MREJ January 2016 by REjournals

VOLUME 32, NUMBER 1

January 2016

Bloomington’s Bridgewater Bank strengthens its presence in Twin Cities market By Dan Rafter, Editor

loomington-based Bridgewater Bank is growing. The financial institution signed a merger agreement with First National Bank of the Lakes, a bank based in Orono, Minnestoa. The merger, once it officially closes, will give Bridgewater Bank a larger footprint in the Minneapolis market and a stronger presence in the Twin Cities' western suburbs.

First National Bank of the Lakes has about $76 million in assets and operates four branches. Bridgewater Bank, before the merger, had more than $925 million in assets and four branches serving Minneapolis and its southwest suburbs. This means that the newly combined bank will end up with assets of more than $1 billion. The bank's headquarters will remain at 3800 American Blvd. West in Bloomington. Jerry Baack, chairman of the board of Bridgewater Bank, said that the time was right for his bank to make this move. Bridgewater Bank to page 19

Marshall Saunders: Using the power of crowdfunding to turn ordinary people into real estate investors By Dan Rafter, Editor

arshall Saunders believes in the power of crowdfunding, and he believes that it can help ordinary people invest in real estate. That's why Saunders, a Minnesota native who now lives in Saint Paul, founded SaundersDailey, a real estate crowdfunding platform that lets smaller investors own a piece of their own neighborhood.

“There is something about crowdfunding that has always appealed to me,” Saunders said. “There is a basic fairness to it. A lot of people are left out of income-producing properties. They are not asked to participate. They need to bring large amounts to be able to invest. With crowdfunding, people can be involved with a much smaller investment required.” A visit to SaundersDailey shows exactly what Saunders means. Check out the company's Web site at SaundersDailey.com, and you'll find a multifamily

property in Minneapolis that you can invest in for just $2,500. That property is expected to bring a 5.98 percent to 8.65 percent dividend return each year and another 12 percent to 14 percent return on your original investment when the property is sold. Another multifamily property in Minneapolis is expected to bring a yearly dividend return of 6.18 percent to 7.74 percent. You can invest in this property Crowdfunding to page 14

Condominium & Townhome Development Summit February 25, 2016 Golden Valley Country Club 7001 Golden Valley Road Golden Valley, MN 55427 7:15 AM Registration 7:30 AM Hot Buffet 8:00 AM – 12:00 PM Program

Speakers Include: Beth Ulrich, BohLand Developmen Steve Bohl, BohLand Development Joe Grunnet, Downtown Resource Group Keena Maher, Waterstone Mortgage Mallory Busacker, BohLand Development Gina Dingman, NAI Everest Mary Bujold, Maxfield Research Herb Tousley, University of St Thomas Rick Packer, Mattamy Homes Aaron Roseth, Elness Swenson Graham Architects, Inc. Ian Peterson, David Weekley Homes

8:00 AM 2015-2016 Condo Market Overview & Update • State of the industry • Who are the players in the market and what are the projects in the pipeline • Lessons learned from last decade • Where does Minnesota stand compared to the rest of the United States • A check list of need to know about the condo marketplace • Market forecasts, trends and projections • The importance of a quality feasibility study • How has the current economic conditions affected the condo industry

8:55 AM 2016 Project Spotlight • Unique Mixed–Use Development – Senior Housing, Retail, Hospitality and Why BohLand chose to purchase? • Design & Construction – Project Approvals, Unique Project Elements • Demographic – Who are our buyers? What are they looking for? How Regatta fit those needs & how the Landing has improved upon that fit • Landing Hotel & Residences – Lake Minnetonka market, sales and clients • Success in the luxury suburban market – lifestyle

9:55 Break 10:05 AM Developers Perspective • Why Apartment and not Condo • State of the industry from the developers perspective • Whats the math when deciding apartment versus condo • Market rent per square foot • Floor mix plan and why so many one bedrooms

11:00 AM Townhome, Mixed Use And Master Planned Communities • Market Update • Demographic Of Buyers For Townhome Or Mixed Use Developments • First Time Buyers Versus Move Up Market. • What Are Buyers Looking For? Attached or Detached Housing. • Is There A Market For 55+ Active Adult Large Scale Communities With Amenities? • How Has The Change In Building Codes Impacted Townhome Construction? • Trends And Opportunities

12:00 PM Adjourn and Networking

January 2016

Contents

Minnesota Real Estate Journal

JANUARY 2016 • VOLUME 32, NUMBER 1

BLOOMINGTON’S BRIDGEWATER BANK STRENGTHENS ITS PRESENCE IN TWIN CITIES MARKET MARSHALL SAUNDERS: USING THE POWER OF CROWDFUNDING TO TURN ORDINARY PEOPLE INTO REAL ESTATE INVESTORS

