VOLUME 36, NUMBER 1
©2020 Real Estate Publishing Corporation
January/February 2020
Plenty of Good News for Minnesota & Midwest Industrial Markets in 2020
By Dan Rafter, Editor
C
hicago might remain the top-performing Midwest industrial market, according to Avison Young's new Forecast 2020 report. But the mid-sized markets of Minneapolis, Indianapolis and Columbus are also showing plenty of industrial momentum, according to Avison Young's research.
The Minneapolis industrial market is especially interesting. As Avison Young reports, the Twin Cities area lacks large blocks of space, particularly in the region's Southwest submarket. This is expected to bring new industrial construction to the market in 2020. Avison Young predicts that this new speculative construction will spread into secondary submarkets and into outer communities in the Minneapolis-St. Paul metropolitan area. The reason? The lack of
available land sites in the Twin Cities' urban core and inner-ring suburbs. In other Twin Cities industrial news, Avison Young says that industrial rents here should rise in 2020 because of low vacancy rates and strong demand for e-commerce and reverse logistics. Amazon’s fulfillment center in the Southwest metro and similar developments in the Northwest submarket are fueling e-commerce and will continue to drive Industrial to page 12
Cushman & Wakefield: 2019 Ends Strong for Twin Cities CRE Market By Dan Rafter
T
he commercial real estate market in the Twin Cities remained on a hot streak in the second half of 2019, with vacancies in the office, industrial and retail sectors continuing to fall. Cushman & Wakefield, in its recently released Minneapolis/St. Paul Compass Report, said that at the end of the fourth quarter of last year, the vacancy rate across office, industrial and retail properties stood at a
low 10.4 percent. That’s down from 10.8 percent as of the end of the first six months of 2019. According to the report, 2.2 million square feet of commercial space was absorbed by users in the office, industrial and retail sectors in the second half of last year. The total absorption for 2019 came in at 4.2 million square feet. That is the strongest absorption in the Twin Cities market since 2015, when 5.5 million square feet of space was absorbed. The 2019 absorption rate was more than 1 million
square feet above 2018’s total, Cushman & Wakefield reported. Much of the absorption, of course, came in the thriving industrial sector, which saw 1.5 million square feet of absorption in the second half of 2019. For the whole year, the Twin Cities market absorbed 2.9 million square feet of industrial space. That’s an improvement over the 2.78 million square feet of industrial space absorbed during all of 2018. The office and retail sectors saw strong ends to CRE to page 8
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Featured Stories
Minnesota Real Estate Journal
JANUARY/FEBRUARY • VOLUME 36, NUMBER 1
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Departments PEOPLE ON THE MOVE 4
CLOSINGS
1
AVISON YOUNG PREDICTS PLENTY OF GOOD NEWS FOR MIDWEST INDUSTRIAL MARKETS IN 2020 CUSHMAN & WAKEFIELD: 2019 ENDS STRONG FOR TWIN CITIES CRE MARKET
6
RYAN COMPANIES DEVELOPING HEALTHY VILLAGE CONCEPT IN TWIN CITIES
10
TWIN CITIES APARTMENT DEVELOPMENT HAS BEEN ON A TEAR
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CBRE REPORT: AIRBNB, VRBO RENTALS WILL IMPACT HOTEL MARKETS IN 2020
New Website! www.eastmetromsp.org
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Minnesota Real Estate Journal (ISSN 08932255) Copyright © 2020 by the Minnesota Real Estate Journal is published bi-monthly for $85 a year by Jeff Johnson, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369. Monthly Business and Editorial Offices: 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369 Accounting and Circulation Offices: Jeff Johnson, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369. Call 952-885-0815 to subscribe. For more information call: 952-885-0815. Periodical postage paid at Maple Grove and additional mailing offices. POSTMASTER: Send address changes to Minnesota Real Estate Journal, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369 ©2020 Real Estate Publishing Corporation. No part of this publication may be reproduced without the written permission of the publisher.
