campus. Kim has been in the field of aging services for 34 years, holding various roles within senior housing, home healthcare and hospice, nursing homes, dining services and hospitals providing leadership, on site management, marketing and sales and customer service. Kim also has played an active and key leadership role in the development of the Leading Age of Minnesota Confident Choices program and Management Certificate programs. In her most recent role, Ms. Webster served as Vice President of Healthcare in Food and Management with A’viands, a service partner for Shepard Park Senior Housing Campus. Webster previously worked with us in the Executive Director role from 20032009 and was part of the development team when The Alton Memory Care was opened. She will be working with our teams at The Alton, Rockwood Place, The Wellington and Shepard Park Home Care to oversee all areas of operations including service and property integrity and quality; employee engagement, development and retention; customer service and financial success Kim earned her B.S. degree in Social Development at University of Minnesota Duluth. She has served in various positions including Board Member for Aging Services of Minnesota, and has received numerous awards including Excellence in Management and Best

New Senior Housing Development for The Alton Memory Care in 2008.

Christianson & Company Adds Sabine Shea Christianson & Company announced that commercial real estate veteran Sabine Shea joined the firm with more than 15 years of experience in financial management and business leadership. At Christianson & Company, Sabine will be focusing on Retail Brokerage and Investment Sales. “Sabine has been an investor and owner of commercial real estate since 2002, and is actively involved in acquisition, negotiation, accounting, managing and leasing of various entities,” said Christianson & Company President, Lisa Christianson. “This vast experience brings significant value to our clients.” Prior to joining Christianson & Company, Sabine was CFO, Partner and Treasurer of Tanek Inc. in Minneapolis, Minnesota. In her 15 years with Tanek, she was a member of the Board of Directors and oversaw financial management of the company.

THE EXCELSIOR GROUP HIRES GRANT CAMPBELL AS VICE PRESIDENT The Excelsior Group (TEG) is proud to announce the recent hire of Grant Campbell as Vice President. As Vice President for TEG, Grant Campbell is responsible for sourcing, underwriting, closing and managing opportunistic commercial real estate investments. Prior to joining TEG, Grant spent eight years at Welsh Property Trust (WPT), most recently as Director of Corporate Finance where he assisted the board of managers with investment strategy and strategic portfolio management. During his tenure with WPT, Grant assisted with underwriting, diligence and closing of over $525 million in acquisitions and dispositions. He also led corporate finance efforts for the company’s capital markets initiatives, including a private equity transaction with Almanac Realty Investors and the initial public offering of WPT Industrial REIT on the Toronto Stock Exchange.

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News MARCUS & MILLICHAP ARRANGES THE SALE OF A 60-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 Crest Oak Apartments, a 60-unit apartment property located in Coon Rapids, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $4,117,820. Dan Linnell and Mox Gunderson, investment specialists in Marcus & Millichap’s Minneapolis office, represented both the seller and the buyer in this transaction. In speaking with Mr. Gunderson he stated, “Crest Oak was a classic 1970’s class C building with strong historical occupancy and competitive rents. The sale commanded several offers and sold at full list price. The buyer was intrigued by the opportunity for increased return

Minnesota Real Estate Journal

through reaching market rent potential and stabilizing operating expenses. That coupled with favorable debt available made this an ideal property for the buyer.” Crest Oak Apartments is located at 9930 Bluebird Street Northwest in Coon Rapids, Minnesota and offers a mix of 26 one-bedroom apartments and 33 twobedroom apartments while situated in a mature suburban community.

Cushman & Wakefield | NorthMarq Secures Two Leases at Baker Technology Plaza The Cushman & Wakefield | NorthMarq (CWN) www.cushwakenm.com team of Dave Paradise and Sydney Johnson represented Baker Technology Plaza in two recent lease transactions. The Class A, five-building business park is located on Baker Road in Minnetonka. Avnet Inc, represented by Jeff Jiovanazzo, Colliers, is leasing 15,000 sq. ft. and is slated to occupy the space in the first quarter of 2015. Avnet is one of

the largest distributors of electronic components, computer products and embedded technology serving customers globally. This is a relocation from Avnet’s current space in the southwest market. Health E(fx), represented by Mark Leutem, Leutem Commercial Real Estate, has leased 3,900 sq. ft., and took occupancy in December 2014. Health E(fx) is expanding its Minneapolis headquarters to grow its account services teams. Health E(fx) is a cloud-based solution that automates all tracking, forecasting, and reporting to help ensure compliance while optimizing workforce and HR decisions within the framework set by the Affordable Care Act. The transactions provide both high tech companies flexibility for growth. “We’re delighted to secure sites in a technology-focused business campus for Avnet and Health E(fx),” said Johnson. “With high visibility along I-494 and immediate access to that freeway and Highway 62, Baker Tech Plaza is a great fit for both companies’ existing and long-term real estate needs.”

