VOLUME 30, NUMBER 6
©2014 Law Bulletin Publishing Co.
June 2014
Building Big: Kraus-Anderson ready to wrap construction of largest offcampus student-housing project ever to open in Minnesota
By Dan Rafter, Editor
T
he Marshall, the new student-housing complex scheduled to open by the start of this academic year in Minneapolis' Dinkytown neighborhood, is a big project. How big? As John Solberg, a vice president with construction manager Kraus-Anderson Construction Company and lead project manager overseeing
the complex's construction, says, The Marshall will have 997 bathrooms alone. "The sheer mass of this job is impressive," Solberg said. "I mean, it has more than 990 bathrooms. Just think of all the corners that have to be taped by a dry waller. It can be hard to imagine or calculate just how much goes into a building of this size." Developed by owner/developer GEM Realty and EdR, The Marshall, once it begins accepting students from the nearby University of Minnesota, will rank as the largest off-campus student-housing complex ever built in the state of Marshall to page 22
A new look for Walgreens
Retailers change to meet their customers’ needs in flagship locations
By Dan Rafter, Editor
Y
ou know exactly what you’ll find when you step into that Walgreens store on the corner in your neighborhood: Makeup, lotion, 2-liter bottles of pop, discounted DVDs and disposable cameras. But what if you stepped into a Walgreens that offered a cafe with a made-to-order juice, smoothie and milkshake bar? What if you could order handrolled sushi and sashimi from your local Walgreens? And what if your neighborhood Walgreens boasted its own walk-in cooler stocked with craft beers and wines?
If your neighborhood featured a Walgreens flagship store, those craft beers, smoothies and sushi rolls would be yours. Walgreens, like many retailers, is opening deluxe versions of its stores across the country, mostly in highprofile, high-traffic areas. Walgreens now has 14 flagship stores located across the country. The latest opened June 25 in downtown Chicago in the north tower of the iconic Wrigley Building. Joe Jackman played a key role in the latest Walgreens. He's the chief executive officer of Jackman Reinvention in Toronto, and he and his team members have helped Walgreens create and design its 14 flagship stores.
“These are the best of the best,” Jackman said. “These stores are designed to amplify what a brand stands for. These are the most exciting versions of a store, the versions you won’t find elsewhere.” The flagship label applies not only to the interior of the stores -- the Walgreens in the Wrigley Building, for instance, has two floors, giving it enough extra space to offer new products and services such as a LOOK Boutique stocked with expanded skincare and hair care products, self-serve frozen yogurt and a healthcare clinic staffed by family nurse practitioners – but to the exterior of them, too. Jackman said that the design team made sure that the new Walgreens Retailers to page 20
June 2014
Minnesota Real Estate Journal
Contents
Page 3
Departments
JUNE 2014 • VOLUME 30, NUMBER 5
PEOPLE
4
NEWS
6
RESOURCE GUIDE
1
BUILDING BIG
16
NEED FINANCING FOR YOUR NEW PROJECT? NEED DOLLARS TO ACQUIRE THAT OFFICE COMPLEX? HERE’S WHAT YOU’LL NEED
18
TECHNOLOGY IS CHANGING THE FACE OF CARE DELIVERY IN SENIOR LIVING COMMUNITIES
A NEW LOOK FOR WALGREENS 14
KEY ELECTION YEAR FOR COMMERCIAL REAL ESTATE - NAIOP’S STATE AND NATIONAL PACS TO LEAD THE WAY
22
The Minnesota Real Estate Journal (ISSN 08932255) is published monthly for $85 per year by Law Bulletin Publishing Company, 13400 15th Ave North STE C, Plymouth 55441. Phone: 952-885-0815. Periodicals postage paid at Minneapolis, MN. POSTMASTER: Send address changes to Minnesota Real Estate Journal, 415 State Street, Chicago IL 60654. Lanning Macfarland, Jr. chairman; Sandy Macfarland, CEO; and Brewster Macfarland, president. Back issues $10.00. Subscriptions are non-refundable. For more information call 952-885-0815. ©2014 Law Bulletin Publishing Co. No part of this publication may be reproduced without the written permission of the publisher.
Page 4
Minnesota Real Estate Journal
June 2014
People a division of Law Bulletin Publishing Co.