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Minnesota Real Estate Journal
7767 Elm Creek Boulevard, Suite 210 Maple Grove, MN 55369 For information call 952-885-0815
President | Publisher Jeff Johnson jeff.johnson@resummits.com Vice President | Publisher Jay Kodytek jay.kodytek@resummits.com Chief Financial Officer Todd Phillips todd.phillips@resummits.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Art Director | Graphic Designer Alan Davis alan.davis@resummits.com Conference Coodinator | CE Specialist Katie Bidinger katie.bidinger@resummits.com
Minneapolis office of Transwestern adds to roster Ben Cookson has joined Transwestern Commercial Services’ Occupier Solutions Group in Minneapolis as a Brokerage Associate. Cookson joins the team of Brian Fogelberg, Will McDonald and Emily Claridge to provide tenant advisory services to the team’s local and national roster of corporate clients. Cookson comes to Transwestern from Avison Young where he spent four years on the Tenant Advisory and Corporate Services team. This included extensive work with national clients Thrivent Financial, Cambria USA, Polaris Industries, and numerous other companies locally in the Twin Cities
Minneapolis' Opus Design Build selects new president, CEO
EDITORIAL ADVISORY BOARD JOHN ALLEN JEFF EATON MARK EVENSON PATRICIA GNETZ TOM GUMP CHAD JOHNSON BILL WARDWELL JEFFREY LAFAVRE WADE LAU JIM LOCKHART DUANE LUND CLINT MILLER DR. THOMAS MUSIL
Dave Bangasser, president and chief executive officer of Minneapolis-based Opus Design Build, L.L.C. will retire effective April 2 of this year. Tom Becker, current regional vice president of Opus Design Build, will then become president and chief executive officer of the business unit. Beth Duyvejonck, currently director, project management of Opus Design Build, will be promoted to regional vice president, taking over Becker’s current role. Bangasser joined Opus in 1981, holding multiple roles across the company. For the last 10 years, he successfully led and grew the construction side of the business. Since joining Opus in 1994, Becker has delivered several notable projects,
January/February 2020
including the recent Orchards of Minnetonka senior living and Variant Luxury Mixed-Use Development, and has actively led the company’s expansion into new product types and driven overall business growth within ODB. As the new leader, he will direct all aspects of construction throughout the organization, including safety, strategic planning, business development and associate growth and development. Duyvejonck, who joined Opus in 1997, has served as the director of project management for integrated designbuild services at Opus. She’s been pivotal in the delivery of a diverse portfolio of marquee projects, including the University of St. Thomas First Year Residence Hall, 365 Nicollet and The Nic on Fifth. In her new role, she will be accountable for all construction-related activities in Minneapolis and Des Moines, including oversight of project management, construction and field operations, and support of strategic planning and ongoing resource allocation decisions
Minneapolis' HGA hires public relations manager Michelle Morgan-Nelsen has joined Minneapolis-based design firm HGA as senior public relations manager and associate vice president. Morgan-Nelsen will collaborate with leadership across HGA’s 11 national offices in this position. Before joining HGA, Morgan-Nelsen worked as senior global public relations and social media manager at Entrust Datacard in Minneapolis, where she managed public relations programs for six business segments for the cybersecu-
rity firm. Previously, Morgan-Nelsen was senior communications manager for FSG, a Boston-based professional services consultancy. Prior to this position, she promoted business-thought leaders for the Harvard Business Review Group.
Minneapolis' United Properties names VP of hospitality Peterson joined United Properties in 2019 as vice president of hospitality and residential development. In this role, he quickly made a noticeable impact on the company’s RBC Gateway project and other hotel pursuits. In his revised role, Peterson will focus on hospitality and office development, including site acquisition, project underwriting, design, development and construction. His hospitality projects include the upcoming Four Seasons Hotel and Private Residences Minneapolis at RBC Gateway. Prior to joining United Properties, Peterson served as senior director of development and construction for CSM Corporation in Minneapolis, bringing more than 13 years of residential and hotel experience across various markets. He holds a Bachelor of Science degree in business management from Montana State University and an Executive Master of Business Administration degree from the Eller College of Management at the University of Arizona. He is an active member of the NAIOP Minnesota chapter and also dedicates his time to mentorships at the University of Minnesota’s Carlson School of Management and several other community organizations.
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Minnesota Real Estate Journal
January/February 2020
Ryan Companies Developing Healthy Village Concept in Twin Cities By Dan Rafter
R
yan Companies is ready to make an impact in the Twin Cities region with its plans to build a mixed-use “healthy village” on 100 acres of land in Maple Grove, Minnesota. Ryan recently acquired the development rights for the land located along Interstate-94 in Maple Grove and is working with North Memorial Health to plan a mixed-use health village with Maple Grove Hospital as the anchor of the project. The goal is to create an active environment in which people can live, work play and heal, according to a press release from Ryan Companies. Ryan has developed projects surrounding the 100-acre parcel during the past several years, including The Grove Retail Village and a number of medical office buildings. “The healthy village will also provide an opportunity for North Memorial Health to foster collaborative partnerships with healthcare providers, academia and other healthcare-oriented businesses,” said Mike McMahan, Ryan’s national healthcare leader.
