Mrej July 2019 by REjournals

VOLUME 35, NUMBER 7

July 2019

Update: A Look at Downtown Minneapolis’ Next Wave of Development

By Liz Wolf

owntown Minneapolis continues boasting billions of dollars in new commercial and residential development activity with no slowdown in sight. “We’re in our eighth year in a row of over $1 billion in building permits each year,” says David Frank, director of the department of Community

Planning and Economic Development (CPED) for the city of Minneapolis. “What that says is it’s a great place to invest, because it's a place people want to live and work and be, and it says it’s validation of the packages that we have available,” he notes. A number of the sites being redeveloped were previously city-owned. Here’s a look at some key projects that recently broke ground or are in various stages of planning:

RBC Gateway Minneapolis-based United Properties broke ground on the RBC Gateway mixed-use development on the “Nicollet Hotel Block” at the northern end of Nicollet Mall. United Properties purchased the site – a cityowned surface parking lot -- from the city of Minneapolis for $10.4 million. The city had had owned the property since the early 1990s, acquiring it after Downtown to page 14

Not Your Mother’s Mall: Transforming the Modern Retail Center By Tom Hershey

atching the latest season of Stranger Things, you can’t help but reminisce about the mall in its glory days. In the 1980s, the mall did to Main Street what the internet has done to almost all brick-and-mortar retail. All too familiar eye-grabbing headlines have now

become commonplace when reading about today’s retail climate. Retailageddon. Mallpocalypse. While there is no doubt that there has been a seismic shift of the retail landscape, all may not be doom and gloom for the favorite teen hangout of the ‘80s. As retail bankruptcies soar and store closures continue, mall developers and owners are creatively transforming their assets into housing, hotels and even multi-faceted entertainment venues. The underlying goal is to get people to go back to (what was) the mall.

Owners and developers are looking to new uses to draw the consumer, some of which include abandoning retail completely or retaining only a portion as a complement. When the oldest mall in the United States, the Arcade Providence in Rhode Island, was transformed into 48 micro apartments, along with various retail amenities, some looked at it as a novelty. Nonetheless, before it opened there was a waiting list Mall to page 12

July 2019

Minnesota Real Estate Journal

Featured Stories

JULY 2019 • VOLUME 35, NUMBER 7

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Departments PEOPLE ON THE MOVE 4 BREAKING GROUND CLOSINGS

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

UPDATE: A LOOK AT DOWNTOWN MINNEAPOLIS’ NEXT WAVE OF DEVELOPMENT NOT YOUR MOTHER’S MALL: TRANSFORMING THE MODERN RETAIL CENTER

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Minnesota Real Estate Journal

July 2019

A Letter from the Publisher 7767 Elm Creek Boulevard, Suite 210 Maple Grove, MN 55369 For information call 952-885-0815

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

We are thrilled to announce that Minnesota Real Estate Journal has become part of a larger commercial real estate publishing company. We are joined by REjournals, REDNews, Midwest Real Estate News, the Illinois Real Estate Journal, and others. The combined company will be headquartered in Minneapolis and run by Jeff Johnson, CEO and Todd Phillips, CFO. Jay Kodytek and Alan Davis Jeff Johnson will also remain members of our Minnesota leadership team. Given the ger Wheless will head our Texas opergrowth of our customers across the ations from Houston. Midwest, we felt it was only natural With our expanded offerings, we that we expand to meet their needs. will be able to provide the readers of The combined company gives us the Minnesota Real Estate Journal dedicated boots on the ground in three with more in-depth local and national of the five largest MSAs in the nation: commercial real estate news, both in Chicago, Houston, and Dallas. To print and on our consolidated website, operate these markets, the company is REjournals.com. By visiting our new joined by two industry veterans with website, which covers 16 states, you more than 25 years of experience in can choose the specific state and / or their respective cities. Mark Menzies industry for which you want up to date will head the Chicago office and Gin- news.

This expansion will also give our readers access to more events and more networking opportunities around the nation by building off the success Midwest Real Estate News has had offering events in Wisconsin, Ohio, and Nebraska to name a few. As part of these expanded events, you will also see us offer awards galas in several new states, leveraging off our successful Minnesota event last April which attracted over 500 of the highest caliber real estate professionals. Finally, I want to personally invite you to our first ever MREJ Holiday Party at the Golden Valley Country Club on December 18th. Watch your email for details. We hope to see you there! We are proud to continue to be part of the local Minnesota commercial real estate community and we thank you for your loyalty to the Minnesota Real Estate Journal. If you have any ideas, questions or concerns please reach out to me at anytime at jeff.johson@resummits.com.