13400 15th Ave North, Suite C Plymouth MN 55441 For information call 952-885-0815
Publisher | Managing Editor Jeff Johnson jjohnson@rejournals.com Associate Publisher Jay Kodytek jkodytek@rejournals.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Conference Manager Alan Davis adavis@recg.com
EDITORIAL ADVISORY BOARD JOHN ALLEN Industrial Equities ROBERT ANGLESON Navigator Real Estate RICK COLLINS Ryan Cos. US Inc. JEFF EATON Cushman & Wakefield/NorthMarq MARK EVENSON ULG Equis PATRICIA GNETZ US Bank TOM GUMP TAG Consulting JON HEMPEL Hempel Properties DAVID JELLISON Liberty Property Trust CHAD JOHNSON Hellmuth & Johnson BILL WARDWELL Colliers International GEORGE KLUEMPKE Braun Intertec JEFFREY LAFAVRE CBC Griffin Companies WADE LAU Founders Properties MIKE LE JEUNE Fabcon JIM LOCKHART WIPFLI DUANE LUND Exchange Realty PATRICK MASCIA Duke Realty Corp. CLINT MILLER Cushman & Wakefield/NorthMarq DR. THOMAS MUSIL University of St. Thomas WILLIAM M. OSTLUND CBC Griffin Companies WHITNEY PEYTON CB Richard Ellis MIKE SALMEN Transwestern STEWART STENDER Stewart Capital Partners
a division of Law Bulletin Publishing Co. 13400 15th Ave North Suite C Plymouth MN 55441 For information call 952-885-0815
Ryan Companies US, Inc. Promotes Tony Barranco to Vice President of Development, Office and Mixed-Use Ryan Companies US, Inc. is pleased to announce the promotion of Tony Barranco to Vice President of Development, Office and Mixed-Use in the NorthCentral Region. Tony will be filling the position previously held for 15 years by Rick Collins, who has been promoted to President of Ryan’s SouthWest Region. As part of his new responsibilities, Tony will assume the role of Project Development Executive for Ryan’s Downtown East project. He will also lead a variety of corporate office and urban mixed-use development pursuits in the Twin Cities and throughout Ryan’s NorthCentral Region. Casey Hankinson, Vice President of Development for Ryan’s NorthCentral and Rick Collins have worked together as development partners over the last five years with a strong track record of successful projects where Hankinson was working the industrial build-to-suit market and Collins the corporate office opportunities. Now Tony Barranco and Casey Hankinson will be teaming up as development partners to pursue these same market sectors in a similar fashion. Casey Hankinson stated, “I am very excited to be forming this new partnership with Tony Barranco. Both the office and industrial build-to-suit markets are heating up in the Twin Cities and I see this as the prime time for us to execute market leading development projects that support our customers business growth plans.” “Tony has established himself as a rock-solid developer who very creatively crafts unique development solutions for complicated projects,” added Collin Barr, President of Ryan‘s NorthCentral Region. “We are excited about this new opportunity for Tony and know he will continue to achieve optimal commercial property development solutions for our customers.” Since joining Ryan in 2005, Tony has spearheaded such notable projects as 222 Hennepin, a downtown Minneapolis mixed-use redevelopment with 286 luxury apartments and a Whole Foods
Market; the apartment project within Ryan’s Downtown East mixed use project, the large Ryan development next to the new Vikings Stadium; and The Vintage, a 210-unit apartment complex anchored by a 39,000-square-foot Whole Foods Market located in St. Paul. Tony received a Bachelor of Science in Business Administration from the Carlson School of Management at the University of Minnesota in 1996. He is currently the First Vice President for the Minnesota Shopping Center Association (MSCA), an Ambassador for the Greater Twin Cities United Way, and President of the Humboldt Lofts Homeowners Association. Tony was recognized as one of the Minneapolis/St. Paul Business Journal’s 40 under 40 in 2014, he is a member of the International Council of Shopping Centers (ICSC), and serves on the Residential Committee of the Downtown Minneapolis 2025 plan.
Ryan Companies US, Inc. Hires Dan Mueller as Director of Development Ryan Companies US, Inc. announced Dan Mueller has been hired as Director of Development in the NorthCentral Region. In his new position, Dan is responsible for all aspects of development from site selection and land acquisition, constraint analysis and due diligence, municipal approvals, design and construction coordination, and lease or sale negotiations. “Dan has a great and varied background in the industry and a real ability to manage multiple projects at once,” said Collin Barr, President of Ryan’s NorthCentral Region. “His skill set will be a great advantage to the Ryan team and we’re thrilled to have him on-board filling an important role in our development team.” Prior to joining Ryan, Dan was a broker with Transwestern where he focused on tenant and landlord representation in lease and sale transactions. He is known for his dedication to clients, problem solving and determination. His customers appreciate his loyalty, commitment and can trust that he is working hard on their behalf. “I’m excited about being part of a
team that includes many different disciplines working together on complex projects toward a common goal,” said Mueller. “I’m honored to work with such talented people and for a company with an outstanding reputation in the industry and business community.” Dan received a Bachelor of Arts in Finance and a Bachelor of Science is Real Estate from the University of St. Thomas. He is a member of the National Association of Industrial and Office Properties (NAIOP) and the Minnesota Commercial Association of Realtors (MNCAR).
JAY SCHOO JOINS THE EXCELSIOR GROUP AS VICE PRESIDENT OF EXCELSIOR CAPTIAL, LLC The Excelsior Group (TEG) is proud to welcome, Jay Schoo, as Vice President of Excelsior Capital LLC. Jay’s primary focus is to cultivate relationships with local home builders seeking predictable and seamless transactions. He is responsible for the overall development and oversight of the construction lending division for Excelsior Capital including approval, closing, funding, draw and payoff processes while helping to coordinate clients’ capital needs. Jay believes that each transaction is unique and that loan products and options ought to be tailored to the situation and concerns at hand. Jay’s knowledge in the construction lending arena is vast with twenty plus years of experience. Prior to joining TEG, Jay was President of the private funding groups Marketline Construction Capital and First Construction Credit where he oversaw the loan portfolio and day-to-day operating activities. Prior to that, Jay was Vice President Senior Lender with Klein Banks where he managed a commercial loan portfolio. Jay graduated from St. Cloud State University with a Bachelor of Science degree in Accounting.