TWIN CITY RENTERS INCREASINGLY EXPECTING HIGHER-END AMENITIES IN THEIR APARTMENT COMMUNITIES

SALES AND USE TAX: WHAT CONTRACTORS NEED TO KNOW

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Departments PEOPLE

NEWS

The Minnesota Real Estate Journal (ISSN 08932255) is published monthly for $85 per year by Minnesota Real Estate Journal, 13700 83rd Way N, STE 206, Maple Grove, MN 55369. 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. ©2016 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

January 2016

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13700 83rd Way N, STE 206 Maple Grove, MN 55369 For information call 952-885-0815

Publisher | Managing Editor Jeff Johnson jjohnson@recg.com Associate Publisher Jay Kodytek jkodytek@recg.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Conference Manager | Art Director | Graphic Designer | CE Specialist 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. 13700 83rd Way N, STE 206 Maple Grove, MN 55369 For information call 952-885-0815

Ryan Companies US, Inc. Announce Promotion of Gary Prinsen to Vice President of Construction Operations, North Region Ryan Companies US, Inc. is pleased to announce the promotion of Gary Prinsen to Vice President of Construction Operations in their North Region. In his new position, Gary will be responsible for the overall leadership and direction of the North Region construction team and will oversee a group of construction leaders including preconstruction/estimating, project management and field operations. In addition, he will continue to play a key role in developing long-lasting relationships with both existing and prospective customers, vendors and subcontractors. “Gary has proven to be a very effective leader and has earned the trust and confidence of his team and our customers. He has a strong track record for hiring top talent and developing the people on his team while delivering excellent results for our customers,” said Collin Barr, President of Ryan’s North Region. “For over 25 years, Gary has been a valuable member of the Ryan team and we’re excited about this new executive leadership opportunity for him. Since joining Ryan in 1990, Gary has been responsible for the construction execution of such notable projects as Midtown Exchange, W Minneapolis – the Foshay, and 222 Hennepin, a 580,000-square-foot mixed-use development with 286 upscale apartments and the first Whole Foods Market in downtown Minneapolis. Most recently, he has served as the Construction Executive in charge of Ryan’s Downtown East mixed-use project that now encompasses a total construction contract value of $443 million across multiple uses including office, apartments, retail, parking and a Radisson Red Hotel. “I’ve always felt that culturally and ethically, Ryan Companies was a natural fit for me. We are a culture of people that care about each other. Jim Ryan said that when people know they are cared about, it facilitates great work. I believe that is the secret ingredient in delivering projects the Ryan way. Ryan employees are also empowered to do the right thing and, in a business where

lines can become blurred between right and wrong, it’s liberating to know that simply doing the right thing is the leadership expectation,” said Gary. “I’m honored to be a part of the Ryan team with priorities to facilitate the culture and the opportunity to work with such a talented and caring group of professionals.”

Ryan Companies US, Inc. Promotes Mike Cairl to Chief Construction Officer Ryan Companies US, Inc. is pleased to announced that Mike Cairl has been promoted to Chief Construction Officer. In his new position, Mike is responsible for the overall leadership of Ryan’s construction operations on a national level. He will play a key role in Ryan’s strategic plan to advance cost intelligence, leverage new technologies, strengthen the integrated delivery of Ryan’s services, enhance construction operations processes, and implement best practices across all regions. “Mike’s strong construction knowledge, deep design-build expertise, unwavering commitment to customer service, keen sense to grow profits, and great ability to mentor employees make him very well suited for this new role,” said Brian Murray, Ryan’s Chief Operating Officer/Chief Financial Officer. “His over three decades of service to Ryan is a testament, not only to his dedication to the company and employees, but to the best interest of our customers.” In his over 30 years with Ryan, Mike has been responsible for the construction execution of such notable projects as 222 Hennepin, Bishop Henry Whipple Federal Building, AT&T Tower, Target Corporate Headquarters, W Minneapolis – The Foshay, Midtown Exchange, and Westin Edina Galleria Hotel and Residences, to name a few. In the last 16 years alone, he has been responsible for the construction operations of projects totaling several billion dollars within Ryan’s North Region. “It is an honor to be recognized and included in the growth of Ryan,” said Cairl. “I am humbled to be a part of the leadership team and to support our great construction professionals. They are the ones that make it all happen.”