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

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

Christianson & Company Welcomes Broker with Extensive Resume to Their Team Local commercial real estate company, Christianson & Company, is excited to introduce the newest member of their brokerage team, Stephani Sundry. Stephani’s considerable legal background, diverse professional experience within the commercial real estate industry, and determined personality enhances and expands Christianson & Company’s capabilities. In her role as general counsel, Stephani directed and managed the multi-million-dollar real estate portfolios of a $1B plus privately held retailer with locations throughout the Midwest, and of a $800M private equity owned manufacturing company with facilities across the United States. As director of real estate for a Fortune 500 retailer, Stephani oversaw all corporate and industrial real estate matters. In addition to the dozens of retail locations

she secured, she managed the disposition of all surplus land and building space throughout the country. Stephani has also served as developer for Told, working with clients to identify retail and industrial opportunities, negotiate terms, lead the entitlement processes, secure end users and engage vendors. In regard to her decision to join Christianson & Company, Stephani says “as someone who has touched many different aspects of commercial real estate, I’ve had the pleasure of knowing Lisa, the president of Christianson & Company, for a number of years. I’ve watched her team grow and her brand develop. Aligning with Christianson & Company allows me to work with a group of conscientious, hardworking and wellrespected professionals. It was such an easy decision to come to this company”. Lisa shares Stephani’s excitement. She exclaims that “Stephani’s relationships, legal expertise and development experience have already proved to be invalu-

able. In addition, Stephani’s commitment to supporting the success of those around her, along with her fun and passionate personality, blends well with our organization. She is both a leader and great partner and we will all benefit working with her”.

The Opus Group Announces Promotion of Josh Babiasz to Director of Safety Management The Opus Group (Opus) is pleased to announce the recent promotion of Josh Babiasz to director of safety management. In his new role, Josh will lead the overall coordination of all safety operations, including the development, implementation and administration of safety programs, practices and procedures. As a core value for Opus, they work to keep associates, subcontractors, partners and the general public safe at all times. “Since joining the team in 2000, Josh People to page 20

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Minnesota Real Estate Journal

Historic Batcher Block Opera House set to Reopen in Staples MN The Batcher Block Opera house, built during the turn of the 20th Century is set to come alive through a partnership with The Staples Economic Development Authority along with local business and community leaders as part of the economic revival of the downtown area. The 30,000 square foot building with original period details such as the mural and fresco work adorning the opera house proper was the crown jewel of performance spaces in MN when it opened in 1907, with a national reputation for acoustical excellence. The opera house closed its doors during the great depression and now the dire need to stage a large scale artistic preservation will ensure that this

piece of MN history is brought back to a vibrant life for the local community as well as tourist destination. The city of Staples has announced an initiative towards a full restoration of the building to serve the community through public and private events as well as educational programs, art related

events, tours and donations as a selfsustaining non-profit agency. The building will house, classrooms, office space, a catering kitchen, rooftop event space and the grand hall to host performances from regional and national artists, as well as community events such as weddings and performances

July 2019

from local musical and theater ensembles. Batcher Block Opera House is considered one of the best preserved opera houses in MN, and is listed on the National Register of Historic Places. It is one of only 13 opera houses of its kind in the United States. The creation of a business plan was funded by Sourcewell and the city of Staples, which was created as part of the cityâ&#x20AC;&#x2122;s application for the revitalization of the building to be considered for funding in the 2020 Minnesota Legislature Capital Projects budget. McClure Placemaking was awarded the contract for writing the business plan. Harmonious Architecture is overseeing the structural needs along with Norson Construction. Historical restoration has been awarded to News to page 8

Page 8 News from page 6

Omforme Design for the intricate mural work within. By offering over 300 events a year, the BBOH will reclaim its place as the “cultural and intellectual heart” of the city of community (National Register). In addition, the BBOH will act as an economic development engine not only for the Staples-Motley region but for the greater region and the state of Minnesota. By attracting local, regional, and national audiences to the space, the BBOH will play an outsized role in the continued revitalization of downtown Staples through arts and culture, and it will help Staples attract and retain the next generation of workforce for whom cultural amenities is essential in deciding where to live, work, and play.

Dougherty Mortgage LLC closes Fannie Mae loan for Sedona Ranch Dougherty Mortgage recently closed a Fannie Mae loan for the acquisition financing of Sedona Ranch, a 253-unit market rate multifamily apartment property located in Dallas, Texas. Property

Minnesota Real Estate Journal

features include a playground, two swimming pools, picnic area and two laundry facilities. The 12-year term, 30year amortization loan was arranged through a partnership with Old Capital Lending for borrower 2749 Sedona Ranch LLC.

Dougherty Mortgage LLC closes Fannie Mae loan for The Oaks at Jane Lane Dougherty Mortgage recently closed a Fannie Mae loan for the acquisition financing of The Oaks at Jane Lane, a 109-unit market rate multifamily apartment property located in Haltom City, Texas. The 12-year term, 30-year amortization loan was arranged through a partnership with Old Capital Lending for borrower Red & White Jane Lane LLC.

MSR Design Selects Stahl for New Living Building Challenge Office Build-out MSR Design selected Stahl as their construction partner for their new office in downtown Minneapolis. Together, MSR Design and Stahl will transform

the existing 14,000-square-foot white shell located in the 510 Marquette building into an innovative, highly sustainable, collaborative workplace housing 53 employees and eight office dogs. The new skyway-connected office will feature modern finishes, custom millwork, and a 24-foot operable door. Together, MSR Design and Stahl utilized the Living Building Challenge (LBC) framework to direct the design scope. The LBC program focuses on the overall impact-built environments have on the building’s occupants and entire surrounding community. Compliant projects consider the future sustainability of all building components, including material lifecycle, community integration, human health impact, and self-sufficiency. MSR Design Principal Paul Mellblom said “We are very pleased about the design of the new home for our firm, MSR Design, in the heart of downtown Minneapolis. Stahl has been a willing and able partner with us on this project. They quickly ramped up their knowledge base about Living Building Chal-