Page 6
Minnesota Real Estate Journal
June 2014
News Cushman & Wakefield | NorthMarq Secures 60,000Sq.-Ft. Lease with World Data Products Cushman & Wakefield | NorthMarq www.cushwakenm.com represented Associates Realty Fund IX in a lease with World Data Products for 60,000 sq. ft. at Xenium Distribution Center, 1105 Xenium Lane North, Plymouth, Minnesota. The distribution center is now 100 percent leased. World Data Products, a provider of cost-effective new and used IT hardware solutions, will take occupancy in October 2014, utilizing the space for warehousing and distribution. Associates Realty Fund IX was represented by CWN’s Dave Paradise, Sydney Johnson and Nate Erickson in the transaction.
Marcus & Millichap ARRANGES THE SALE OF a 100,681-SQUARE FOOT
OFFICE BUILDING Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Two Appletree Square, a 100,681-square foot office property located in Bloomington, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $3,950,000. Michael Ahles and Jon Ruzicka, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a bank/financial institution. The buyer, a partnership, was also secured and represented by Michael Ahles and Jon Ruzicka. Speaking with Mr. Ahles, “This property was a desirable asset due to its convenient Bloomington location near the MSP Airport, Mall of America and light rail station. With the recent economic upturn and leasing activity we’ve seen
in the area, this building is expected to outperform in the short-term. Once stabilized, it should have accretive cashflow to the new owners.” Two Appletree Square is located at 8031 34th Avenue in Bloomington, Minnesota.
StuartCo Voted Top 100 Workplaces for Fourth Consecutive Year StuartCo has been named one of the Top 100 Workplaces in Minnesota for the fourth consecutive year based on an employee-based survey project from the Star Tribune. The Star Tribune Top Workplaces special section was published on Sunday, June 15. The report can also be found at: http://www.startribune.com/jobs/topworkplaces Produced by the same team that compiles the Star Tribune report of the bestperforming public companies in Minnesota, Top Workplaces recognizes the most progressive companies in Minnesota based on employee opinions
about company leadership, communication, career opportunities, workplace environment, managerial skills, pay and benefits. The rankings in the Star Tribune Top 100 Workplaces are based on survey information collected by Workplace Dynamics, an independent company specializing in employee engagement and retention. StuartCo was ranked number 25 in the mid-size category.
Cushman & Wakefield | NorthMarq Represents AMF Bowling Centers In Sale Of 32,000 Sq. Ft. Fridley Bowling Alley Cushman & Wakefield | NorthMarq (CWN) www.cushwakenm.com represented AMF Bowling Centers in the sale of a 32,000 sq. ft. property at 6310 Highway 65, Fridley, Minn. Scott Beitz was the buyer. With excellent visibility from Highway 65 and convenient access to retail
Page 8
shopping, the property will be renovated by Banquets of Minnesota as an event center offering full-service catering and event planning for any occasion. The sale of a small parcel of land, which will be utilized for overflow parking at the new facility, was also completed as a separate transaction. CWN’s Deb Carlson represented AMF Bowling Centers in the sale of the building and Sinclair Oil Corporation in the sale of the land parcel.
CBRE ANNOUNCES LAND SALE FOR PRAIRIECARE CHILDREN’S PSYCHIATRIC HOSPITAL IN BROOKLYN PARK, MN CBRE is pleased to announce the future home of PrairieCare Children’s Psychiatric Hospital, a University of Minnesota Medical School affiliate, on 10.5 acres of land in Brooklyn Park, MN. Their 72,000 square foot facility will sit on the corner of Highway 610 and Zane Avenue North. Tom DeSautel and Brandon Megal of CBRE’s Minneapolis Corporate Services Group, alongside Richard Palmiter
Minnesota Real Estate Journal
and Brian Pankratz of CBRE’s Minneapolis Land Services Group, represented PrairieCare in pursuit of their new metro location proposed to open in September 2015. IRET was the final land purchaser in the transaction. The organization considered a number of locations in the northwestern suburbs before ultimately deciding on land within the Astra Village Master Plan area of Brooklyn Park. PrairieCare’s facility will be a multi-story building with 50 patient rooms, doctor offices, exam rooms, and support facilities. “It was very gratifying to work with PrairieCare, IRET, City of Brooklyn Park, the seller, and the entire development team for such a worthy endeavor. The group collaboration made this development possible,” says Richard Palmiter. Brooklyn Park Mayor, Jeff Lunde states: “Prairie Care offers a vital service that’s needed in the Northwest Metro. We are proud that they have chosen to make Brooklyn Park their home. It’s an exciting development that continues to strengthen the commercial corridor along Highway 610. This also
advances our commitment to the youth in our community and Brooklyn Park’s future success.” John Ryan, General Counsel for PrairieCare and project lead for the Brooklyn Park facility states: “We are very excited to see this project move from concept to reality. It has been very gratifying to work with the Mayor and city council, IRET, and CBRE in such a collaborative way to answer the needs of Minnesota’s children. We look forward to expanding on our ability to provide access to high quality, patient centered, compassionate and responsive care.” Ted Holmes, Senior Vice President for Investors Real Estate Trust (IRET) stated: “IRET, as developer, is excited this project will commence and we are very pleased to have worked with the City of Brooklyn Park and CBRE to make this project happen. We have engaged Paul Reinke of Silver Oak Development to oversee this project on behalf of IRET through its completion.”