January 2015

St. Louis Park Landmark Renovated to Create OpenAir Power Center Cushman & Wakefield | NorthMarq announced today that the firm has been selected to provide leasing and property management services for the newly renovated Shoppes at Knollwood, the 463,000 sq. ft. premiere power center in St. Louis Park, Minn. The property underwent a nearly 10-month overhaul that transformed the nearly 60-year old regional enclosed shopping mall, formerly known as Knollwood Mall, into a vibrant power center with most retailers facing the street and parking lot. CWN will bring its leasing and management strength to the property, focusing its services on re-tenanting the power center with national brand retailers to complement the current tenant mix. “We are very excited to partner with Shoppes at Knollwood,” said Wendy Aaserud, CWN Senior Vice President, Regional Director, Property Management. “There is already an enviable mix of retail, dining and consumer goods tenants along with new retailers sched-

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uled to open within months. Shoppes at Knollwood is in an excellent location and is a convenient go-to destination for many consumers in the market. We are excited to be a part of helping return this shopping destination to its iconic glory.” CWN’s Senior Director, Brokerage Services, Tricia Pitchford will be responsible for the center’s leasing while Senior Property Manager Laura McGraw will manage the property. Shoppes at Knollwood is currently anchored by Kohl’s Department Store and Cub Foods, with TJ Maxx, Old Navy and DSW occupying the junior box plots that make up some of the redefined space. Additionally, Nordstrom Rack is set to open its second Twin Cities location at the mall in April 2015. Customers at Shoppes at Knollwood also can soon expect to see ULTA Beauty and Torrid, a fashion retailer for sizes 12 to 28. Panera Bread, once a part of the enclosed mall, is now a part of an outbuilding on the property. The newly renovated mall also features two outlots available for lease. “With its current and future tenant mix, there is a synergy at the Shoppes at

Minnesota Real Estate Journal

Knollwood that is sure to drive traffic,” said Pitchford. “And the outlots provide great upside potential for the right tenant. It’s an exciting property to be a part of…and we look forward to leasing and managing the property while adding tenants to Shoppes at Knollwood.”

CBRE ASSISTS NAF NAF GRILL WITH FINDING THEIR FIRST RESTAURANT 2LOCATIONS IN THE MINNEAPOLIS/ST. PAUL MARKET CBRE represented Naf Naf Grill in their selection of their first three locations in the Minneapolis/St. Paul market. Naf Naf Grill is considered the premium destination for fresh, authentic Middle Eastern food. Oven baked pitas, hand cut salads, and freshly prepared sauces all served as an accompaniment to award-winning shawarma and falafel.

THE EXCELSIOR GROUP HIRED AS THIRD PARTY / CONSTRUCTION MANAGER The Excelsior Group has been award-

ed a third party management contract at SouthView Gables Apartments in Inver Grove Heights, Minnesota. In addition to managing the property, The Excelsior Group will act as construction manager overseeing significant capital improvements over the course of three years. SouthView Gables, 424 units, is at 4930 Ashley Lane, near the intersection of Interstate 494 and Highway 52. The asset was acquired December 30, 2014 for $58 million by a partnership comprised of White Oak Partners (Ohio) and a fund managed by Ares Management (Atlanta). The apartment complex was built in 1987. The six buildings include four three-story apartment buildings, one clubhouse and a pool house.

TEAM INDUSTRIES LEASE IN ROGERS, MINNESOTA CBRE announces TEAM Industries lease 49,729-square-feet at I-94 Distribution Center in Rogers, Minnesota. Located at 22000 Industrial Boulevard, the property features 24’ clear height, multiple dock doors and easy access to I-94 and Highway 101.

January 2015

CBRE ARRANGES $62.6 MILLION IN FINANCING FOR ACQUISTION OF MINNEAPOLIS/ST.PAUL MULTIFAMILY PORTFOLIO CBRE Capital Markets’ Debt & Structured Finance team has arranged $62.6 million in financing for the acquisition of an apartment portfolio in the Minneapolis/St. Paul metropolitan area. The 1,422-unit portfolio consists of five garden-level apartment complexes in first- and second-tier suburbs of Minneapolis and St. Paul, Minnesota.

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Minnesota Real Estate Journal

January 2015

Cassidy Turley/DTZ merger: Midwest CRE pros excited about international reach By Dan Rafter, Editor

or Douglas Bolton, the merger between DTZ and Cassidy Turley in early January was the best possible way to start a new year. The merger mostly eliminated the Cassidy Turley name, leaving behind a much larger DTZ, one that boasts $2.9 billion in annual revenues and more than 28,000 employees. The new DTZ -- now owned by a private equity investment consortium backed by TPG Capital, PAG Asia Capital and the Ontario Teachers' Pension Plan -- also manages 3.3 billion square feet of property across the globe. Bolton, who was managing principal of Cassidy Turley's Cincinnati and Dayton regions and retains the same position now that the company is DTZ, says that he had long hoped that Cassidy Turley would expand its reach with such a high-profile merger. "When I first joined Cassidy Turley almost four years ago, I was hoping that something like this would happen," Bolton told Minnesota Real Estate Journal. "That was the discussion around my recruitement to come