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lenge (LBC, https://livingfuture.org/lbc/), which we are seeking for our new office space – the first such certification in the state of Minnesota. When we interviewed Stahl, they were not familiar with LBC but quickly committed to meet the challenge, as well as work with us to meet strict budgetary guidelines and a tight schedule. It has been a really good partnership with Stahl: we are all pleased.” MSR Design and Stahl are working to achieve three distinct petal certifications, beauty, equity, and material selection, through the LBC program. To achieve the beauty petal, a space must contain a meaningful integration of public art that is intended solely for human delight and visible to the community. Equity petal certification means to create a true sense of community in the surrounding neighborhood. The new space should have equitable access for all people regardless of physical abilities, age, or socioeconomical status. Similarly, occupants of the space should have universal access to public transportation, nature, and places to shop, congregate, News to page 16

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Downtown From page 1

the Nicollet Hotel was razed. “It’s a very big deal,” Frank says of the development. “We have owned that block for quite awhile, and there have been several tries to sell it.” Several previous attempts to redevelop the block were unsuccessful. United Properties’ new skyscraper will reshape the city’s skyline. The 37story tower will include 530,000 square feet of Class A office space, a Four Seasons Hotel and Resorts (the city’s only five-star hotel), 31 for-sale condos, street-level retail space and a public plaza. The tower will be skyway-connected to the Minneapolis Central Library. RBC Wealth Management will anchor the tower occupying approximately 310,000 square feet for its new U.S. headquarters. The company plans to move to the new building once it’s completed in fall 2021. Also, Minneapolis-based Pohlad Cos. will relocate to RBC Gateway, taking three floors. The company will lease 96,000 square feet for seven of its Pohlad Cos., including developer United Properties. The office space is around 85 percent leased. The block is integral in connecting Nicollet and downtown’s core to the

Mississippi Riverfront. “It will really take that quiet end of Nicollet Mall on the north and transform it,” says Bill Katter, president and chief investment officer of United Properties. “Downtown continues to move back toward the river, and this project helps

continue to pull activity all the way back to the river,” he says. “That should be a goal so that we can reenergize the entirety of downtown.” Katter says this development will bring new energy. “That’s what we think we’re selling here,” he says. “That energy is mostly

just from the scale of the project and the amount of people that are going to be working on-site, living on-site or enjoying the hotel experience on-site. We think there will be on a daily average 3,000 or 3,500 people [at the propDowntown to next page

From Historic to to Hig gh Tec ghe h, The Place e to Grow iss

Small TTo own w Pride. Biig City Oppo ortunities. 20 019 City/Mu unicipality of th he Ye Year

2019 Greater MN Project P of the Ye Year e

City of Faribault aribault • Community & Economic Devellopment • ci.f ci faribault.mn.us arib bault mn us • 50 07.334.0 334 0100

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July 2019

Downtown from previous page

erty]. All of that’s going to be a gamechanger.”

North Loop Green Houston-based developer Hines is planning its latest development called North Loop Green, a mixed-use, transit- and entertainment-oriented project on the edge of downtown that would connect the North Loop neighborhood to the city’s CBD. The development would be built adjacent to Target Field and replace a surface parking lot that sits 30 feet below the existing 5th Street bridge. Hines’ plans call for developing two towers: a 14-story, 340,000-squarefoot, multi-tenant office tower and a 36-story, 450-unit apartment tower that would include 360 market-rate apartments and 90 short-term rentals. The towers would be linked by a 14th -floor skyway. A planned large plaza would offer community gathering space, and plans call for retail and restaurant space that would be located off the plaza level. The office tower already announced its first tenant. Minneapolis-based ESG Architecture & Design, the firm selected to design Hines’ project, will move its headquarters there from its current offices on Washington Avenue when

the new tower is completed in late 2022. “The mix of retail, restaurants, hospitality, residences, and office, as well as the added public park space, called ‘The Green,’ will knit together this part of the City with positive energy, activi-

ty and sense of place,” said Bob Pfefferle, managing director for Hines Minneapolis, in a prepared statement. The plans are the final phase for a 6acre parcel that Hines purchased in 2012 for $13.7 million. Hines developed the Dock Street Flats apartments

and the T3 office tower on the site. Hines is in the process of getting ready to submit plans to the city and the North Loop neighborhood. Downtown to next page

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The Dayton’s Project The Dayton’s Project is setting out to reinvent the historic, former Minneapolis Dayton’s department store building at 700 Nicollet Mall. The building has been added to the National Register of Historic Places. Many of its historic elements are being retained and restored in the repurposing. Overall, the 12-story, 1.2 millionsquare-foot Dayton’s Project will include a mix of office, restaurant and retail space. The 601w Cos., the majority owner of the building, is working with minority stakeholders and project partners the Telos Group, United Properties and Gensler. The renovated project will feature the 45,000-square-foot Dayton’s Food Hall & Market on the basement level that will be connected to both Nicollet and the skyways. Overseeing the food hall development is James Beardaward winning chef Andrew Zimmern and his team at Passport Hospitality, and Robert Montwaid of Gansevoort Market in New York. “We thought that was a really cool pairing of those two groups to make a dynamic partnership to bring in users here,” says Tricia Pitchford, principal and senior vice president of leasing at Mid-America Real Estate. Mid-America is leasing the retail space for The Dayton’s Project.