June 2014
Habitat for Humanity Receives Major Gift of Land from Schwieters Companies Habitat for Humanity has announced receipt of a major gift of land —a 5-acre package of suburban St. Paul development-ready lots valued at more than $1 million. The land, which comprises 33 lots in the Generation Acres subdivision of Hugo, Minnesota, was donated to Twin Cities Habitat for Humanity by Joel and John Schwieters, co-owners of Schwieters Companies, a group of Hugobased construction services and building materials supply companies. Commenting on the gift, Susan Haigh, president and CEO of Habitat for Humanity and also chair of the Metropolitan Council, called the donation of the development lots “just extraordinary,” describing the gift as ”the largest in the history of Twin Cities Habitat for Humanity.” In donating the land, the Schwieters brothers said they had hoped to set an example for others in the construction industry to work with Habitat to address the serious lack of affordable housing
Page 10
for young families, especially in Twin Cities suburbs. John Schwieters said they also chose to work with Habitat because of its policy of requiring “aspiring homeowners to be directly involved in the building of their own future homes,” in the process acquiring basic training in construction techniques. “Our companies employ hundreds of skilled carpenters and craftsmen,” he said. “Our hope is that we might possibly be able to add to our own workforce by recruiting some of the new residents to work for us.” Haigh described the gift of the lots and their transfer to the organization as “a dream” for Habitat. “Not only that,” she said, “but they are in a very nice neighborhood, right by an elementary school. It’s going to be just a wonderful place for Habitat homeowners to raise their families.” Chad Bouley, Habitat vice president, homebuilding, called the donation from the Schwieters “very unusual, not to mention fantastic. From a land acquisition perspective, it is unparalleled, and we are very grateful to Schwieters Companies.” Bouley said that Habitat is par-
Minnesota Real Estate Journal
ticularly delighted with the fact that the lots are located in Hugo, a fast-growing suburb of St. Paul which ranks among the top ten areas of the Twin Cities in terms of demand. “In the last six months, 57 townhouse units have been sold in the Hugo area, which tells us that these lots, when fully developed, will be very marketable,” he said. Habitat’s plans call for the first phase of development to include two four-unit townhouse buildings: one addressing its typical market of families with 30-50 percent average median income (AMI), and a second which will be a pilot of a new modified version focusing on families with an AMI of 60 percent. A second later phase will include five -unit and four-unit buildings. The development of the 33 lots by Habitat will employ the organization’s proven system of training potential homeowners in citizenship skills while also requiring an investment of sweat equity by joining in the actual construction process.
CSM Residential Invests Millions in Bass Lake Hills Townhomes Residents of Bass Lake Hills Townhomes can expect over a million dollars in updates and improvements. Owned and managed by CSM Corporation, Bass Lake Hills is planning for major renovations this fall, including a new clubhouse addition and other updates. “This is an extremely large investment for us. But more importantly, it’s an investment in and for our residents,” said Brian Schwarz, regional property manager for Bass Lake Hills Townhomes. “At Bass Lake Hills, we believe our residents are more than residents, they’re part of our family. This is a very exciting time as it all comes into focus.” The new clubhouse willfeature a state-of-the-art fitness center, new office, patio with grilling area and party room with a sleek, modern lounge and bar area. In addition to the clubhouse, new in-unit upgrades will include a choice of items like cabinets and countertops, allowing residents the opportunity to make each home uniquely their
June 2014
own. To keep residents informed throughout the process, Bass Lake Townhomes will leverage the Raising Expectations microsite and the community’s Facebook page to share updates, photos, videos and more. With 284 units, Bass Lake Hills Townhomes are located just outside of Minneapolis in Plymouth. Bass Lake Hills features a heated swimming pool, sport court, walking paths and a spacious courtyard. The property is conveniently located near I-494, I-94 and Hwy 169, and just minutes from great shopping at Arbor Lakes in Maple Grove.
Marcus & Millichap ARRANGES THE SALE OF a 13,160-SQUARE FOOT RETAIL PROPERTY Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Highwood Center, a 13,160-square foot retail property located in Saint Paul, Minnesota,
Page 12
according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $2,950,000. The seller, a limited liability company, was represented by an outside brokerage. The buyer, also a limited liability company, was secured and represented by Sean Doyle and Cory Villaume, investment specialists in Marcus & Millichap’s Minneapolis office. Speaking with Mr. Doyle, “The property was roughly 90 percent occupied with three tenants at the time of sale and is anchored by Davita Dialysis. Highwood Center is well located in Saint Paul with good visibility to Interstate 94.” Highwood Center is located at 1758 Old Hudson Road in Saint Paul, Minnesota.