Stettinius

here, that Cassidy Turley would grow into an international player in the commercial real estate services business. The promises made to me almost four years ago have certainly come

true." Bolton is far from the only Midwest CRE pro impacted by the merger. Cassidy Turley had a strong presence in the Midwest, operating in markets from Chicago to Columbus to Minneapolis. Bolton says that the brokers now working DTZ have gained an important benefit from the merger: DTZ has an international reach. The brokers working with DTZ, then, are now in better position to do business not only locally and nationally, but internationally, too. "In this industry, you definitely need to get bigger to be better," Bolton said. "The ability to do business across the globe is a prerequisite. The DTZ organization comes to this party with a great list of clients, too. Besides our brokers now having the ability to push our

clients into international markets in a way we couldn't before, we now have the ability to represent some great U.S. clients we didn't have access to before." Jeff Henry, former managing principal with Cassidy Turley's Indianapolis office who now holds the same position with DTZ, said that he, too, is excited about the merger. Like Bolton, he pointed to DTZ's international presence as a major positive. "Our ability to do more multi-market and international business because of the reach of DTZ is exciting," he said. "We were strong locally and nationally as Cassidy Turley. But there was a certain amount of business with existing clients and prospects that we couldn't get because we didn't have an international presence. This will help us alleviate those roadblocks." Changes Tod Lickerman will serve as the global chief executive officer of the integrated company. Joseph Stettinius Jr., Cassidy Turley’s chief executive officer, is now chief executive of the Americas, while Brett White, former

chief executive officer of CBRE Group, who also invested in the acquisition, will become full-time executive chairman beginning in March of 2015. “This combination is an excellent cultural fit and mutually beneficial for both companies, given our strong position in the U.S. market and DTZ’s global footprint,” said Stettinius in written statement. “As DTZ and Cassidy Turley join forces under our new brand and ownership, I’m excited about the advantages we can now offer our clients and our people.” In a blog post about the move, Stettinius says that DTZ is now a top-three global commercial real estate services firm. He points to the combination of the smaller and “more tenacious” Cassidy Turley with the global power of DTZ as a reason why the acquisition of Cassidy Turley made so much sense. “DTZ’s established full-service resources throughout Europe and Asia, paired with Cassidy Turley’s legacy of strong market leadership in the U.S. will immediately create new advantages for our clients,” Stettinius said in his post. Lickerman, too, said that the acquiMerger to page 16

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Minnesota Real Estate Journal

January 2015

How ‘Small Change’ Delivers Big Results for Business Property Taxpayers at the Capitol By Brandon Champeau Vice President, United Properties Chair, Public Policy Committee NAIOP, Minnesota Chapter The Commercial Real Estate Development Association Many NAIOP chapters and local trade organizations ask me, “What’s the secret to NAIOP’s constant success at the State Capitol and in the legislature?” “You’re there every year,” they say, “leading the charge on property taxes and the business environment ---and you’ve been unusually effective. What do you have that other organizations don’t have?’ My answer is that we have many of the same advantages that other professional or industry groups have---an outstanding Capitol Hill lobbying team, hundreds of highly motivated and involved members, well orchestrated and executed media campaigns for our issues, and a superb public policy committee made up of smart, dedicated volunteers who plan and direct

Brandon Champeau the entire program. But we also have one more advantage that not only makes us unique among all other NAIOP chapters nationwide, but that is also highly unusual among other comparable professional organizations---a single, dedicated source of ongoing funding of our

public policy efforts called the “Penny Per Square Foot Fund.” Conceived of 24 years ago by the late Boyd Stofer, a top executive at the time of what today is United Properties, the idea behind the Penny Per Square Foot Fund is the essence of simplicity: Minnesota’s commercial and industrial property owners each contribute just one penny to the Fund annually for each square foot of building space they own or manage. Their pennies are combined with the pennies of dozens of other Minnesota business property owners, and then used exclusively to fund NAIOP Minnesota’s nationally recognized, award-winning public policy program. From its very first day, the Fund has had just one purpose: to provide the financial support needed to defend our state’s business property taxpayers--property owners and their employertenants—against increases in commercial-industrial property taxes and other government-imposed business costs.