Cresa Minneapolis promotes Tim Carlson to Principal Cresa Minneapolis, Inc. is pleased to announce Tim Carlson has been promoted to Principal. Tim joined Cresa in 2004 and has continuously reinforced the mission, vision, and values of the organization. He dedicates his time to managing local, national, and international accounts and will continue to do so in his new role as a Principal. Tim is a member of the St. Paul Area Chamber of Commerce and the UW Real Estate Alumni Association. “Tim’s expertise and passion for client service excellence, as well as training new real estate advisors, have made him an integral member on our Cresa Minneapolis team,” said Tom Sexton, Managing Principal.

Minnesota Commercial Real Estate Women Names 2016 Board of Directors Minnesota Commercial Real Estate Women (MNCREW) announced today that Mary Jo Kelly of Kraus-Anderson Companies was named as their 2016 Chapter President. Janet Piper of Wells Fargo Bank will serve as Chapter Treasurer, Deb Barnes of HGA Architects and Engineers will serve as Chapter Secretary and Shari Bjork of Studio Hive was named President Elect. The immediate Chapter Past President is Andrea Fazendin of Art Partners Group. Kelly will lead the organization in its mission to champion the advancement and success of women in commercial real estate. She will also focus on promoting MNCREW by furthering its efforts to offer excellent programming and education, community outreach opportunities and networking events. Kelly will also support MNCREW’s annual signature event, Women Run the Cities, which benefits The Link, an organization that provides support to atrisk youth in the Twin Cities, as well as the CREW Network Foundation and MNCREW.

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News CBRE PLANS NEW WORKPLACE MODEL IN DOWNTOWN MINNEAPOLIS CBRE announced today its plans to move 192 local employees to new offices at LaSalle Plaza in Downtown Minneapolis.The new space is part of CBRE’s global “Workplace360” initiative, the company’s leadingedge approach to workplace strategy designed to promote flexibility, mobility and productivity through technologyenabled,100 percent-free address and paperless offices CBRE currently has offices in the Young Quinlan Building at 81 S. Ninth St. in downtown Minneapolis and at Two MarketPointe, 4400 W. 78th St. in Bloomington, which will consolidate to form a new office in a new location. CBRE will occupy approximately 34,000 square feet on the 19th and 20th floors of LaSalle Plaza, at 800 LaSalle Ave. in Minneapolis, beginning July 2016. CBRE and building owners, affiliates of Zeller Realty Group and Invesco

Minnesota Real Estate Journal

Real Estate, finalized the lease this week. “Our Minneapolis team is excited to join the more than two dozen CBRE offices around the globe that have successfully implemented our new workplace strategy, for which employee feedback has been overwhelmingly positive,” said Managing Director Blake Hastings. A year after CBRE employees in Los Angeles made the switch to the Workplace360 environment, more than 90 percent of those surveyed said they would not return to a traditional office environment. Consolidating all employees at LaSalle Plaza creates an opportunity to move away from the traditional office and demonstrate a leading-edge workspace. “Regardless of industry or geography, the very nature of the workplace is changing,” Hastings said. “Our new Workplace360 environment will speak to that in a very real way — both for our own employees and for our clients who are considering transforming their own space.”

CBRE Press Release Workplace360 is a paperless and “free address” office environment where employees have the flexibility to choose from different work spaces to meet their daily needs. CBRE’s own Workplace Strategy team is working with clients across the globe to reimagine the working environment and develop new office solutions. “I am very excited to be welcoming CBRE and its talented workforce to downtown Minneapolis,” said Minneapolis Mayor Betsy Hodges. “CBRE’s global leadership in workplace innovation will not only be an asset to our downtown economy, but will help in Minneapolis’ transformation into a leading 21st century city.” Global design firm, Gensler, which has designed other Workplace360 offices for CBRE, will design the Minneapolis space. Employees will provide input for the design and functionality of the new office. Like other companies relocating and expanding in the central business district of Minneapolis, CBRE understands the value of the dynamic urban core for its

January 2016

employees and clients. “It was the right time to consolidate our two offices into one central, CBD location for a variety of reasons,” Hastings said. “Most importantly: striving for increased collaboration amongst our team, a location with access to mass transit, a more diverse talent pool, and having our entire team under one roof, all of which will lead to better outcomes for our clients.” “As we’ve continued to focus on adding office space and resulting jobs through the 2025 Plan, CBRE has been influential in helping secure businesses in the downtown area,” said Steve Cramer, President & CEO of the Minneapolis Downtown Council and Downtown Improvement District. “Having CBRE’s full team here not only brings them closer to the action, but it continues to emphasize downtown Minneapolis is where businesses can enjoy top-notch features that impact job attraction and retention — a dynamic work environment, entertainment, dining, transportation options and residency options that are all centrally-

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located,” Cramer said. CBRE plans to maintain a southwest metro presence at its current offices in Bloomington at Two MarketPointe.