The new village will include healthcare, wellness, senior living, multifamily, office, hospitality, retail and public spaces. Maple Grove Hospital recently marked its 10-year anniversary just adjacent to the property. “North Memorial Health is excited
about the opportunity this land and partnership with Ryan brings,” said Andy Cochrane, chief executive officer of Maple Grove Hospital. “Having the flexibility to evaluate expansion in our growing market and improve access to care for the community is something we look forward to in our next chapter.”
Ryan Companies will partner with the City of Maple Grove, North Memorial Health and other project partners to develop the land. The first projects are expected to break ground in the fall of 2020 or spring of 2021.
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The 2020 Minnesota Real Estate Awards is an elegant evening showcasing Minnesota’s top real estate achievements and developments during 2019
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• Medical Property
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• Industrial / Manufacturing / Science
• Woman of the Year
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• Interior Design – Retail / Restaurant / Hospitality • Retail / Restaurant
Transaction Awards:
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• Most Significant Lease Transaction
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Company Awards: • Developer of the Year
City / Municipality Awards:
• General Contractor of the Year
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• Property Management Firm of the Year • Sub-Contractor of the Year
Page 8
Minnesota Real Estate Journal
January/February 2020
CRE From page 1
2019, too, with more than 200,000 square feet absorbed in each sector during the last six months of the year. Office saw 750,000 square feet of absorption for the whole year, while the retail sector broke even in absorption last year. “Our record-setting up-cycle is still going strong in the Twin Cities,” said Mike Ohmes, managing principal of the Cushman & Wakefield Minneapolis-St. Paul office. “Most submarkets and sectors are still expecting positive absorption in 2020. In fact, our experts only projected one submarket with negative absorption.” Absorption is expected remain strong in the first half of 2020, with 1.85 million square feet projected for the next six months. Most of that comes from the office and industrial sectors, where only one submarket is projected for a negative first half. Most of the retail sector is expected to see flat absorption in early 2020. Construction continues at a strong pace, and an additional 2.8 million square feet of properties are expected to be complete by the end of the year. The
investment sales market is also expected to be active in early 2020, with the
industrial and office sectors especially busy and several trophy assets already
on the market with potential first-quarter closings.
Page 10
Minnesota Real Estate Journal
January/February 2020
Twin Cities Apartment Development Has Been On a Tear It’s been another busy year for the multifamily sector with booming new construction levels, continuing strong renter demand and robust investment sales activity. But is the sector peaking? What’s in store for 2020?
By Liz Wolf
I
t’s probably safe to say the Twin Cities apartment market has blown past expectations. Strong market fundamentals, a healthy economy and a tight single-family housing market have extended the Twin Cities multifamily boom. The metro continues to boast one of the lowest vacancy rates in the U.S., which is driving both development and investor demand. “It seems again that we’re at a point where the runway still feels very long and very wide in this industry,” says Josh Talberg, senior vice president in the Minneapolis office of JLL Capital Markets, specializing in multifamily assets. For the third year in a row, Twin Cities apartment deliveries “shattered Nuveen Investments acquired the 216-unit Flux Apartments in Uptown Minneapolis for $54 million from the previous year’s peak,” according to PNC Realty. Keith Collins, Abe Appert and Ted Abramson of CBRE represented the seller. Photo By Heinrich Photography
Golden Valley-based Maxfield Research and Consulting. Maxfield projected 7,256 new units (both market rate and affordable) would come on line in 2019, up from the 6,164 new units delivered in 2018. Suburban development will account for 53 percent of the new product in 2019. Minneapolis proper will account for 31.4 percent of all deliveries in the metro area. Looking ahead, 11,238 units are in the construction pipeline for 2020, according to Maxfield. (Many of those are phased developments). In 2020, Minneapolis proper will account for 42.6 percent of all deliveries in the metro.