Winning the Business Property Tax Battle, One Penny at a Time When the Fund was established in 1990, the statewide effective tax rate on commercial-industrial property stood at 4.32%. Over the next five years, the rate grew steadily higher, reaching an astonishing and almost forgotten peak of 5.95% in 1994. With the Fund’s support, NAIOP’s public policy teams went to work at the Capitol and in the media, winning support and reductions almost every year, including the major tax reforms of 2001, in the process delivering millions of dollars in property tax savings to business property taxpayers all across the state. More recently, the importance of the support provided by the Fund to our efforts has grown even larger. In fact, NAIOP President Sonja Dusil, Cushman & Wakefield | NorthMarq, describes it as “the critical component of our efforts at the Capitol.” That view is shared by Dave Jellison, Liberty Property Trust: “It is diffiSmall Change to page 20

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Minnesota Real Estate Journal

January 2015

An Interview with CushmanWakefield| NorthMarq’s Sonja Dusil, 2015 President of the Minnesota Chapter of NAIOP Sonja Dusil, Executive Director/Brokerage Services, has been involved in client services for Cushman & Wakefield | NorthMarq for 18 years, specializing in owner representation and the acquisition, disposition, repositioning and renovation of office properties in the Central Business District of Minneapolis, as well as unique properties in the North Loop and Warehouse Districts. In addition to heading up NAIOP Minnesota in 2015, she is a member of and serves on the local Board of the Society of Industrial & Office Realtors (SIOR). Q. As president of NAIOP Minnesota, and as the new leading public advocate for commercial real estate developers, owners and investors in our state, as well as their thousands of business tenants and clients, what is your view of the state of the industry and the outlook for 2015? A. We have a healthy marketplace, with many great things to be thank-

Sonja Dusil ful for---a strong economy, low unemployment at 3.6 percent, and billions of dollars being invested into making the Twins Cities into a strong live-work-play environment. The vibrancy of what’s going on in Minneapolis is really exciting for the entire Twin Cities and greater metro

areas. It means an influx of new capital into our marketplace, and I am hopeful that it will lead to more businesses locating here and it is also helpful in attracting and retaining a talented labor pool.

how that will affect the timing of new construction and how older buildings become relevant and maintain or increase their value through re-purpose and or renovation.

Q. Do you see any problems or concerns looming on the horizon for the commercial real estate industry? A. I don’t view them as problems so much as challenges. We need to be especially aware of our rapidly changing workforce, and the evolving views of business owners about how their space is utilized. Businesses are confident again, making decisions about their space needs and what’s important to the success of their business. However, although we are seeing deal velocity coming from this business confidence, that doesn’t necessarily equate to absorption of space. As companies continue to look for ways to reduce their overhead and do more in less space, the industry needs to be aware of

Q. How did you first become involved in the commercial real estate industry? A. I was working for a company called SBA, in site acquisition for cell tower sites for our client, Sprint. I found a desirable site and I guess I bombarded the broker who was representing the owner with phone messages, trying to get more information. When we finally connected, he was rather blunt with me. “You know you are really quite annoying,” he said. “Have you thought about going into commercial real estate? ” I guess that’s what started it all, that and a proposal from United Properties. And here I am, nearly 20 years later. Dusil to page 23

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Apartment From page 1

boom in the Twin Cities. Pent-up demand for rental housing is also driving much of the multi-family construction activity here. As O’Neil says, there wasn’t enough multi-family or singlefamily housing construction from 2008 through 2011 to meet the demands of a growing population. According to Dougherty's report, the number of households in the Twin Cities continued to expand by about 14,000 to 15,000 people each year during that time period. But during that four-year period, housing production brought no more than 5,000 units in any given year to the region. Developers, though, haven't been shy about meeting the area's demand for rental housing since 2010, in part thanks to the low interest rates that remain today. As Dougherty's report says, the multi-family boom in the Twin Cities isn't over, either. According to the report, the market will see the arrival of 22 new multi-family projects in 2015. These projects will add more than 3,800 new rental units. And in 2016? Up to 11,400 rental units are being proposed for the market.

Minnesota Real Estate Journal

O’Neil says that he isn’t worried that developers are overbuilding here. “I’m not concerned simply because for so many years our housing production in the Twin Cities was so low,” O’Neil said. “In the years of the housing crisis and the financial crisis, we were not producing enough housing units for the number of people who were moving here. So there is an element of catch-up going on now in the housing market. We haven’t yet met all of the pent-up demand.” For evidence of this, O’Neil points to a multi-family vacancy rate that fell to just 2.4 percent in the third quarter of 2014 in the Twin Cities market. “Clearly, we are absorbing all the new rental housing that is being built,” he said. “There will still be a healthy, strong rental market through 2015, at least.” The Minneapolis/St. Paul market is benefiting from another trend: In recent years, young consumers have increasingly headed to the core areas of cities. They want to live in an area in which they can walk to public transportation, movies, grocery stores, restaurants and parks. This trend has been evident in the Twin Cities for years. It’s one of the reasons why developers have been so eager to build multi-family projects in downtown and its surrounding com-

munities, O’Neil said. What type of rental housing is being built here? According to Dougherty's report, developers have built a solid number of high-rise apartment projects -- those rising eight or more stories above ground -- in downtown Minneapolis, neighborhoods near the University of Minnesota and in certain suburban locations such as Edina, Bloomington and St. Louis Park. This high-rise construction has accounted for 8 percent of all the new apartment units built here since 2010. Mid-rise construction, though, has been even hotter. Developers have built 74 mid-rise buildings -- those rising four to seven stories above the ground -- in all areas of the Twin Cities market since 2010. This type of building has accounted for 59 percent of all new rental units in the market since 2010. O’Neil expects the positive multifamily news to continue for the Twin Cities. He expects more young residents to head to the urban core of the market. And he expects government officials and developers here to continue putting dollars into the region’s infrastructure and amenities as a way to attract new residents of all ages. “We have had two light-rail lines open in the Twin Cities in the last 10 years. We have also had a commuter rail line open,” O’Neil said. “That has