Cushman & Wakefield/NorthMarq Secures First Downtown Minneapolis Five Guys Burgers and Fries at RBC Plaza Cushman & Wakefield/NorthMarq (www.cushwakenm.com) Senior Director Kim Meyer represented property owner KBS in a new lease with Five Guys Burgers and Fries for a new ground-floor restaurant along Nicollet Mall in downtown Minneapolis. Five Guys will open in a 2,200 sq. ft. space in the newly renovated RBC Plaza in Spring 2016. The restaurant joins Subway (opened this month), Sprout Salad Company, Caribou Coffee and D’Amico & Sons as food options in the premier 709,000 sq. ft. downtown office and retail property, which last year wrapped up an 18-month renovation project.

Minnesota Real Estate Journal

“Five Guys is an excellent addition to our growing retail and dining options at RBC Plaza,” said Meyer. “They provide a high-quality product that is an ideal fit for the downtown Minneapolis market and RBC Plaza, and having more food concepts on the north end of Nicollet Mall will be great for the city and the employees in the surrounding buildings.” The Five Guys location will be its first in downtown Minneapolis, with 12 restaurants in the metro area and four outside the metro area in outstate markets. Since opening in the U.S. in 1986, the Virginia-based company has grown to over 1,200 outlets in the U.S. and Canada. Since 2013, Five Guys has opened 35 restaurants in the United Kingdom. The new restaurant will be located in the northwest corner of RBC Plaza, and will have both interior and exterior access. The interior will feature a fresh, modern interior design. The nearly year and a half transformation of RBC Plaza created a unified space involving, among many features,

the conversion of former four-story retail and food court space on the 3rd and 4th floors of the 555 Nicollet Mall to a vibrant two-story atrium within the premiere 40-story office tower at 60 S. 6th Street

NAI Everest’s Erin Houge Brokers Sale of Suburban St. Paul Retail Center NAI Everest’s Erin Houge successfully brokered the sale of a 19,817 square foot neighborhood retail center located in Mahtomedi, Minnesota known as Lincoln Square Shopping Center. The asset, located at 3124 Century Avenue N, is located immediately off of Interstate 694, and was acquired by a local buyer who plans to lease and manage the property. “There was strong demand for this retail asset from local, regional and national investors,” said Erin Houge. “Lincoln Square was attractive to many buyers, especially since the property has a diverse tenant mix as well as some vacancy to lease-up, which will ultimately add value.”

January 2016

MARCUS & MILLICHAP ARRANGES THE SALE OF A 40-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 Creekside Apartments, a 40-unit apartment property located in Litchfield, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $1,575,000. Chris Collins, Mox Gunderson and Dan Linnell, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, an individual/personal trust and secured the buyer, a limited liability company. Speaking with Mr. Collins, “Creekside Apartments was on the market for four weeks and received five offers from Twin Cities and greater Minnesota investors. The interest from Twin Cities investors speaks to the strength and News to page 18

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Minnesota Real Estate Journal

January 2016

Twin City renters increasingly expecting higher-end amenities in their apartment communities By Dan Rafter

hat do renters in the Twin Cities want from their apartment units? How about everything from walk-in closets and high-speed Internet access to hardwood floors, premium countertops and kitchen islands? These are some of the amenities that ranked high for Minneapolis/St. Paul renters in 2015 Renter Preferences Study released recently by the National Multifamily Housing Council and Kingsley Associates. According to the study, renters today want more high-end amenities. In some ways, renters expect their apartments today to look and feel more like expensive hotels. The ability to access the online world, though, still ranks high. According to the preferences study, 95 percent of surveyed Twin City renters were either interested or very interested in having high-speed Internet access in their apartment units. That came in sec-

ond place on the survey, behind only in-unit washers and dryers. Other top finishers? A total of 89 percent of Twin City-area renters are interested or very interested in patios or balconies, while the same percentage want walk-in closets. Soundproof walls scored a rating of interested or very interested from 87 percent of local renters, while smart thermostats interested 82 percent of renters and premium countertops nabbed the interest of 78 percent. Renters here expect plenty of community amenities in their apartment buildings, too. A total of 82 percent of Twin City-area renters were interested or very interested in recycling services, 80 percent in on-site fitness centers, 81 percent in package delivery rooms and holding areas and 76 percent in an on-site pool. A total of 47 percent of renters were interested or very interested in bike-storage areas. That is less than 50 percent, but does rank high in terms of national averages. Rick Haughey, a vice president with the National Multifamily Housing Council, said that Twin City-area