“I would think in the next 60 days they’re going to be making announcements [for the food hall],” Pitchford notes. Plans also call for retail on the street and skyway levels and a restaurant in the former JB Hudson space at Eighth Street and Nicollet; no tenants have yet

been announced. “The project is receiving national attention,” Pitchford says. “We have had really positive response from retailers not just in our market but nationally. “Retail is just slower right now,” she points out. “There’s not as much deal

velocity. So as we’re talking with these groups, we’ve been slow to make announcements because it’s just taking a little longer to pull the deals together.” Pitchford says the most active users Downtown to page 13

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July 2019

Mall From page 1

of 4,000 eager dwellers wanting to live in the historic property, which is now thriving. There are currently projects underway across the United States incorporating apartments, hotels and even senior living into the mall redevelopment strategy. When looking at revitalization prospects, one major factor often missing from the discussion are costs. Although malls may sell at seemingly attractive prices, the actual costs for repositioning these outdated facilities can be significant. The Summit Place Mall in Waterford Township, Michigan, sold for a reported $3.7 million late last year, while the costs to redevelop the site are estimated at $63 million. Several factors come into play when looking at redevelopment. According to Jeffrey Soclof with Coldwell Banker Commercial Emmco Realty Group in Beachwood, Ohio, the redevelopment costs, existing debt structure, lenders’ debt service requirements and potential rents on the project are key. More time is still needed to get a clear picture on the overall economic viability of mall repurposing. Some owners have found success with office conversions, replacing fail-

Tom Hershey ing shops with creative space and medical uses. Earlier this year Google announced that it would lease 600,000 square feet, or 81 percent, in what was the Westside Pavilion shopping mall in Los Angeles. The now almost completely shuttered mall will re-open in 2022 as One Westside, featuring creative office and destination tenants. In Detroit, Ford leased more than 200,000 square feet of space in the revitalized Fairlane mall for use as offices. The space once housed Lord & Taylor. Medical uses in malls are not a new idea, with dental, vision, drug stores and even chiropractic uses dating back sev-

Riverside, Minneapolis

eral years. More recently, lifestyle centers have grown to include leading healthcare providers alongside pharmacies and other wellness tenants. An excellent example is the Life Time Center in Chestnut Hill, Massachusetts, previously known as the Atrium. The overhauled center reopened in 2017 as a health and fitness destination with Dana Farber Cancer Institute opening in early 2020. The famous Mall of America in Minneapolis has entered the fray, too, announcing last week that the University of Minnesota will be opening a clinic in the mall that will be operated by a locally-based healthcare provider.

Investors are also looking to fill space with experiential tenants. Escape rooms, trampoline centers, gymnastics venues, dine-and-view movie theaters and even axe throwing. Faraz Cheema with Coldwell Banker Commercial NRT in Alexandria, Virginia, is leasing the Frederick Towne Mall, in Frederick, Maryland. According to Danielle Balkin on the leasing team, “the area’s solid, and improving, demographics make this a prime project for a destination venue, similar to that of Ballston Mall re-development in Arlington, Virginia, as well as Mall to page 19

Uptown, Minneapolis

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July 2019

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Downtown from 11

right now are food and entertainment, and they’re talking with a number of groups. She also says there will be retail space designated as a “Beauty Hub” on the skyway level, which could include a hair salon, nail salon, barber shop, etc. They will all be in one area so they can feed off of each other. And there will a “Fitness Hub, tailoring toward cycling groups, Pilates groups, yoga groups, etc., which would share some amenities like locker rooms. As for the redevelopment’s office space on the upper floors, exclusive amenities will include a rooftop terrace, a private lounge and fitness center. Some floors offer 90,000 square feet of continuous space. United Properties’ Katter says there‘s a lot of marketing underway for the office space and many tours taking place, and the property is seeing significant interest by office tenants. Construction on The Dayton’s Project began in 2017, and the redevelopment is scheduled to open in spring 2020.

800 Washington AECOM’s plans for a mixed-use development on a long-vacant, cityowned site at 800 Washington Ave. S. in

the Mill District continue to move forward, and the developer was given an extension by the city to give it extra time. The city selected Los Angelesbased AECOM to develop the 0.56-acre site following an RFP process. AECOM plans to develop a 14-story

tower with about 120 for-sale condos, 18,540 square feet of office space and 18,540 square feet of ground-floor retail/restaurant space on the site, located south of the Guthrie Theater, and also referred to as the “Guthrie Liner Parcel.” Initial plans called for a 12-story

tower, however, Brian Dusek, AECOM’s managing principal for real estate development, says the increase in the project’s height is a combination of compensating for the rise in construcDowntown to 14

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Downtown from 13

tion costs and also the increased demand for condos in the market. “There hasn’t been a lot of condo product; it has been mostly rental,” he notes. “So there’s a lot of pent-up demand.” Floors four through 14 would be the condos -- a mix of studios, one-, twoand three-bedroom units -- and Dusek says they’re still working to determine pricing. Floors 13 and 14 would also include several penthouse units. The office space is planned for the third floor and would house American Academy of Neurology, whose headquarters is located next door and it was looking to expand. The new office would be connected to the Academy via a skyway. Plans for the second floor include a clubroom, a mezzanine lounge and fitness center while the first floor would feature a large lobby, bike room and outdoor lounge. As for the ground-floor retail space, Dusek says AECOM is looking to serve the neighborhood with several smaller stores like an urban gardening store, an urban hardware store and coffee shop. Also, plans call for a restaurant, likely at the corner at Washington and Chicago avenues. The project would also include public open spaces and rooftop gardens.