January 2015

helped generate interest in the central core of the Twin Cities. It has also really helped to spur development along those lines. That has been an important factor, too, in boosting the amount of apartment units being built here.” Merger from page 10

sition will result in a stronger DTZ. “The combination of our two companies under new ownership has immediately enhanced our ability to meet our clients’ needs with speed, efficiency and flexibility—service qualities that are unique among global firms our size,” Lickerman said in a written statement. Henry told Minnesota Real Estate Journal that he is ready to compete for new business now that his brokers have the DTZ name behind them. "If you want to compete for certain types of business, you need to get bigger," Henry said. "This merger allows us to get into the door and have a conversation with clients that we were challenged to reach before."

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Stevens From page 1

is taking over the role of vice president and president of asset management at the company. The importance of teaching Stevens is committed to United Properties, of course. But she also devotes time to the commercial real estate industry as a whole. She is an active member of NAIOP, for instance, serving with the association’s developing leader mentorship program. She meets monthly with young commercial real estate professionals to discuss a wide range of issues, everything from how new brokers can gain confidence to the challenges of gaining clients to the issues that women face in an industry that is still dominated by men. During these meetings, Stevens again relies on her teaching and mentoring skills. “I never use language that insinuates that someone has made a mistake,” Stevens said. “I prefer using language that indicates we are having a learning experience. My team is a safe place. We’re welcome to try new ideas, to stretch our understanding of a situation. That makes us stronger.” Stevens, of course, tackled many of

Minnesota Real Estate Journal

the same challenges that the young pros she mentors once faced. When she first entered the commercial real estate industry, there were not many women in the profession, especially in investment real estate. Stevens rarely saw women at industry functions, either. She didn’t let this slow her, though. Instead, Stevens and her fellow female real estate pros in the Minneapolis/St. Paul region formed their own networking group. The group was a small one, with about 10 members. But these members supported each other and became each other’s mentors. Most impressive? The members still meet on a monthly basis. Stevens has watched these peers change jobs, get married, get divorced, have children and celebrate the arrival of grandchildren. “I grew up in a neighborhood of all boys. It never occurred to me that as a woman I didn’t belong in real estate,” Stevens said. “Back then, the women I knew in this business created our own mechanisms for success. We didn’t let being women matter. We didn’t let that become barriers to us.” A career that is also a passion Stevens didn’t initially plan a career in real estate. She graduated college with a degree in accounting and went to work as an entry-level auditor. But once there, she quickly migrated to the

January 2015

company’s real estate team. “I don’t know if it was the real estate that attracted me or the fact that the leader of that team was such a highenergy, inspiring person,” Stevens said. “But there was something about real estate that grabbed me. I discovered that I really enjoyed working in real estate.” It helped that one of the first real estate projects on which Stevens worked was helping to build the financial model to facilitate the bond sale that helped make Minneapolis’ Metropolitan Stadium – former home of the Minnesota Twins – a reality. That stadium, of course, is now being demolished for a more modern, high-tech sports stadium in Minneapolis. But Stevens gained a taste for using her number skills for forecasting the future instead of analyzing what has already happened. “Each piece of real estate to me is like running a small business,” Stevens said. “That is very appealing to me. So I’ve stayed on that path over the course of my entire career. I’ve always wanted to do something with numbers, real estate and investment. That has always been interesting to me.” When she looks back at her career so far, Stevens points to several traits that have helped her succeed. She has a natural interest in understanding how things work, and the same natural type

of interest in teaching. Just as importantly, Stevens seeks new challenges. In commercial real estate, new challenges are always waiting. “I think that the most important thing for me is always being open to learning something new,” Stevens said. “There is always something changing in this industry. A building is aging. Tenants are leaving. Something is always happening. Being open to that learning has been really beneficial to me.” Stevens also understands the importance of balance. When she’s not working, Stevens prefers to spend time with her spouse of 38 years and her family. She’s active, too, a fan of everything from hiking to snow-shoeing. Then there’s her horse. Stevens spends plenty of time at her barn with her horse to relax and ease the stresses that sometimes come with a career in commercial real estate. “At the end of the day, I look forward to the quiet time,” Stevens said. “You need that time with your spouse and your family. That’s what it’s all about.”