renters are not unlike most of their peers across the country, all of whom are seeking more amenities from their apartment buildings. There is a challenge, though. Haughey said that much of the new apartment construction taking place in urban areas like Minneapolis/St. Paul today are built for wealthier renters. These apartment buildings are offering the amenities that today's renters want. But they are charging extremely high monthly rents for them. Many renters who want to live in the middle of cities today, then, can't afford the rents being charged for most urban units, Haughey said. "There is demand for this higher-end product. But how deep is that demand? How many folks out there can afford this product?" Haughey asked. "Our surveys are saying that people want it. But how many can actually afford it? That we don't know." It's not easy for developers to build affordable apartment units in the middle of busy urban areas, Haughey said. Land is simply too expensive in urban markets, he said. It's challenging, too,

to build these higher-end apartments in suburban areas. That's because other suburban residents often fight higherdensity developments in their lowerdensity communities, he said. "A lot of Millennials can't afford these apartments today," Haughey said. "And that's a problem because developers have been building many of these buildings with Millennials in mind." Regardless of the allure of multifamily living, most renters today -- including Millennials -- don't plan on remaining renters for life. In one of the more interesting results of the National Multifamily Housing Council's survey was that 66.9 percent of Twin City-area renters said that they saw themselves owning a home in five years. Just 33.1 percent said that they saw themselves continuing to rent in five years.

EXTEND THE LIFE OF YOUR ROOF Learn to identify roof deficiencies and apply that knowledge to your roof. Properly maintaining your roof will prolong its life!

KNOW YOUR OPTIONS Understand the roof types and installations available to you and how they will perform on your building.

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Minnesota Real Estate Journal

January 2016

Sales and Use Tax: What Contractors Need to Know By Sarah Hopkins, Manager, State and Local Tax Baker Tilly Virchow Krause, LLP

Summary of sales tax and use tax differences

roperly documenting and applying sales and use tax is crucial for construction contractors, but can often prove to be a complicated task. There are many moving parts to consider when determining if your business is in compliance for sales and use tax, the most important being: • Understanding the difference between sales tax and use tax and when each applies • Knowing where you are required to collect and remit these transactionbased taxes Other things to be aware of include: • Knowing what rate is owed when working in different locations • Being aware of the sales and use tax requirements for general contractors vs. subcontractors • Understanding who is liable for the tax amount • Addressing tax exempt projects properly • Retaining necessary records to document compliance

Sarah Hopkins Having a good grasp of these issues is essential for maintaining proper sales and use tax compliance for your company. Understanding sales and use tax Sales tax and use tax complement one another. They are transactionbased taxes imposed on the purchase or use of tangible personal property and select services. Sales tax is added to an invoice by a

retailer at the time of purchase. The retailer collects the tax from the customer and remits it to the state or local taxing authority. Use tax comes into play for the purchaser when the retailer fails to or is not required to administer the sales tax. Use tax also is owed if the rate which is collected by the retailer is less than the correct amount of tax which is owed. Sales tax is due when the purchaser takes title or possession of a good or when the purchaser receives a service which is taxable. Use tax is due upon the privilege of using, storing, distributing, or consuming tangible personal property or taxable services. Use tax is not owed if sales tax was paid at the time of purchase in the appropriate

amount. Items which are manufactured or purchased exempt from tax for resale are subject to use tax when they are removed from inventory by a manufacturer or retailer for internal use or consumption. When is compliance required? A contractor is required to comply with a state and/or local taxing authority’s regulations when it has a business presence in that location. This is referred to as nexus. Nexus is created by having an office, place of distribution, sales location, warehouse, or other place of business in a state. Having an employee, sales person, or a solicitor present in a state Tax to page 19

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Crowdfunding From page 1

for a minimum of $2,576. For Saunders, offering these investment opportunities at such affordable levels – there are higher-priced investments on SaundersDailey.com, too, of course – means that a greater number of people can realize the income that can come from commercial and residential real estate. “There are opportunities out there. Unfortunately, most people aren’t asked to be involved with these kinds of investments,” Saunders said. “Usually, we get 100 accredited investors in a room, we need to raise $5,000 and we need five investors to put in $100,000 each. We then hope that five people raise their hands. Most people aren’t asked to be part of those groups. A lot of people don’t have that $100,000 available to them, either.” Through crowdfunding, real estate investments become more accessible, Saunders said. Crowdfunding companies like his can also help bridge the income gap that is becoming an always bigger issue in the United States, he said.