Rent growth is on the rise Historically, rent growth in the Twin Cities has been lower than the national average, notes Matt Mullins, vice president at Maxfield. However, the metro’s rent growth in 2019 is roughly 3.7 percent, which is one of the higher percentage growth rates in the U.S. (The national average is 3.1 percent). Mullins says rent growth is higher in the suburbs than Minneapolis. The abundance of new product in Minneapolis has kept rents in check as developers Apartment to page 14
Page 12
Industrial From page 1
growth in the warehouse sector, the company's forecast report says. Avison Young says that the volume of online sales could spur the need for ‘return centers’ in the local area as the demand for reverse logistics rises. The report had plenty of good news for Columbus and central Ohio, too. Avison Young said that Central Ohio is poised for steady growth in 2020, having outperformed the national average during the past 10 years with GDP growth of more than 28 percent and employment growth of 22 percent. Significant growth in the industrial sector, fueled by the Columbus area's proximity to surrounding major markets, low cost of living, low taxes and low cost of land has helped establish Central Ohio as a major industrial and distribution hub for the Midwest. Last year was a record-setting year for the Columbus industrial market, with nearly 6 million square feet of net absorption within the first three quarters of the year alone. The Columbus industrial market added more than 5 million square feet of industrial space for the second consecutive year in 2019. Asking rental rates have reached
Minnesota Real Estate Journal
an all-time high of $3.78 per square foot even with this new construction. The growth in the Central Ohio industrial sector is expected to slow somewhat in the early stages of this year as more inventory is delivered ahead of demand. The market should also see more modest rental rate increases than in previous years. Avison Young says that the Indi-
Among the significant drivers is the market’s central location. Indianapolis has an extensive transportation and logistics network, allowing access to 75 percent of the U.S. and Canadian populations within a 12-hour drive. Several of the new speculative projects currently under construction include mid-size to large modern distribution centers. One examples is a mas-
“ Avison Young predicts that this new speculative construction will spread into secondary submarkets and into outer communities in the Minneapolis-St. Paul metropolitan area.”
anapolis industrial market should remain strong in 2020, too. This market saw more than 10 million square feet of new industrial inventory added during 2019 and net absorption of 10.8 million square feet, a record for this Central Indiana market. More than 95 percent of that space was absorbed quickly, leaving the market with a fourth quarter 2019 vacancy of 4.2 percent.
ter-planned park called Whiteland Exchange being developed by Jones Development in Whiteland, Indiana, in the South submarket. The masterplanned park is located along the I-65 corridor and slated to include 2.4 million square feet of space. Avison Young projections for 2020 include increasing rental growth, construction, leasing and investment vol-
January/February 2020
ume and decreasing vacancy, all positive signs for this Midwest market. Avison Young's report said, too, that the speculative construction of bulk distribution centers is expected to slow in St. Louis in 2020. There is currently 5.4 million square feet of industrial space under construction, an 11.6 percent increase from 2018. Vacancy has increased to 8.4 percent and asking rents have decreased from $4.90 to $4.66 per square foot, a 5.1 percent decline. Medical marijuana became legal in St. Louis in April of 2019 and licenses will be awarded this year. Those applying for licenses were required to secure a property before submitting their application, which has resulted in a temporary shortage of industrial space between 30,000 square feet and 60,000 square feet. Those awarded licenses will occupy their properties and the remaining spaces will come back on the market. Asking rents for those properties may decrease initially, Avison Young said.
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Apartment from page 10
have offered concessions. Some new projects are offering leasing specials to ensure absorption projections are met. The metro’s vacancy rate is hovering around the high 2s to 3 percent – among the lowest in the U.S. Coming out of the cycle, the Twin Cities has remained “one of the lowest vacancy rate markets in the entire country and that has been for several years running,” Talberg says. “We often get the question are we building too many apartments? My answer to that is always we haven’t built nearly enough apartment units to keep on pace with some other secondary markets and some other major MSAs across the country.” Talberg says when considering the low vacancy rate as a supporting indicator, the Twin Cities has been and remains a very supply-constrained market. “In fact, it’s economically a difficult market to build in, just with some of the regulations and now we have some inclusionary zoning polices that are taking effect,” Talberg notes. “In a market where labor costs and construction costs are increasing, economically, it’s making it more difficult to deliver new supply.” Under new inclusionary zoning policies being adopted, developers must assure that some units in their develop-
Minnesota Real Estate Journal
ments are affordable for lower-income renters.