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Page 20 Small Change from page 12

cult to imagine where our property taxes would be today, given commercial real estate’s high values, if the Penny Per Square Foot Fund and the efforts it supports had not been effective in reducing the class rate from its peak in 1994 of 5.95 percent.” Dusil says commercial property owners “have a fiscal responsibility to support NAIOP’s legislative initiatives, which in turn benefits the entire commercial real estate industry. The Fund is a unique component of our Minnesota chapter and our public policy program, one that many people may not even be aware of.” Focused on Defending Business Property Taxpayers The Penny Per Square Foot Fund was originally established with a list of high priority goals, set by NAIOP Minnesota’s Board of Directors and the Public Policy Committee. Those same goals apply today. --First among them is continuing to defend and protect the property tax reductions NAIOP has won over the years for owners of commercial-industrial property and their business tenants. As part of that defense, NAIOP’S Capi-

Minnesota Real Estate Journal

tol team and the Public Policy Committee are charged with monitoring public policy debates closely, playing an active role in those debates, and measuring the potential impact of any proposed legislation or regulations that might affect business property taxpayers. --Another priority has been identifying and understanding the cause and effect relationships which lie behind the constant need for increased property taxes. The Public Policy Committee’s Transparency Initiative has addressed this challenge in a major way, through our efforts over the past few years to encourage legislation requiring greater transparency regarding budgets and spending decisions by local governments. The Initiative calls for uniform reporting statewide by cities and counties of their spending by specific line items, known as object codes, (compensation, health benefits, pensions, etc.) rather than just by department (parks, public safety, administration, etc.) or function. Legislation proposed by NAIOP Minnesota reached the governor’s desk in 2012 with bipartisan support, but was vetoed along with the omnibus tax bill of which it was a part. We are reintroducing it again this year and in 2016, if necessary. In the meantime, support for

the concept of introducing greater clarity and understanding of local budgets has been growing, with several statewide citizens groups considering joining with NAIOP in this important taxpayer focused effort. --Supporting all of these efforts is another Fund priority, that of informing the public and our elected leaders at every level about the actual impact of their spending and taxing decisions on economic growth and job creation in our state. NAIOP has done that through an ongoing statewide public relations program designed to educate legislators, taxpayers and especially the media about the economic concerns of the commercial real estate industry and our job-creating business tenants. Strengthening the Fund: A Major NAIOP Goal Keeping business property taxes fair and competitive with other states continues to be a critical issue for Minnesota businesses. Strengthening and growing the Fund and its partnership role in supporting NAIOP’s public policy efforts will be the key to our future success in assuring a more equitable property tax system, which in turn will benefit our tenants and enhance their ability

January 2015

“I hope that 2015 will be a year in which awareness of the benefits the Penny Per Square Foot Fund has brought to our commercial real estate industry will be elevated and recognized,” says Sonja Dusil. “It is important for our industry to know the history of our success as a result of its support--not only the deep reduction in the class rate on C-I properties over the years, and our success in defeating efforts to impose new taxes, such as our resounding defeat last year of the warehouse tax---but also the future benefits the Fund will continue to provide to owners and users of commercial space.”

January 2015

News From page 8

garden-level apartment complexes in first- and second-tier suburbs of Minneapolis and St. Paul, Minnesota. Murray Kornberg, Doug Seylar, Joel Torborg and Ben Bastian of CBRE’s Minneapolis office worked on behalf of the buyer, Sterling Georgetown, LLC, an affiliate of Fargo, North Dakotabased Sterling Real Estate Trust, to secure the new 65% loan-to-cost permanent financing. The portfolio was strategically separated into two cross-collateralized loans with different maturities to spread the timing of future refinancing. One loan holds a 10-year tranche at 3.72% fixed-interest rate, and the other a 15-year tranche at a 4.00% fixed rate; the loan amounts are $16,705,000 and $45, 890,000, respectively. The financing was originated through CBRE’s correspondent relationship with AEGON USA Realty Advisors, LLC, with funding from Transamerica Life Insurance Company. A sixth property financed

Minnesota Real Estate Journal

with an existing banking relationship, Bell State Bank & Trust, was also acquired bringing the total acquisition to 1,494 units. “Aegon was able to close this loan on a very tight time frame to accommodate the transaction requests, and their twotranche structure was an excellent solution for the purchaser,” said Mr. Kornberg, Senior Vice President, CBRE Capital Markets. The properties were marketed for sale by CBRE’s Abe Appert and Keith Collins. The buyer was represented by Jim Echtenkamp, Principal at Goldmark. The portfolio was 99% leased at acquisition. Sterling Real Estate Trust will continue to expand upon the recent in-unit and common area upgrades in process at some of the properties and will utilize GOLDMARK Property Management Inc. to provide property management services for the portfolio. “This transaction provided Sterling with the opportunity to acquire a large portfolio of well occupied, well main-

tained and well located multifamily assets,” said Brad Swenson, president of Sterling Real Estate Trust.