Dusek says they’re looking to receive final site plan approvals in the next couple of months. “Given pre-sales, we’re probably looking at a 2020 start, and I would say from groundbreaking to opening would be 24 months,” he adds.

301 Nicollet The Opus Group has proposed a 20-

story, mixed-use residential project – dubbed 301 Nicollet – on 1.5 acres at the corner of Nicollet Mall and Third Street. The site is next to its recently completed, 30-story 365 Nicollet apartment tower. The block is known as the “Ritz Block” as the Ritz Hotel previously occupied the site and was razed in 1990. 301 Nicollet would include between 357 and 370 upscale apartments, 5,000

square feet ground-floor commercial space on Nicollet Mall with space for outdoor seating, and a 351-stall parking ramp, according to plans Opus submitted to the city. Also, the Third Street side of the tower would feature two-story, townhome-style rentals. This project would redevelop the last remaining surface parking on Nicollet Mall into a transit-oriented, high-density

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Minnesota Real Estate Journal

residential development, Opus’ plans noted. Opus also said the design won’t mirror 365 Nicollet. “The building’s design is intended to provide a character unique from the phase 1 development,” according to the plans. “Where the phase one building’s massing relates to the commercial core of downtown, the phase two building relates to the mid-rise character of the gateway district while maintaining the strong pedestrian realm of the historic core.” Plans call for the sixth and 20th floors to feature indoor and outdoor amenity spaces. The sixth floor would feature a rooftop terrace, swimming pool and hot tub as well as a clubroom, fitness center, spa and yoga studio. The 20th floor would include a club room and large outdoor terrace. In an email to MREJ, Opus officials said they’re in “early stages of the development process and look forward to working with all stakeholders.” Portland and Washington project (Allied Parking site) Minneapolis-based Sherman Associates has plans for a mixed-use development on a surface parking lot at the southwest corner of Portland and Washington avenues, behind the Crooked Pint Ale House. Roughly half

of the block is surface parking and Fire Station 1 is at the corner of Portland and Third Street South. The fire station would be razed as part of the redevelopment, and Sherman would build a new station for the city elsewhere on the block. Sherman’s plans call for a 22-story tower with 238 units of market-rate apartments, a six-story building with 90 affordable units, 6,000 square feet of commercial space and a parking ramp. Shane LaFave, director of development at Sherman Associates, says the market-rate tower alone is a $100 million development. Plans would be for Sherman to purchase the existing fire station, construct the new one, sell the new one to the city, raze the old one and then develop the apartment buildings and ramp. Plans call for the new station to be rebuilt at the corner of Fifth Avenue South and Third Street South. Sherman first revealed plans for the site in summer 2018. “Really what we’ve been doing the last however many months is trying to line up financing,” LaFave says. “That has been a multi-tiered effort including conversations with the city regarding tax increment financing and also about what’s the appropriate purchase price for both us purchasing the existing fire

station and selling a new fire station. “This is new ground for all of us,” LaFave points out. “We’ve never built a fire station, and I don’t know that the city has ever purchased a fire station before.” He says all parties are doing a lot of due diligence. “Architecturally, not a lot has changed [since first revealing plans], but we’ve been doing a lot of work behind the scenes to line things up from a financial perspective to make sure we can have a closing and get this thing going,” LaFave says. The developer plans to go the city's planning commission with formal plans in fall. Sherman could potentially break ground in first or second quarter of 2020, LaFave notes. Once construction begins, he says it will be a 24month construction timeline to build all phases.

City of Minneapolis New Public Service Building The city of Minneapolis razed a parking ramp at 501 Fourth Ave. S. to make way for the new 11-story, 382,000-square-foot Public Service Building. “Demolition was completed in November of 2018 and construction began in December of 2018,” says

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Sarah McKenzie, media relations coordinator for the city of Minneapolis. The city is currently scheduled to start moving departments into the new facility in fall 2020. McKenzie says the new building will be located diagonally across from city hall and allow the city to strategically collocate city employees now working in several different sites downtown and provide better service for residents and businesses. Employees are currently in working in seven city buildings spread out around downtown. “Opening day, we will have approximately 1,000 employees and contractors in the building,” McKenzie notes. One floor is being planned for future growth and flexibility. Fully occupied, the building can hold 1,300 people. Also as part of the project, city hall will be renovated. McKenzie says the total project budget for both buildings is $208.7 million. The city owns buildings at 309 Second Ave. S. and 250 S. Fourth St., and after the new complex is completed, they will be offered for redevelopment and sold.

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News from page 8

work, and learn. Lastly, creating a successful material economy that is nontoxic, transparent, and socially equitable will help to achieve the Materials petal certification. The Stahl and MSR Design teams are responsible for eliminating all waste during the design, construction, and operation of the new space. The lifecycle goal of the project is to have no negative impact on human and ecosystem health and, instead, replenish and regenerate the overall community. Certification of each petal is based on the actual performance of the space, which can only be awarded after at least one year of occupancy. “It has been incredible to work with MSR to design and now build space that evolves how their team will work and sets the bar for human health and wellness and environmental sustain-

Minnesota Real Estate Journal

ability,” said Jessie Houlihan, President at Stahl. “The Living Building Challenge is the most stringent standard for regenerative design, and we are committed to creating resilient, durable, adaptable, equitable work, through our partnership with MSR Design and in the future.” Construction started in June 2019 and is expected to be completed by November 2019.