What’s driving demand for apartments? Mullins says several factors are behind the multifamily boom including pent-up demand from the Great Recession when households lost homes to foreclosure and moved into rental units. “That kicked it off,” Mullins points out. “We’ve also had no production basically for the last decade. No one was building apartments.” At the same time, multifamily was one of the preferred asset classes that lenders were willing to provide financing for, so that helped stimulate the market. “And then demographically, you’ve had the barbell effect, which is the boomers and the millennials,” Mullins says. “Demand is driven by these two large demographic groups that are peaking at the same time.” Downsizing empty-nesters are selling single-family homes and moving into rental housing. The 55-plus housing market is thriving as more baby boomers look to invest in a new home to live out their retirement. Meanwhile, millennials are flocking to Minneapolis, according to a report by Smart Asset. Minneapolis came in fourth on the list of cities that millennials are moving to.
Other drivers include a strong economy, new job creation, a low unemployment rate and wage growth. People’s confidence is up, Mullins says. “People feel good and are spending money and more apt to form new households,” he notes. Also, there’s a lack of supply in the for-sale housing sector.
Is a slowdown inevitable? “There’s no question that we’re at the peak,” Mullins says. “I think things may cool off a little bit next year, but we’re not going to see a bust by any means. “The question I get asked all of the time is where are we in the cycle?” Mullins continues. “What inning are we in? We’re in extra innings. We’ve been in extra innings now for a long time. In theory, we should have already peaked and there should have been a slowdown.” However, the Twin Cities’ rent growth and vacancy rates remain strong. “If you have a sub-5 percent vacancy rate, that still suggests there’s room in the marketplace,” Mullins says. “As long as units are being absorbed, you’re going to keep seeing more and more new product. We still feel pretty good about the market. Sooner or later, we’re going to see some correction to some extent... We’re due in theory.”
January/February 2020
Market sees insatiable investor appetite The Twin Cities continues to attract national interest and out-of-town investors pursuing apartment deals that have healthier returns than other major markets. “There’s no question that there are a lot of dollars chasing apartments,” Mullins notes. “You have a lot of outside capital chasing deals today… and they’re paying top dollar for the assets.” In addition to newer product, investors are also still seeking value-add deals. “It’s a market that checks a lot of the boxes from an institutional capital’s perspective on where they want to place capital, and that has been the reason why we’ve seen a lot of new buyers coming into the market,” Talberg says. “There are a lot of new investors and new lenders, and we expect that trend only to continue.” Talberg says many investors consider Minneapolis like a Denver or Austin, Texas, in that it’s a core secondary market. Also, some believe that the Twin Cities is perhaps at a later stage of the economic cycle and a good market to place their money from a long-term hold perspective. “We’ve been trending over the past few years around $2 billion in sales volApartment to page 18
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Minnesota Real Estate Journal
January/February 2020
CBRE Report: AirBNB, VRBO Rentals Will Impact Hotel Markets in 2020 By Dan Rafter
H
otel owners have reason to worry about the continued growth of services such as AirBNB and VRBO. Short-term vacation rentals will remain popular in 2020, with the trend further expanding in suburban, rural and resort markets, according to a new report from CBRE. And that could mean more competition for hotel operators this year. CBRE predicts that the short-term rental industry will expand to about 650,000 actively rented units in the United States this year. That is equal to 12.2 percent of the U.S. hotel room supply, according to CBRE. Short-term rentals typically are houses, condominium units and unoccupied apartments that are rented out for short vacation stays on platforms such as AirBNB or VRBO. These short-term rentals are direct competitors to hotels, and can have a significant impact on the strength of the hospitality market. As CBRE says, when there is a high penetration of short-term rentals in a market, it limits the ability of hotels in that same market to raise their rates.