Minnesota Real Estate Journal

“The more people who can invest in these income-producing properties, the more we can help close the gap of wealth in this country,” he said. “The growing wealth disparity is partly because the most profitable investments are not available to as many people as they should be. Wealthy or accredited folks get more opportunities. Unaccredited and less wealthy people don’t. That’s part of why the income gap keeps growing. It’s a true problem. You can’t have such a very small class of people owning so much wealth. It creates an unstable economy.” How it works People who want to invest through SaundersDailey start by logging onto the company’s Web site. Once there, they can browse real estate investment opportunities. Some of the investments are open to anyone who can come up with the cash. Others require accredited investors. “It’s all about determining what type of investor you are and what investments are open to you,” Saunders said. Listings explain the basics of a property, provide a list of expected returns – both on a yearly basis and when a

property is sold – and lists the minimum amount of money people need to invest. Investors make their profits in different ways. In the site’s equity investments, investors become part owners of an LLC that owns the property. These investors get stock certificates. Saunders said that such investors can expect yearly returns of about 5 percent to 8 percent. These investors also hope for their properties to appreciate in value. That way, when it sells in five to seven years, investors would profit even more. SaundersDailey also offers debt investments. Investors in these properties receive a promissory note in which they are promised a static yearly return, say 9 percent or 10 percent annualized with a term of about 18 months. For example, investors who put up $10,000 might earn 9 percent of that investment over a period of 18 months. “Crowdfunding looks new and different,” Saunders said. “But it’s a natural evolution of what we’ve long seen going on. We’ve seen it in the stock market. People want to become more involved. They want to make their own investment decisions. The next natural

January 2016

progression is investing on the Internet.” Real estate is a perfect fit for crowdfunding, Saunders said. That’s because multifamily buildings, say, have a tangible value. That inspires a bit more confidence in investors, he said. “Investing online is still a little weird and new,” Saunders said. “The fact that through our program you own a piece of real estate that has some core value takes away some of that apprehension people often have. A property has been appraised for a certain amount of money. Real estate can lose value. But you can be confident that if you are buying a home for $100,000, you know that, at the very least, the lot should be worth some money. There is a floor to the level of risk you have.”

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Minnesota Real Estate Journal News from page 8

competition we are seeing in the current market. The seller of the property was the original developer and has owned the property for over 40 years; the decision to sell was due strictly to their desire to retire. The buyer is an experienced purchaser and plans to make minor upgrades to create more value in the property and continue to hold as a long term asset.” Creekside Apartments is located at 203 - 211 West 9th Street in Litchfield, Minnesota.

Cushman & Wakefield/NorthMarq Listing Prime Downtown Minneapolis Hotel Development Site Across from Convention Center Half block, 1.2 acre site opportunity in booming hotel market Cushman & Wakefield/NorthMarq (www.cushwakenm.com) is offering for sale a skyway-accessible hotel development site immediately north of the Minneapolis Convention Center and in the heart of the thriving Minneapolis CBD.

The Cushman & Wakefield/NorthMarq team of Dan Wicker, Kai Thomsen, Paul Donovan, Ronn Thomas, Jeremy Striffler and David Stokes is representing the property owner in the potential sale of 228 S. 12th St., a half-block, 1.2 acre site currently home to an underutilized church building. “Immediate proximity to the active Minneapolis Convention Center, direct access to the skyway and 35W/94, and a booming downtown Minneapolis hotel market make this site a natural target for a new hotel development,” said Ronn Thomas. “This is an ideal and rare opportunity for a new hotel in downtown Minneapolis.” The hotel industry has rebounded strongly in downtown Minneapolis, with year-to-date occupancy at 75.1 percent through the end of November, according to STR Global research. Last year’s occupancy of 72 percent was an all-time record for the Minneapolis CBD, and Meet Minneapolis expects the total 2015 occupancy to easily surpass 73 percent. “Downtown Minneapolis’s hotel market is benefiting from a stronger econo-

my, stronger meeting and convention business and stronger city branding initiatives which is attracting more visitors and events,” said Kevin Hanstad, Director of Market Research for Meet Minneapolis. “2015 has been another stellar year for the city and we expect that trend to continue.” In 2015, Minneapolis hosted 609 conventions and events, dwarfing the previous record of 534 set in 2014. The metropolitan area attracted 30.9 million visitors in 2014, outperforming most of its peer markets, and that number is only expected to grow with such upcoming events as Super Bowl LII in 2018, the 2019 NCAA Final Four and several other major gatherings yet to be announced in the new U.S. Bank Stadium. The site for sale will have impeccable access to each of those events, and Target Center, Target Field, the Hennepin Avenue arts and cultural district and vibrant downtown Minneapolis restaurant scene are all also easily accessible from the property. Thousands of public parking spaces are within two blocks of the site, which has easy access to both