United Properties selects Cynthia Froid Group to market Four Seasons Private Residences Minneapolis, part of RBC Gateway United Properties announced today that the Cynthia Froid Group of Keller Williams Realty Integrity Lakes of Minneapolis will exclusively market

the Four Seasons Private Residences Minneapolis, affiliated with Four Seasons Hotel Minneapolis, in its new RBC Gateway development. The appointment is effective immediately. The private residential portion of RBC Gateway will consist of 31 Four Seasons Private Residences on the uppermost floors of the building, boasting impressive city and Mississippi River views. Residents will enjoy Four Seasons services and amenities, as well as access to the facilities offered at the attached five-star Four Seasons Hotel, which will feature a restaurant and bar, a spa complex and one of the largest pool decks in the city overlooking downtown. “The Cynthia Froid Group has established itself as a premier name in Minneapolis’ luxury residential sales community. It has done so while maintaining a reputation as fair and trustworthy,

July 2019

which gave us confidence in their handling the listings for this dynamic new address,” said Chris Pohlad, vice president, United Properties, who is overseeing the development of Four Seasons Private Residences Minneapolis. “Our partnership with Four Seasons allows us to offer residences that deliver not only beautiful and comfortable homes, but also the signature hospitality and luxury lifestyle experience that Four Seasons is known for around the world,” he said. “We are thrilled to represent United Properties on this unique offering for discerning downtown residents,” said Cynthia Froid, president of Cynthia Froid Group. “The service offerings, lifestyle and perfect location downtown simply can’t be beat. We are confident these 31 residences will sell out fast, given their connection to the Four Seasons brand, the first five-star hotel

July 2019

in Minneapolis.”

Dougherty Mortgage LLC closes Fannie Mae loan for Rolling Hills Apartment Homes Dougherty Mortgage recently closed a Fannie Mae loan for the acquisition financing of Rolling Hills Apartment Homes, a 384-unit market rate multifamily apartment property located in Lancaster, Texas. The pet-friendly property features a dog park, playground, clubroom, fitness center and pool. The 12-year term, 30-year amortization loan was arranged through a partnership with Old Capital Lending for borrower RHP202, LLC.

JLL selects United Properties’ RBC Gateway for new Minneapolis office United Properties announced that JLL, a global commercial real estate services firm, will relocate its Minneapolis office to RBC Gateway in early 2022. JLL will occupy approxi-

Minnesota Real Estate Journal

mately 15,000 sq. ft. at United Properties’ 34-story, 1.2 million sq. ft. mixeduse RBC Gateway development. “As our Minneapolis office continues to grow, we are always looking for ways to provide the best office setting for our team,” said Chris Rohrer, JLL managing director. “RBC Gateway will provide wonderful amenities in a terrific location for our clients, employees and partners.” Employees from JLL’s Minneapolis office will move to RBC Gateway, located at the landmark intersection of Hennepin, Washington and Nicollet Mall in downtown Minneapolis. Other RBC Gateway office tenants include RBC Wealth Management and several entities within the Pohlad Companies, including United Properties. In addition to Class A office space, the building will include the Twin Cities’ first five-star hotel, the Four Seasons Hotel and Private Residences Minneapolis, a public plaza and greenspace, and street-level retail. JLL is a key partner in the RBC Gateway development, providing proj-

ect and development services on all aspects of the project. United Properties recently broke ground on RBC Gateway, with an expected completion in 2021. “United Properties and JLL have a long history of working together on both new construction and comprehensive renovation projects,” said Rick McKelvey, senior vice president, United Properties. “We’re very pleased that JLL’s team will call RBC Gateway home, and we look forward to having them as our neighbors in the new building.”

Minneapolis Industrial Sees 947,110 SF Positive Net Absorption in Q2 The Minneapolis industrial market saw 947,110-square-feet of positive net absorption during Q2 of 2019, according to a new reportby CBRE, slightly down from 1 million-square-feet in Q1, resulting in direct vacancy increasing slightly to 4.4 percent compared to 4.3 percent in Q1, while asking rates

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increased to $6.59-per-square-foot, up from $6.16 in Q1. A major factor in the positive net absorption was steady Twin Cities employment growth, economic expansion and strong demand for warehousing, bringing total positive absorption to nearly 2 million-square-feet in 2019, eclipsing more than half of 2018’s total positive net absorption. “The consistent and growing demand for industrial properties, along with positive employment growth in the Twin Cities continues to fuel our strong industrial market,” said CBRE’s Andy Lubinski, senior vice president with CBRE. “While positive net absorption was slightly down from Q1’s 1 million-square-feet, 2019 is well on pace to surpass 2018’s total.” Construction deliveries remained steady, with 327,222-square-feet of industrial space completed in Q2, with more than 600,000-square-feet of construction scheduled to be completed in Q3, all build-to-suit and in the SouthNews to next page

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Minnesota Real Estate Journal

followed by WPT Industrial REIT’s purchase of the 282,100-square-foot distribution warehouse at 9150 217th Street West for $23.5 million in Lakeville.

After 2017 Change in Ownership of The Jax in Lowertown, Historic Property Now Leased at 48% Since Opening in June

west submarket. Leasing slightly declined with 2.4 million-square-feet recorded in Q2, down from 2.6 million in Q1. The Northwest submarket continues its Q1 trend, having the highest portion of transactions at 39 percent, followed by the North Central at 30 percent.