That’s because more short-term rentals hit the market during periods of high demand and low vacancies, the same periods in which hotels usually boost their rates. This, of course, directly impacts a hotel’s profits. And, as CBRE says, a high concentration of short-term rentals can dissuade developers from building hotels in certain markets. CBRE officials say that the growth of short-term rentals, then, is something that hotel operators need to watch closely. “The industry used to essentially
ignore the impact of short-term rentals when assessing a hotel’s value, but not anymore,” said Tommy Crozier, the executive vice president leading CBRE’s National Hotel Advisory Practice. “It’s clear that these rentals can have a direct and meaningful impact on hotel performance and asset values. The impact might be more pronounced in some submarkets than in others, contingent on conditions, but it is a legitimate impact nonetheless.” According to CBRE, a market reaches its saturation point when its shortterm rental supply equals 10 percent to
20 percent of its supply of hotel rooms. Of the 30 largest hotel markets in the United States, 14 have short-term rental ratios of 10 percent or more, CBRE said. In the Midwest, Minneapolis is a good example of how popular shortterm rentals have become. CBRE said that through 2019, Minneapolis saw its supply of short-term rentals grow to 2,320 out of 44,432 hotel-room units. That brings its short-term rental ratio to 5.2 percent, an increase of just less than 0.5 percent when compared to a year earlier. Minneapolis’ short-term rental ratio is the 24th highest in the country, CBRE reported. “While Minneapolis’ true short-term rental ranking is low compared to other larger cities, it did see positive growth with a small uptick in its supply unlike many of the markets currently ranked ahead,” said Mark VanStekelenburg, managing director of CBRE Hotels. “Its short-term rental penetration is quite low at 5.2 percent, offering substantial opportunity to expand its shortterm rental market in the future.”
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Page 18 Apartment from page 14
ume, which is up significantly from coming out of the recession where we were a $300 million to $500 million market,” Talberg notes. “We will be around that $2 billion mark as well in 2019. But I do expect that 2020 has the potential to be a record year and surpass the $2 billion.”
2019 was another active year It has been another busy year in the multifamily sector, says Keith Collins, executive vice president in CBRE’s Minneapolis office, specializing in the sale of apartment properties. CBRE tracked around $1.9 billion in Twin Cities apartment sales in 2018. Collins anticipates 2019 will be closer to $1.6 to $1.7 billion. While the market is still very strong, investment sales have dipped slightly. “I don’t think it’s a lack of capital,” Collins says. “We still have more and more capital looking to get into Minneapolis.” It’s more due to a lack of willing sellers and also much of the older, valueadd product has sold and much has been rehabbed, he notes. “There’s less and less of those opportunities, and as far as the merchant builds, how many true merchant builders do we have out there?” Collins asks.
Minnesota Real Estate Journal
He says the market has some, but it’s not like there’s an abundance of the Opuses and Ryans of the world that are selling. Collins also says the market hasn’t likely seen enough rent growth in the urban areas to justify owners wanting to sell right away. “They haven’t seen enough appreciation, so I think that’s halting a little of the sales volume,” he notes. “All in all, it’s good. Cap rates are still strong. I think our market is very well-received.”
What investors are active? Collins says the market will likely have 18 to 20 sales of 100 units-plus in 2019. “Of that, pretty much all but two are out-of-town buyers,” he notes. “People want to get into Minneapolis. It used to be a little under the radar. It’s not anymore.” He says people are well aware of the Twin Cities including all of the Fortune 500 companies and the diverse base of employment. “We’re certainly attracting the institutions -- whether it’s pension fund advisors or life insurance companies,” Collins says. There are also many private groups seeking assets in the Twin Cities. Whether it’s a regional sponsor with an institutional partner or core funds, core-
plus funds, value-add funds, they’ve been very active acquiring more of the older product. In addition, there’s high-net-worth private capital coming in from outside of the Twin Cities as well as 1031 activity and some public REIT activity.
Market is in a ‘new paradigm’ Two or three years ago, everyone was asking what inning is the multifamily market in? Collins says. “Now everyone just realizes that there’s a new paradigm where the market has been in extra innings and will continue to be,” he says, noting new apartment units delivered and those in the construction pipeline. There’s also a shift to more suburban development in areas that have been underserved with newer product. “Do I see the market shutting down anytime soon?”Collins asks. “No. Is it peaking? One would certainly think that we can’t keep going at this rate, especially in the urban locations where there has been much more meaningful supply, and then just how deep is that market? If there’s one challenge, it’s you haven’t seen the dynamic rent growth in the urban locations that you’ve seen in the suburban locations.” Collins says strong investor demand for apartment assets will continue and pricing has remained very strong across
January/February 2020
the spectrum. “There’s going to be continued abundance of capital. That’s not going away,” he says. “The debt markets continue to be very creative. There’s always this concern about the agencies – Fannie Mae and Freddie Mac—cutting back, etc. But they seem to continue to get enough of their allotment to stay very active and relevant in our industry, and that has happened again. I think with the interest rates, the debt markets remain very attractive.” He also points to the upcoming 2020 presidential election. Collins says there’s the “mindset that, ‘Hey, it’s a good opportunity to capitalize that,’ because there’s probably more uncertainty with the post-election next year. “Consensus from my colleagues throughout the country is it’s going to be a very strong and active on the capital side, for sure for the first half of the year,” Collins says.