Ackerberg Signs Tenants at The Hennepin Curve The Ackerberg Group announced that two tenants will join the roster of retailers and businesses in the building known as “Hennepin Curve”, located at 1605 1619 Hennepin Avenue, in downtown
Minnesota Real Estate Journal
Minneapolis. a&bé bridal boutique and RE/MAX Results will open storefronts at 1605 and 1609 Hennepin Avenue respectively, on the edge of Loring Park. a&bé has signed a five-year lease for 3,086 rentable square feet of retail space. Build out will begin in August 2014 with retail operations starting in September. a&bé bridal, an independent Denver-based high bridal boutique, selected Minneapolis as the site of its first expansion store. The owners approach the bridal industry with their own interpretation of the neo-wedding, showcasing a curated catalog of designers that share the company’s vision to provide “bohemian, vintage, and romantically inspired wedding gowns” at approachable prices. RE/MAX Results has signed a 10year lease for 6,874 rentable square feet of first floor and lower level space. Broker/owners John Collopy and Marshall Saunders, named the 2013 RE/MAX Brokers of the Year, own the third largest RE/MAX brokerage in the world with 24 offices throughout Minnesota and Wisconsin.
a&bé bridal boutique was represented by Angela Demonte of CBRE and RE/MAX Results was represented by Mark Hulsey of RE/MAX Results Commercial. The Ackerberg Group coordinated marketing and leasing of the storefronts. LL, LLC owns and manages the property. The property owners plan to renovate the former Thompson Hotel above the 1605 storefront into new housing.
Ryan Companies US, Inc. and SilverCrest Properties, LLC Break Ground on SilverCreek on Main Ryan Companies US, Inc. and SilverCrest Properties, LLC broke ground on SilverCreek on Main, a $29 million senior living community situated on 9 acres at Weaver Lake Road and Main Street in Maple Grove, Minnesota. The 275,000-square-foot, four-story building will accommodate 195 units and offer a mix of independent living, assisted living and memory care. SilverCreek on Main is scheduled to be completed by July 2015
June 2014
To mark the start of the construction project, executives and employees from Ryan and SilverCrest gathered at the project site for a ceremonial groundbreaking event on May 27, 2014. The event was also attended by Maple Grove City Administrator, Al Madsen, several members of the Maple Grove City Council, and many soon-to-be SilverCreek on Main residents. “We’ve been working on this project with the City of Maple Grove for a number of years and are thrilled to see it come to fruition,” said Michael Gould, President of SilverCrest. “SilverCrest is known for its mission to promote health and wellness and we’re excited to continue our growth in the Twin Cities and to provide both needed services and good jobs to the community.” One of the unique features of SilverCreek on Main is its wellness center. The center includes state-of-art fitness stations by TechnoGym™ specifically designed for older adults, the HydroWorx® 1200™ aquatic therapy pool, a warm water multi-purpose pool for lap swimming and water aerobics,
Page 14
Minnesota Real Estate Journal
June 2014
Key Election Year for Commercial Real Estate - NAIOP’s State and National PACs to Lead the Way By Duane Arens NAIOP Minnesota, The Commercial Real Estate Development Association
I
t’s another big election year in Minnesota, with the Governor’s chair and every seat in the House of Representatives in play. Statewide campaigning is already underway in what is expected to be a hard-fought battle for control of the House. The campaigns follow closely on the heels of what was a highly successful legislative session for NAIOP and the commercial real estate industry. Using the momentum, NAIOP’s Political Action Committee (PAC) is already at work. NAIOP’s PAC essentially pools private campaign contributions from members and donates those funds to the campaigns of candidates that support commercial real estate and its instrumental business tenants. Pat Mascia, Briggs & Morgan, is chairing the Chapter’s own state PAC, The Leadership Fund. June’s NAIOP Minnesota program
was the setting for the launch of the drive, and NAIOP’s PAC volunteers will be actively soliciting contributions at upcoming NAIOP events, with a major fundraising event planned for September. Contributions to Candidates Give NAIOP Greater Leverage at the Legislature “Historically, Minnesota NAIOP members have been very active and generous in supporting NAIOP’s state PAC,” Mascia said, “and we want to build on that tradition this year. We want to show as much support as possible, but we also want the effort to be broad-based. Although the individual limit is $1,000, every contribution, even if it’s just $25, $50 or $100, is important. In fact this year we are especially interested in engaging as many smaller donors as possible. Our theme is ‘give what you can, as early as you can.’” Mark Nordland, Principal at Launch Properties and NAIOP Minnesota president, echoed that theme. “Our most
important goal is broad participation. While I realize that a lot of individual NAIOP members are not likely to write large personal checks to the PAC, we really need everyone to contribute what they can. With each of participating, we are able to know that we have great people on the front lines watching our backs. Our PAC’s contributions to candidates who are pro-job and probusiness help the business climate and our industry flourish, and at some point that will benefit every member personally.” The generous PAC contributions from NAIOP members and the careful targeting of those dollars in previous elections resulted in a significant influx of new legislators, he noted. Mascia said it is especially important for the industry to understand that, in distributing the PAC money collected, “NAIOP has traditionally supported members of both parties. Politics aside, we look for those who are sympathetic to business issues and, of course, to the concerns of the entire commercial real estate industry and our business tenants.”