NorthMarq Capital’s Minneapolis office secures $10.7 million in acquisition financing for Williston Business Center Patrick S. Minea, senior vice president/managing director and Dan Trebil, senior vice president/managing director of NorthMarq Capital’s Minneapolis based regional office arranged $10.7 million in acquisition financing for the Williston Business Center, a 354,730 sq.ft. of multiple office properties in Minnetonka, Minnesota. NorthMarq arranged financing for the borrower through its correspondent relationship with a life insurance company. “This acquisition financing provides significant structure and flexibility, which will allow the borrower to efficiently execute their business plan for this well-located property,” said Minea.

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MARCUS & MILLICHAP ARRANGES THE SALE OF A 22-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 Amber Court Apartments, a 22-unit apartment property located in Minneapolis, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $2,100,000. Josh Talberg, an investment specialist in Marcus & Millichap’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 Josh Talberg along with Mox Gunderson and Dan Linnell, investment specialists in Marcus & Millichap’s Minneapolis office. Speaking with Mr. Talberg, “Offered for the first time in over a quarter-cenNews to page 22

Page 22 News from page 21

tury, Amber Court Apartments presented the investment community a rare opportunity to acquire a well-kept, pride in ownership type asset in the highly desirable southwest metro rental market. The deal received interest from both local and out-of-state investors, ultimately generating18 offers within a 2week marketing timeline. The property closed within 2.5 weeks of going under contract substantially over list price.” Amber Court Apartments is located at 5523 and 5531 Washburn Avenue S in Minneapolis, Minnesota. Built in 1959, the building itself features vintage appointments such as original woodwork, original hardwood flooring, ample closet space, and modern day conveniences such as built-in air conditioning units, circuit breakers and garage parking.

MARCUS & MILLICHAP ARRANGES THE SALE OF AN 84-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 Grant Street Commons, an 84-unit apartment property located in Minneapolis, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $8,484,000. Dan Linnell, Mox Gunderson and Josh Talberg, investment specialists in

Minnesota Real Estate Journal

Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a partnership. The buyer, a private investor, was also secured and represented by Dan Linnell, Mox Gunderson and Josh Talberg. In speaking with Mr. Linnell, “The property was very well received by investors and ultimately generated 14 offers. The property sold above the list price due to the intense bidding competition and closed at $101,000 per unit. The new owner plans to upgrade units as well as common area amenities to attract working professionals downtown and to subsequently obtain higher rents. The seller was very pleased with the strong interest for the building and the Elliot Park Neighborhood, which has improved in strides over the last twenty years. The property is located just blocks from the new Vikings Stadium and Ryan’s Downtown East Project.” Mr. Linnell, speaking of the subject specifically, stated: “It was built in 1984 and although the building was in good shape, it was mostly original and its fixtures had become somewhat dated. The building is comprised of nine studioapartments, 65 one-bedroom apartments and 10 two-bedroom apartments. It features underground and surface parking, a large greenspace, fitness center and large community room.” Grant Street Commons is located at 515 E Grant Street in Minneapolis, Minnesota.

Dougherty Mortgage LLC Closes $3.2 Million Fannie Mae Loan for Trails Place Townhomes Dougherty Mortgage LLC, a full service national mortgage banking firm, has arranged a $3.2 million Fannie Mae loan for the acquisition of Trails Place Townhomes, a 62-unit market rate multifamily housing property located in Wylie, Texas. The 10-year term, 30year amortization, 1-year interest only loan was arranged by Dougherty’s Dallas, Texas office, for borrower 3515 North Story IBAN, LLC. Dougherty Mortgage LLC is a full service mortgage banking firm, an approved FHA MAP and LEAN lender, as well as a Fannie Mae Delegated Underwriting and Servicing (DUS®) lender, offering a variety of loan products for the acquisition, refinance, construction or rehabilitation of various property types. In addition, Dougherty Mortgage LLC provides loan servicing on their mortgages and is an approved Ginnie Mae seller/servicer, currently servicing in excess of $3.5 billion of loans. Based in Minneapolis, Dougherty Mortgage also has additional offices in California, Colorado, Tennessee, Texas and Virginia.

CBRE Announces the Execution of a Joint Venture Partnership to Develop an Industrial Park in Rogers CBRE announces the execution of a joint venture partnership between Launch Properties and Greenfield Partners to acquire and develop Launch Park

January 2015

Rogers. The sponsor, Launch Properties, was represented by CBRE Institutional Properties in Minneapolis led by Steven Buss and Judd Welliver. Launch Properties is a leading developer of industrial, healthcare, retail, and office properties in the Twin Cities. Co-Principals Mark Nordland and Dan Regan have devoted their combined 35 years in commercial real estate to acquiring, developing, and repositioning institutional quality real estate assets and have completed projects with an aggregate value of $800,000,000, including over 5,000,000 square feet of new development and acquisitions.