January/February 2020
Minneapolis' Timberland Partners acquires three apartment communities Minneapolis-based Timberland Partners Investments acquired three new apartment properties through its newly created Timberland Partners Apartment Fund VII. TPAF VII will raise $100 million to acquire and manage quality multifamily rental properties in the Midwest and Southeast markets of the United States. The first three deals created with the fund are consistent with Timberland’s strategy of investing in secondary and tertiary markets that are primed to produce cash flow and value increases in the short-term. The three properties include: Meadowridge Apartments; St. Peter’s, Missouri. Located 30 minutes northwest of downtown St. Louis, Meadowridge Apartments is a 180-unit community built in 2019. Timberland owns and manages 1,966 units in the St. Louis metro area with Meadowridge being its seventh local apartment acquisition. Trails at Cahaba River, Birmingham, Alabama Located 20 minutes southeast of downtown Birmingham, the Trails at Cahaba River is a 400-unit apartment community. Built in 1988, the property recently underwent a $6.6 million renovation of the clubhouse and 85 percent of the apartment units. Timberland Partners plans to invest an additional $2.5 million to renovate the remaining 15 percent of the apartments, as well as install a second, resort-style pool, a new dog park, firepits and outdoor grill spaces throughout the property. This is Timberland’s first community in Alabama. Encore Memorial; Bixby, Oklahoma Located 15 miles south of downtown Tulsa, Encore Memorial is a 248-unit apartment community. Timberland Partners owns and manages 1,032 units in the Tulsa market. Minneapolis’ Timberland Partners owns and manages a portfolio of more than 16,000 apartment units in 15 states.
Minnesota Real Estate Journal
My Place hotel expands to Minneapolis region Following its fifth year in franchising, My Place Hotels are officially in half of the United States with its
newest hotel opening in Minnesota this month. Located off of Highway 169 (Exit 112) at 3912 12th Avenue East in Shakopee, Minnesota, the four-story, 63-unit hotel was developed by Eller
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Enterprises and is managed by True Hospitality, LLC. My Place Hotel-Shakopee is located across the road from the iconic Canterbury Park and under five minutes away
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from Valley Fair, making the hotel an ideal destination for travelers to the greater Minneapolis-St. Paul area. This is the sixth My Place hotel for True Hospitality, LLC.
Stahl wraps $8 million school renovation in Minneapolis Stahl has partnered with Minneapolis Public Schools Special School District #1 on the addition and renovation of the Marcy Open School in Minneapolis. The 44,000-square-foot facility was originally built in 1991 and serves 741 K-8 students. The $8.5 million project included a new cafeteria and kitchen, relocation of the art and music spaces, modernizing learning environments and enhancing security. Construction began in the spring of
Minnesota Real Estate Journal
2019 and was completed in November 2019, with the landscape and final exterior elements to be completed in August 2020.
Autism services provider opens location in Minnesota MOB Caravel Autism Health is the newest tenant at Davis’ Plymouth Medical Building in Plymouth, Minnesota. Caravel will join Fresenius Kidney Care in this newly renovated Class-A medical office building this spring. Caravel Autism Health is an autism services provider offering diagnosis and treatment. John Coleman, Frank Richie and John Marquardt of Transwestern represented Caravel in this transaction.
Women's clinic joins medical roster at Minnesota's CityPlace II Adefris & Topping Women’s Specialists will join Shriners Healthcare for Children in the newest medical office development at Woodbury, Minnesota’s, CityPlace II this summer. Adefris & Toppin will move from the Woodwinds Hospital Campus and take a long-term lease for 8,040 square feet at CitPlace II. Brian Passeri of RG Commercial Realty Group represented Adefris & Toppin. CityPlace is a mixed-use development in Woodbury, a suburb of Minneapolis. The development features an expanding medical hub including MNGI Digestive Health, Associated Eye Care, Midwest ENT, Tria Orthope-
January/February 2020
dics, Woodbury Dental Arts and Shriners Healthcare for Children.