It’s really important to support our friends, the people who have or support us. The legislators who support our mission, our objectives and our special initiatives - like our proposed transparency legislation - give us a competitive edge. Having a successful PAC drive will allow us to leverage our already strong Capitol Hill presence. In a year when we will be electing major leadership- possibly a new governor and the entire House - what we do as individuals can clearly change the direction of public policy for years to come. Contributions from NAIOP’s local PAC will be especially important to candidates in those swing districts where money really matters. A major kick-off event for the Chapter’s PAC drive is planned for midSeptember. Leading up to that event, there will be PAC tables and displays at NAIOP Minnesota programs. Contributions can also be made online. Our goal is to engage every member of NAIOP in the drive. To reach that goal, we intend to make giving as easy and convenient as possible. NAIOP to page 21
Page 16
Minnesota Real Estate Journal
June 2014
Need financing for your new project? Need dollars to acquire that office complex? Here’s what you’ll need By Dan Rafter, Editor
I
t’s easier today to get financing for the new hotels, multi-family buildings and strip centers that you want to build. And if you want to purchase that office tower in downtown, you’ll find plenty of banks and lenders willing to provide you with the acquisition funds you’ll need. But don’t expect lenders and banks to just hand you this money. You’ll still have to work for those dollars. That’s the message from two lending pros working the Midwest, Pat Dempsey, senior vice president with Walker & Dunlop, and DJ Effler, senior vice president in the Columbus office of Bellwether Enterprise. Both lending pros said that developers can nab financing dollars today. But they’ll first have to prove that demand is high for whatever hotel, apartment complex or mini-mall that they’re building. And they’ll also have to show that they have the positive cash flow necessary to repay their loan on time. Those developers and investors that
Pat Dempsey can do this? They’ll find plenty of money available in today’s lending market. “The capital markets are incredibly healthy right now,” Effler said. “There is a lot of capital out there.” Part of the reason? In addition to more traditional lending sources, the CMBS market is strong today. Effler says that this is good news for anyone seeking development or acquisition funding.
DJ Effler As Effler says, when the CMBS market is running well, that forces life insurance companies, banks and Fannie Mae and Freddie Mac to be more competitive with their own lending terms. “That’s great news for borrowers,” Effler said. “And that is what we are seeing today. We are seeing deals being done at incredibly competitive interest rates. We are seeing lenders take a little more risk. It’s not crazy risk, but it
is more risk. It’s really good to be a borrower right now.” The CMBS numbers bear this out. As Effler says, in 2007, CMBS issuance peaked at an incredible $229 billion. Two years later, though, after the country’s economy crashed, CMBS issuance dropped to $2.7 billion. “That was a 99 percent decline in CMBS issuance,” Effler said. “The market was dead.” But in 2013, the CMBS market began its rebound. That year saw $86.1 billion in CMBS issuance. Effler hopes that the CMBS market in 2014 will hit an issuance of $100 billion. More opportunity If this happens, expect financing to become even more available to borrowers in 2015 and beyond. But, of course, only to the right borrowers. Dempsey, from Walker & Dunlop, says that his company looks carefully at borrowers themselves before loaning them commercial real estate dollars. Financing to page 19
Page 18
Minnesota Real Estate Journal
June 2014
Technology is changing the face of care delivery in senior living communities Y
ears ago we cared for seniors by personally observing them and requiring that they tell us if they were experiencing problems. Next, emergency call pendants were developed to allow seniors to press a button and call for help while still leaving in their own home, and technology keeps evolving. Today, technology allows us to continuously monitor the health and wellness of seniors without invading their privacy with frequent personal observations, or depend on them being able to activate an emergency call pendant. Many new senior living communities owned and managed by Ebenezer; offer a variety of technology-enabled care products and services that help provide a new sense of security and peace of mind for its residents and families. In support of the growing technology enabled care products and services available in senior living, Ebenezer has a Technology-enabled Care Specialist on staff to help navigate new products and services within a variety of care settings. Ebenezer, a part of Fairview Health
System, has been providing services to seniors for nearly 100 years and has always had a reputation for innovation. Staff members in senior living communities are using technology to help support care for residents beyond pull cords and pendants adding wireless remote monitoring; motion sensors, contact sensors, bed sensors and by responding to alerts or information that may predict or avoid an unfavorable event. Wireless devices monitor activities of daily living and the software program “learns” individual patterns for sleeping, moving about, eating and more. The program will detect changes in daily patterns; these changes might mean there is a health concern. When these patterns change, the system notifies the care staff with alerts indicating that the behavior pattern falls outside of the normal ranges for that resident. The care team, who knows their residents, then follows up to assist. For example, contact sensors under a toilet seat could detect that a resident is using the bathroom more frequently than normal, indicating a possible Urinary Tract Infection.