January 2016

Interstate 35W and Interstate 94 and could also feature multi-family residential development. The Average Daily Revenue for hotels in downtown Minneapolis is $153.93 through the end of November, a 3.6 percent increase over 2014. RevPAR, a measure of hotel revenue per available room, sat at $115.60 through the end of November, up from just over 109 last year. “The latest economic indicators continue to show that downtown Minneapolis has room for a new hotel property, and several brands have shown interest in bringing new flags to our market,” Thomas said. Multiple sales of existing hotels in the Minneapolis CBD have set new records over the past 18 months, indicating continued investor interest in top-tier properties in prime locations.

Cushman & Wakefield/NorthMarq Closes Sale of Prime Redevelopment Site in St. Louis Park The Cushman & Wakefield/NorthMarq (www.cushwakenm.com) team of

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Senior Director Tom Martin and Senior Director Kim Meyer has closed the sale of an underutilized 1.2-acre site in St. Louis Park, Minn., clearing the way for a new mixed-use development complete with housing units and a grocery store. Cushman & Wakefield/NorthMarq’s Martin and Meyer brokered the sale of the land and vacant former Bally Total Fitness building at 4900 Excelsior Boulevard, just east of Highway 100 and adjacent to the Excelsior & Grand mixed-use project. The Cushman & Wakefield/NorthMarq team represented L.A. Fitness, which had acquired the property when it purchased Bally in 2011. Martin and Meyer evaluated the potential users and developers for the site, entertaining multiple development proposals, before selecting Oppidan, who recently received all entitlements to commence a development that includes a grocery store and 170+ apartment units. “This transaction required a great deal of patience on behalf of both parties as the buyer negotiated city approvals and

Minnesota Real Estate Journal

evaluated the market potential of the site,” Martin said. “The willingness of the buyer to continue down this path especially shows the strength of the residential market in this pocket of St. Louis Park.” Initial site work, including abatement and demolition, has begun.

NAI Everest Brokers Sale of 60 Unit Luxury Apartment Building in Minneapolis NAI Everest is proud to announce the successful closing of a luxury sixty-unit, boutique apartment building in the booming Uptown Neighborhood of Minneapolis. The asset, located at 3021 Holmes Avenue South, is just one and a half blocks from the intersection of Lake Street and Hennepin Avenue. The apartment building was acquired by The Laramar Group, a Chicago-based owner and manager of multifamily properties for $15,675,000, or $261,250 per unit. “It was a pleasure to assist with the disposition of this superb apartment building; 3021 Holmes Avenue is an

exceptional multifamily asset in the Uptown landscape,” said Gina Dingman, CCIM and President of NAI Everest. “It will be exciting to watch the Laramar team add another fantastic asset to their growing portfolio of owned properties in our market. This sale reinforces the continued vibrancy of the multifamily investment market in the Twin Cities Metro Area.”

MARCUS & MILLICHAP ARRANGES THE SALE OF A 72-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 Lakewood Apartments, a 72-unit apartment community located in Alexandria, Minnesota, according to Craig Patterson, Regional Manager of the firm’s Minneapolis office. The asset sold for $3,207,500. Cole E. Harstad, Mox Gunderson and Dan Linnell, investment specialists in

January 2016

Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a non-profit community development corporation. The listing team also secured the buyer. Speaking with Mr. Gunderson, “The property commanded five offers within a three-week marketing timeline and ultimately sold for more than the original asking price.” Lakewood Apartments is located at 204 Kenwood Drive in Alexandria, Minnesota. The 72 units are comprised of 25 one-bedroom, 46 two-bedroom and one three-bedroom units.