Timberland Partners to build 218-unit apartment community near Minneapolis Timberland Partners closed on the land and financing necessary to begin construction of Sundance at Settlers Ridge, an apartment community in Woodbury, Minnesota. The $68 million, 218-unit project was designed by Kaas Wilson Architects and will be constructed by Frana Companies, both based in Minneapolis. Dougherty Mortgage LLC arranged a $53.5 million HUD-insured 221(d)(4) loan to finance the project. Sundance at Settlers Ridge is designed as a townhome-style apart-
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ment community, appealing to those desiring a neighborhood experience not available through traditional midrise apartment construction. As a toptier suburb, Woodbury is an ideal location due to its family-friendly reputation, highly recognized school district, continued growth, proximity to major area employers, and easy access to transportation and services. Sundance at Settlers Ridge is comprised of 23 two-story buildings, each with eight to 10 homes. This unique structure more closely aligns with townhomes, as residents will enjoy ample green space, walking paths, and a secluded, neighborhood style. Community amenities include a community room with full kitchen, outdoor pool with sundeck, fitness center and yoga studio, and outdoor kitchen, to name a few. One-, two- and three-bedroom floor
Minnesota Real Estate Journal
plans are available. Each home will include a private entrance, with attached garage, private balcony, granite countertop, and in-unit washer and dryer. Construction will be completed in phases, with the first building and clubhouse opening in late August 2020, and project completion scheduled for late Summer 2021.
Kraus-Anderson to build $25 million medical center in MInnesota Sanford Health will start construction on a new heart and vascular center at the Sanford Bemidji Medical Center in Bemidji, Minnesota, in the spring of 2020. The center will cost more than $25 million with $2.5 million raised by the Sanford Foundation. Naming rights and donor opportunities for the build-
Public Notice For Qualifications Statements for Real Estate Marketing and Brokerage Services for the Metropolitan Airports Commission, Minneapolis-St. Paul International Airport The Metropolitan Airports Commission (MAC) is requesting qualifications statements from qualified firms interested in providing real estate marketing and brokerage services for the MAC. To obtain a copy of the Request for Qualifications, please go to the following website http://www.metroairports.org/business/solicitations/ and look under Request for Qualifications. The RFQ will be released on or about January 22, 2020. MAC contact for the RFQ is Eric Johnson at 612-725-8322 or eric.johnson@mspmac.org. Questions regarding the RFQ are due to MAC no later than 4:00 p.m. CST on February 7, 2020. Submission of qualifications statements is due on or before 4:00 p.m. CST on February 21, 2020.
January/February 2020
ing and certain areas within the center are still available. Located between the medical center’s east entrance and the Main Clinic east of the Healing Garden, this new center will house all cardiology, vascular, pulmonary and respiratory therapy services. This includes 19 clinic rooms, 11 diagnostic imaging rooms, education rooms, a cardiovascular recovery unit family room and 3 cath labs with space to add a fourth. Since beginning the program a decade ago, the cardiology department has experienced a 20 percent growth
year-over-year reaching capacity in 2019. In that same time, heart diseaserelated deaths have decreased by up to 15% in the region. With direct access to the second floor of the medical center, the building will allow patients to transfer to inpatient floors and services more smoothly providing a better, overall patient experience.
Great Events Coming in 2020 Save the Date or Register Today at MREJ.com April 3
North Metro Development Summit
April 8
Residential Real Estate Summit
April 16
Capital Markets Summit
April 22
Women In Real Estate Summit
May 1
Land Development Summit
May 5
Destination Medical Center Summit in Rochester
May 14
MREJ Awards
May 21
St. Paul Summit in St. Paul
May 28
Mid-Year Apartment Summit
June 5
Property Management Summit
June 11
Commercial Real Estate Forecast Summit
July 23
Brownfields Summit
August 3
19th Annual MREJ Golf Classic
August 14
East Suburban Development Summit
August 21
Building Efficiency & Energy Summit
September 11
Hotel & Hospitality Summit
September 18
South Suburban Development Summit
September 25
Multifamily Finance Summit
October 2
Rochester Real Estate Summit
October 9
Downtown Summit
October 14
Building Operations Summit
October 22
Net Lease 1031 Summit
October 29
Senior Housing Summit
November 6
Data Center Summit
November 13
Industrial Real Estate Summit
November 19
Redevelopment Summit
December 4
Office Summit
December 9
MREJ Holiday Party
December 11
Affordable Housing Summit
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