Renewals were slightly ahead of new leases with 54 percent of all leasing activity, up from 47.6 percent in Q1. The largest sale in Q2 was Blackstone Group’s purchase of the 2.4 million-square-foot industrial equities portfolio at $247 million that spans multiple properties across the metro,

In 2017, there was a change in the ownership of The Jax 48-unit apartment building in St. Paul’s coveted Lowertown neighborhood — much of it driven by the importance of art and artists in and around the building. Since then, the new project team has worked to connect with their Lowertown neighbors and infuse the artistic soul of the area into the historic Jax property. The property now features works from local artists and the new ownership group has committed to further support of these artists as sponsors of the St. Paul Art Crawl. The result is that The Jax is now almost half leased (48%) since opening

July 2019

in June of this year! As you’ll not in the full News Release, the refurbished structure provides an authentic St. Paul lifestyle that delivers contemporary comfort without compromising the art and architecture of a true Lowertown landmark. Recognizing the artist community that preceded the 21st century redevelopment of downtown’s inner urban core, the building is hard to miss: It features a striking Ta-coumba T. Aiken mural, tying the past to the present and future. According Jon McClure, Chief Executive Officer of Iuvo Companies, SBC, “The previous owners planned to remove Ta-coumba’s mural from the building and had generally not embraced the local artist community. Once we took over the project, it was an easy decision to save the mural and explore ways that we could promote and support the artists.”v

Minneapolis Office Asking Rates Increase to $15.44, 14.4% Above the 10-Year Average

July 2019

The Minneapolis office market saw asking rates increase to $15.44, 14.4 percent above the 10-year average as demand remains high and job growth continues to surge, particularly in the tech industry, according to a new report by CBRE. Class A asking rates continue their upward trend, rising to 33 percent above their lowest point in 2011, with the North Loop Class A multi-tenant office market at $22.42-per-squarefoot, followed by the I-394 submarket at $19.39-per-square-foot. “The combination of new buildings and new owners making renovations is driving asking rates higher and tenants are willing to pay,” said CBRE’s Ann Rinde, vice president, advisory and transaction services. While the overall vacancy rate increased slightly to 18.4 percent, leasing activity remains strong in Minneapolis, with 32,633-square-feet in positive net absorption during Q2. The technology sector was the major driver in the market, accounting for 40 percent of all leasing activity, followed by

Minnesota Real Estate Journal

education at 25 percent. Continuing the trend from recent quarters, the majority of leases were new rather than renewals, with the Minneapolis CBD accounting for 30 percent of overall leasing activity, followed by the submarkets of I-494 at 24 percent and I-394 at 19 percent. New construction completions reflected the high demand for creative urban office space, with the Nordic and 201 Irving completions combining for nearly 250,000-square-feet in Q2. All remaining construction scheduled to be completed in 2019 is in the I-394 and North Loop submarkets. The two largest sales were recorded in Minneapolis CBD, with Starwood Capital Group purchasing the 1.1 million-square-foot Wells Fargo Center and R2 Companies purchasing the 216,609-square-foot Lumber Exchange Building.

Mall from page 12

White Flint Mall in Rockville, Maryland.” Owners of those projects are in the process of converting them into mixed-use developments with strip retail and destination-centric amenities. Teardowns are likewise an option. Amazon is making its own mark on the mall landscape by demolishing them and constructing distribution centers. The company has already converted two malls in Ohio. Recently, it announced that it would be converting the former Rolling Acres Mall in Akron, Ohio, bringing its Ohio distribution hub count to eight. Total demolition is not the only path developers are taking. While not being completely leveled, the Northgate Mall in Seattle, Washington, will soon boast 1,200 housing units, a large park, at least one hotel and office space. Retail uses are still viable in many locations, especially with Class-A type projects. Updates, however, are needed to attract today’s convenience-oriented shopper. The traditional mall typically requires a parking battle and falls short in providing the services consumers need daily – those once found on Main Street.

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Many developers have taken note, and have transformed the indoor shopping behemoths into drivable, and walkable, main street experiences, utilizing outdoor space for farmer’s markets, car shows and summer concerts. The newly-built Runway in Playa Vista, California, combines various shopping and entertainment experiences with rental and for-sale housing in a walkable neighborhood. Whole Foods, CVS and Starbucks share the project with dining, fitness, wellness and a handful of specialty boutique shops. In the battle of the clicks versus the bricks, the clicks are winning. While it is no secret that stores are closing, overall vacancy has been relatively flat despite increased deliveries. Contrary to headlines the mall is not entirely dead. Rather, the mall we have come to know is morphing into something different, something that investors hope will again draw consumers. Tom Hershey is national director of commercial servicing for Coldwell Banker Commercial.

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Minnesota Real Estate Journal

People from page 4

has been instrumental in advancing our safety first mentality across the country,” said Jeff Walker, director of operations at Opus. “Promoting a safe and secure work environment is an important part of our corporate culture, which is why it’s vital that we have committed individuals like Josh managing our health and safety programs at all Opus jobsites.” Josh will continue to work closely with safety field leadership, operations leadership, risk management, and legal team members to integrate safe work practices through all phases of a project. Josh will also continue his oversight of Opus jobsites across the country on a regular basis, where he will perform workplace safety audits, develop safety-training programs for supervisory personnel and diligently promote safety accountability for all associates. “When I began my career at Opus as an associate project manager, I quickly realized that safety management was a passion of mine,” said Babiasz. “I am

excited to continue enhancing and overseeing these critical programs.”