January 2016 Tax from page 14

(permanently or temporarily) will create nexus for sales tax purposes. Repairing, maintaining, delivering, or installing property in a state will also create nexus for sales tax. Using a subcontractor to work on a project establishes a taxable presence as well. Deliveries into a state using a common carrier will not create nexus. For example, if a Minnesota-based contractor purchases materials from a business with a warehouse in Minnesota, the business is required to collect sales tax from the contractor at the time of purchase. However, if that same Minnesota-based contractor purchases materials from a supplier that does not have a business presence (nexus) in Minnesota, that supplier is not responsible for collecting sales tax. Instead, the contractor would be responsible to pay use tax on that purchase to Minnesota, unless an exemption exists. Since the supplier does not have nexus in Minnesota, it is not required to comply with the state’s sales and use regulations and responsibility falls to the contractor. Tax rates In Minnesota, the statewide general sales tax rate is 6.875 percent, which is the same rate as the state’s use tax. Many local jurisdictions also impose a sales tax that is most often administered by the state. In a few states, the local taxes are administered by county or municipal taxing authorities rather than by the state taxing authority. Local sales taxes are common across the states. Application to the construction industry In Minnesota, as well as many other states, the contractor or subcontractor is considered the consumer of the materials and supplies that are provided under a construction contract. Materials and supplies that are incorporated into realty are not considered to be resold to the customer. This is because they have purchased an improvement to real property rather than simply purchasing tangible personal property. Sales tax should never be charged on construction contracts in Minnesota. The cost of the sales tax paid on materials and supplies which are used on the project should be passed on to the customer as part of the materials cost, but not itemized separately on the customer’s invoice or contract. Note that when a contractor sells materials to outside parties, rather than install them in real property, it must collect the appropriate sales tax because is it acting as a retailer. This may also be true when the contractor sells used construction or office equipment. The tax rate is determined by where the construction project site is located. If the materials or supplies are purchased in a location with a lower tax rate than where they are used, the difference is owed as use tax. On the other hand, if the materials or supplies are purchased in an area with a higher tax rate than where they are used, no refund will be given for the difference in tax rates.

Minnesota Real Estate Journal

Exempt projects There are different exemptions available for specific construction projects as well as for tax-exempt entities like notfor-profit organizations and units of government. Construction projects with taxexempt entities most often require additional administrative work to ensure that the project is in compliance to avoid paying unnecessary sale or use tax. For example, separate bids must be submitted and awarded for materials and for labor. Additionally, a purchasing agent agreement must be in place and the contract needs to address certain aspects for the project such as risk of loss, transfer of title, etc. Specific construction projects which are provided an exemption under Minnesota law often do not have the same stringent contract and bidding requirements. They typically require that tax is paid at the time of purchase and a refund for the sales tax is applied for subsequently. Recordkeeping When in doubt, do not throw it out! It is better to err on the side of keeping additional records than disposing of records you aren’t sure if you need any longer. Minnesota has a statute of limitations for sales and use tax of 3½ years. This means that an audit of books and records can go back 3½ years —longer if the state determines that tax was underreported by 25 percent or that tax was intentionally underreported. Records should be maintained to show that either sales tax was paid at the time of purchase for materials and supplies or records should tie out to show that use tax was remitted on purchases which sales tax was not charged by the vendor. Contracts with exempt entities should be kept as well as supporting documentation to show that the bidding, contracts, purchasing agent agreement, etc. were executed as required by Minnesota regulations. In the event of a sales and use tax audit, the burden of proof is on the taxpayer rather than the Minnesota Department of Revenue to show that tax is or is not owed. Compliance If your contracting firm does not have a system in place to ensure that sales tax is being charged correctly on its purchases and to check if use tax is owed due to differing rates, you should consult with your accountant or tax advisor. He or she can assist in bringing the business into compliance. There are options available to assist with reducing the potential liability owed and any related penalties and interest. Additionally, if your business enters into contracts for tax-exempt projects, and you are uncertain if Minnesota’s requirements are being met, discuss the facts with your accountant or tax advisor. This should be done prior to the acceptance of the project as the use tax liability will fall upon the contractor rather than the exempt organization if not done properly.

Bridgewater From page 1

"We had the capital available to make the acquisition," Baack said. "There is a lot of consolidation going on in the market right now. And their locations fit in perfectly with our desired footprint. We think this merger is going to help us become an even stronger presence in the market." Baack said that Bridgewater Bank was looking for in-fill locations in the Minneapolis/Saint Paul area. First National Bank of the Lakes provided that with its branch locations. After the merger, Bridgewater Bank will have seven branches. Bridgewater will consolidate the downtown Minneapolis branch of Bank of the Lakes into its own downtown location, eliminating one of the four branches that it is acquiring in the merger. David Delaney, chairman of the board of First National Bank of the Lakes, said that the merger will allow his bank to offer more services to its customers.

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"We are thrilled to partner with Bridgewater Bank and provide the same familiar service with a broader range of products," Delaney said, in a written statement. "The clients of the merged bank will benefit from opportunities that would not exist if we each remained independent." Baack will remain the chairman of the board and chief executive officer of the newly merged bank. The merger is expected to officially close before the end of the second quarter of 2016. "Our first priority is the client," Baack said. "This merger will not only provide new opportunities to diversify both our lending and deposit portfolios, but it will also allow us to expand our geographic presence in the markets we aim to serve. Over the past 10 years, we have built a solid foundation. I am excited to see the positive implications this partnership provides for both shareholders and clients."