CBRE Announces Sale of 26Story High Rise in Downtown Minneapolis CBRE announced today that it has closed the sale of the 26-story, high rise Symphony Place Apartments in downtown Minneapolis. Abe Appert, Keith Collins and Laura Hanneman of CBRE’s Minneapolis office represented the seller, Chicago based Waterton Associates L.L.C. The purchaser was MLVI Symphony Place Apartments, LLC, an affiliate of CASA Partners VI, LP, a closed-end multifamily real estate fund sponsored by TIAA-CREF Alternatives Advisors, LLC.

January 2015 Dusil from page 14

Q. What led you to join NAIOP, get involved, and eventually follow the leadership track to the presidency? A. I joined NAIOP because, once I was working in the industry, I discovered that it was the organization to be part of, clearly the leader of the CRE industry in Minnesota. Getting more personally involved, first at the committee level, just came naturally. I was chair of the Community Enhancement Committee for several years, a really fulfilling job, and then went on to serve on almost every other committee---golf, education, and eventually the board of directors, which led to where I am today. Q. Do you see your own path as a model for other NAIOP members? A. I absolutely do, especially for our Developing Leaders group. They are a very smart, strong group, and have been very helpful to NAIOP in many facets. But that applies to all of our members—we are lucky to have so many fully involved and deeply engaged people who are really not only committed to their industry and their colleagues but also to our organization. Q. How is the Chapter doing in terms of growth and member involvement, compared with others across the country? A. We’re holding steady at 750 members, which makes us the fourth largest chapter in the nation. And that’s especially unusual, given the competitive environment within our local real estate community. Our market is so different from most others—we compete so directly with many other real estate organizations and their offerings, not to mention competing for people’s valuable time. Despite that more challenging environment, we continue to have a highly engaged membership as well as a steady influx of new and

Minnesota Real Estate Journal

younger members as well, and that is critical to the continued success of our organization. Q. What are your personal goals as president for the coming year--what would you like to have accomplished when you look back next January on your twelve months in office? A. I guess my primary objective is to assure the overall continued success of the chapter, by selecting a couple of meaningful things and doing them well. One of my goals is to promote our value proposition as strongly as I can, I want to elevate the awareness of the value that our organization brings to our members and the market. I’d like to ensure that people continue to recognize and truly understand and appreciate the value NAIOP brings to our industry. I also want to drive membership and member involvement in the chapter. As I mentioned, we are enjoying an influx of new, younger members who bring great energy and new ideas. We need to serve them well, through better educational and advocacy opportunities. I also want to strengthen and stabilize our unique Penny Per Square Foot Fund, and assure its continued success. My dedication towards the fund is a testament to the memory of the late Boyd Stofer, my boss at United Properties, and his work creating the fund. Over the years it has become critical to our success and effectiveness in defending and advancing the interests of our members. As we are seeing new investors and owners entering the Twin Cities market I want to try to recruit them as new, strong supporters and contributors to the fund. That’s the best way to assure the continued success of the fund and all of the important public policy work our chapter does on commercial property taxes and other issues affecting our members and their business tenants.

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Q. What are the major issues and concerns your public policy team will be addressing in the 2015 legislation session that has just begun? A. As always, our first priority will be to protect our members and all business property owners and their tenants against unreasonable increases in taxes on commercial property. Costs matter greatly to our members and to the employers who lease or occupy the buildings our members develop, own or manage— especially those costs over which they have little or no control, particularly property taxes and increasingly, overburdening regulations which hamper their ability to work and be successful. Q. One of NAIOP’s key policy initiatives over the past couple of years has been seeking legislation requiring greater transparency in local governments’ reporting on budgets and spending. Will that continue? A. Having more transparent reporting on local spending, by expenditure type (compensation, pensions, health benefits, and other line item costs) rather than by department or function, as is currently the case for most local governments, is the key to understanding what is really driving the constant need for higher property taxes, and enabling all taxpayers to get more involved in the local budgeting process. We are working hard this year to build a new coalition of leading statewide citizen groups who believe as we do—that every taxpayer has a right to know what his money is actually buying---and with their support we will continue to push for uniform legislation requiring it across the state, in this session and in 2016.

quarters staff, at a time when the federal government seems to be becoming more involved in real estate industry issues? A. Our Minnesota chapter will be right beside them, and support their efforts both nationally and locally. There are a host of issues that, although being discussed at the national level, have huge implications at the local level. We are fortunate to have an extremely strong team in Washington working hard to defend our interests, and we’re dedicated to doing everything we can to assure their success and influence. Q. NAIOP’s members are major players in economic development and big drivers behind construction, job creation and the ripple effects of development. What more can be done to encourage and support increased business expansion and employment growth here in Minnesota? A. We must continue to work to hold down business property taxes and control the urges of government at every level to add layers of regulations and costs that hamper development and growth. Quite simply, we have to help our policymakers make smart decisions about supporting business growth by controlling all business costs—keeping them reasonable and our state competitive. That will build business confidence and reassure employers, investors and entrepreneurs that they have a bright, prosperous future here in our state. Thank you, Sonja.

Q. What do you see as the Minnesota Chapter’s role in supporting the work of the national head-

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