Healthcare Real Estate Firm Davis Promotes Three Property Management Staff Members Davis announced that it has promoted three property management employees in its Minneapolis, Phoenix and Bismarck offices. The national healthcare real estate company, which is headquartered in Minneapolis, named Margaret (Peggy) Schatz Vice President of Property Management, Linda Tierney Vice President of Asset Management and Business Development, and Jerry Anderson Senior Business Development and Property Manager.

Margaret (Peggy) Schatz – Vice President, Property Management, Minneapolis Office Margaret (Peggy) Schatz has more than 25 years of property management experience in the Twin Cities metro area. She has a solid background in

developing corporate real estate strategies and is experienced in working with a broad base of employees, contractors, brokers and vendors. Ms. Schatz has been acknowledged for team leadership as well as strategic goal achievement, and she is accustomed to thriving in a demanding, customer-driven environment. Before joining Davis’ team in 2013, she served as a Commercial Property Manager with CBRE where she managed two office towers totaling 500,000 square feet in the prestigious West End development in the Minneapolis suburb of St. Louis Park. Previously with IRET Properties, she was responsible for managing more than 2 million square feet of office, industrial and medical properties. She received her Bachelor of Science Degree in education from Winona State University and has been a licensed broker in Minnesota since 2005. Davis Principal Mark Davis notes, “Peggy has done an exceptional job of building a strong Midwest team and is recognized as one of the property management leaders in the Minneso-

July 2019

ta market.”

Linda Tierney – Vice President, Asset Management and Business Development, Phoenix Linda Tierney has more than 12 years of experience in commercial real estate and property management. She currently is responsible for operational oversight of Davis’ Midwestern/Western offices and staff located in Phoenix, Nebraska, and Washington. With her recent promotion, she assumes the additional role of leading business development efforts nationally. Her management portfolio includes over one million square feet of assets, and she continuously works to transition additional assets to Davis. Prior to joining Davis in 2015, she quickly advanced into asset management and director roles. She has been directly involved in the executive corporate decision-making process, and her past experience includes executive oversight of all operations in the southeast U.S. for a large institutional real estate investment trust for over three million square feet of medical office buildings.

July 2019

Linda graduated with a Bachelor’s Degree from the University of Arizona and holds an Arizona real estate license. “Linda has done a tremendous job building a strong property management team in the Western and Midwestern U.S. and we’re extremely excited she has taken on the business development role,” Mr. Davis says.

Jerry Anderson – Senior Business Development and Property Manager, Bismarck Office Jerry Anderson has over 26 years of management experience, including facility and real estate management. He currently provides property management and oversight for six properties in North Dakota. He has also agreed to take on additional responsibility and work with Ms. Tierney to drive Davis’ business development strategy. His training in organizational strategic planning and direction makes him instrumental in executing Davis’s core business values. Prior to joining Davis in 2016, Mr. Anderson served in the United States Marine Corps and the North Dakota Army National Guard.

Minnesota Real Estate Journal

As a career military officer, he achieved the rank of colonel and received the Legion of Merit and the North Dakota Distinguished Service Medal. He holds a Master’s Degree in National Strategic Studies. “We have really appreciated Jerry’s strong leadership in the North Dakota market, and we thank him for taking on this additional role with our firm,” says Mr. Davis. Mr. Davis notes, “We thank Peggy Schatz, Linda Tierney and Jerry Anderson for their many contributions to Davis over the years and congratulate them on their well-deserved promotions. We are confident that they will do well in their new leadership roles and continue to build strong relationships with our clients and prospective clients.”

HGA Welcomes Bill Lyons as Interiors Principal in Minneapolis HGA is pleased to welcome Bill Lyons, Associate AIA, LEED AP, as Associate Vice President and Interiors

Principal in the Minneapolis office. He will direct interior workplace design strategies, team processes, and client relations within the firm’s growing Public and Corporate group. “Today’s workplaces are dynamic and always changing as they anticipate new workstyles and the need to recruit and retain the best and brightest workforce,” Lyons said. “HGA is a leader in research-focused design processes that anticipate and drive changes in the workplace. I look forward to joining a creative team and expanding our design expertise as we continue to partner with dynamic clients.” Lyons has extensive experience designing interior workplaces and headquarters for creative, law, retail, money management, and corporate clients globally. Before joining HGA, Lyons was Director of Design and Construction at Room & Board in Minneapolis. Previously, he was Principal and Managing Director at Gensler, where he opened the Minneapolis office. Lyons has won numerous national

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awards, including 40 Under 40 by the Minneapolis-St. Paul Business Journal, IIDA National “10 to Watch,” and several IIDA Awards for Commercial Office Design.

Mike Nordstrom joining The Excelsior Group’s (TEG) Real Estate Advisory business Mike joined the Real Estate Advisory business as the Vice President of Operations after retiring from his 15+ years at General Mills as the Vice President of Global Workplace Solutions. Not only does Mike have excellent experience and is well known in the real estate industry, he has a great connection with President (and prior Gopher goalie) Jim Jetland. After retiring, he realized he had more to offer professionally and, fortunately, was able to discuss opportunities with Jim, as they are long-term friends from an actual business deal 20+ years ago.

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July 2019

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