Additional evolving technologies support real time documentation in the electronic health records through mobile devices and applications used by care staff in senior living communities. Apple iPhones and iTouch devices are being piloted for roll out to multiple communities for use by care staff in some settings to record services to the health record providing more accurate and efficient use of staff time. Less paper for these activities allows senior living communities to be positioned for a future integrated Electronic Health Record exchange with other health care providers. This will create a smoother transition between health care providers and services including hospitals, pharmacy, laboratory, rehabilitation and more. The overall goal is to always provide individuals with the best quality care through improved communication between providers along the continuum, allowing for accurate shared information.
fy service needs earlier and prevent more serious care interventions like hospitalizations, allowing people to live at home longer. · Improve staff efficiencies through data that monitors response time, service time and even changes around scheduled or unscheduled visits. · Provide reports with more accurate information for care providers, clients and family members. For more information about how technology is enhancing senior care in residential settings, contact Susan Farr, Vice President of Business Development or Mary Chapa, Technology Enabled Care Specialist at Ebenezer Management Services at 612-874-3460.
To summarize, technology innovations at Ebenezer communities: · Provide opportunities to identi-
PRIME WAREHOUSE/OFFICE LOCATION! SPACE AVAILABLE: 94,123 15 DOCK DOORS 1 DRIVE-IN DOOR For more information, please contact Traci Tomas at 952-473-1700 or ttomas@leasespace.com
16'-24' CLEAR HEIGHT AMPLE PARKING
Jennifer Development 10701 Hampshire Avenue, Bloomington MN 55438
June 2014 Financing from page 16
First, Walker & Dunlop studies the track records of borrowers when it comes to developing a certain product type. “Have they developed this product before? Do they have a good experience not only in developing the product but in operating and managing it?” Dempsey asks. For new development, borrowers must also have a decent net worth and liquidity, Dempsey says. “There are construction risks on new assets,” Dempsey said. “Sponsors have to demonstrate that they can cover cost overruns on new development.” In a perfect world, Dempsey says, borrowers would have a net worth that is at least equal to the amount of money they are requesting. From a liquidity standpoint on a new development request, Walker & Dunlop officials want borrowers to have a net worth equal to 10 percent of a project’s costs. This helps guarantee that borrowers can cover items such as cost overruns or additional tenant costs, Dempsey said. Credit history plays an important role, too, Dempsey said. Those borrowers who have a long history of treating banks well and paying their loans back on time are more likely to receive financing. “How did they fare during the last recession?” Dempsey asked. “Did they give a lot of properties back? How did they handle the tough times? Did they file bankruptcy?” Many borrowers suffered credit issues in the last downtown, Dempsey says. If these borrowers treated their lenders well and, say, didn’t file lawsuits against them, they are more likely to get financing today, Dempsey said. If they filed for bankruptcy protection or sued their lenders? The financing dollars might not be as available. The properties Walker & Dunlop officials take a close look, too, at the strength of the development that borrowers want to build or the properties that they want to acquire. “The most important thing there is the market strength and depth,” Dempsey said. “Is there already product like it in the marketplace? Is that product performing well? Will the market support this property?” For instance, multi-family properties across the Midwest are performing particularly well today, Dempsey said. For the last several years, multi-family has boasted high occupancies, low concessions and little bad debt. Because of this, developers can more easily find financing dollars for new multi-family projects. Those seeking development dollars are more likely to earn them if they are proposing a higher-quality project, Dempsey said. Property types Today, the financing dollars are flowing most freely for, of course, multi-
Minnesota Real Estate Journal
family projects. But developers and investors are finding financing for a wide range of property types in addition to apartments. For new construction, the second most active market for financing dollars are high-quality retail and industrial projects, Dempsey said. Hotels and seniors housing projects are also receiving a significant share of financing, he said. The one sector where financing is still sluggish? Office, Dempsey said, continues to be a laggard. Different markets, too, are seeing more financing. Dempsey points to the Midwest markets of Chicago and Minneapolis as being especially strong today, with plenty of new-construction projects receiving financing. To take advantage of this financing, though, borrowers need to have cash on hand, Dempsey said. In 2006 and 2007, borrowers were able to finance their projects with little cash invested. That has now changed, with Dempsey saying that banks need borrowers to provide at least 15 percent to 20 percent real cash when seeking financing for most projects. A local game Most borrowers today will be working with local, community lenders, Effler said. “In the Midwest, especially, you are usually not going to have a national bank, unless you are a major borrower, providing you with your financing,” he said. “If you are a developer with just a handful of projects, if you aren’t a top10 developer in your specific market, you will be playing with the local community bank lending sources to get projects out of the ground.” Lenders today will look carefully at borrowers’ cash flow, Effler said. That, he adds, is a significant difference between now and 2007. Effler explains it like this: During the recent economic downturn, banks recognized that even if the asset they are financing is strong, that doesn’t mean that their borrower can’t be hurt. If the rest of the developer’s portfolio is going south, for instance, and that borrower is struggling with cash-flow issues, it doesn’t matter how well the one asset that a bank financed is performing. The odds are good that the developer will eventually default because of the other financial disasters it is facing. “You can still be pulled into the abyss,” Effler said. “Even if the property you financed has all the good fundamentals.” This is a smart move on the part of banks and lenders, Effler says. But for borrowers? It can make getting financing a bit more challenging. “Is this a positive trend?” Effler asked. “I guess that depends on whom you ask.” For Effler, though, the banks’ insistence on looking more carefully at issues such as cash flow is a good sign for the commercial real estate market. Financing to page 21
Page 19
Page 20
Minnesota Real Estate Journal
June 2014
Retailers From page 1
store fits into the surrounding architecture on Michigan Avenue. An example? The Wrigley Building is known for the clock atop its tower. Customers stepping inside the new Walgreens will immediately see a tile mosaic of the famed clock as they enter from Michigan Avenue. “We’ve been working for Walgreens for just about four years, and during this time we’ve helped them realize their vision of where the brand can go,” Jackman said. “We are working to take Walgreens into the future. There’s a reason this kind of work is exciting. You are working in a higher-profile way. The work is more visible and amplified.” The future Jackman says that retailers will continue experimenting with new versions of their stores. It’s not a new concept, with several retailers, for instance, opening smaller versions of their traditional stores in urban areas. In Minneapolis, Target plans to open a Target Express on one corner of The Marshall, a new student-housing
development being built in the city's Dinkytown neighborhood near the University of Minnesota. Target Express is the opposite of the Walgreens flagship stores. The one in The Marshall will actually be the smallest Target store in the chain's history. It is designed to serve students and urban guests who want to make quick trips to pick up snacks, aspirin or lipstick. The Target Express is about 15 percent of the size of a general merchandise Target store. "This is an exciting opportunity to test and learn as we continue exploring new ways to meet our guests' needs,"
said John Griffith, executive vice president of property development at Target, in a written statement. The Target Express seeks to eliminate the typical "pain points" of quick shopping trips such as long lines and dull offerings. The checkout lanes will be designed to cater to high traffic and to customers carrying smaller shopping baskets instead of pushing full-size shopping carts. Walmart has opened its own city versions of its stores, many in urban Chicago locations. The company brands these smaller versions as Walmart Express stores.
For Jackman, it all comes down to bringing shoppers what they want. And shoppers stepping into a Walgreens in the Wrigley Building are usually looking for a different experience than those visiting a corner store in the suburbs, he said. “How can we be of the greatest value to our customers?” Jackman asks. “That’s the approach we take. We don’t want to take the cookie-cutter approach that so many other retailers have taken in the past. We want to offer products and services that match exactly what the need is.” In a flagship location like in the Wrigley building, this means serving a variety of customers. There are the nearby office workers who want to stop in to get a sandwich for lunch. There are the residents who live in condos and apartment buildings nearby who want kitchen supplies and fresh produce. Then there are the tourists who want to experience the whole store, munching on frozen yogurt while browsing the wide range of Chicago souvenirs on display.
WHEN IT MATTERS WHO YOUR APPRAISER IS... DEPEND ON THESE: MAI, SRPA, SRA.
“Your most educated and trained real estate appraisers” THANKS TO OUR CORPORATE SPONSORS PLATINUM MINNESOTA REAL ESTATE JOURNAL GOLD FREDRIKSON & BYRON LAW FRIM • HEARTLAND REALTY INVESTORS • OAK GROVE CAPITAL SILVER MALKERSON GUNN MARTIN LLP • CENTRAL BANK • LARKIN HOFFMAN DALY & LINDGREN
NORTH STAR CHAPTER WWW.APPRAISALINSTITUTE.ORG
June 2014
NAIOP from page 14
NAIOP’s National PAC Supports the Work of Its Staff on Federal Issues Jean Kane, NAIOP’s National Chairman, and CEO of Welsh / Colliers International, framed the importance of giving to NAIOP’s national PAC within the larger context of assuring the continued health of the commercial real estate industry. “From a national perspective,” she said, “our 2014 message has been that while we are pleased that our industry is growing, imagine what it could be if we had economic certainty and sound public policy legislation.” Speaking from Washington, D.C., where she was participating as a new board member of the Real Estate Round Table, Kane explained that “in the last few months, we’ve seen activity at the federal level surrounding energy and tax legislation. Our hard-working NAIOP national staff has been at the table and in the media. TRIA (Terrorist Risk Insurance Act) has been a particular priority for us. We’ve been working with both the House and Senate so they understand that insurance against terrorist attacks is essential for continued growth and development.” “The same holds true for tax reform,” she said. “As you know, the current draft of legislation has a carve-out for commercial real estate with respect to carried interest - a huge win for us! But things like that don’t happen over night. It takes a lot of time and education for elected officials to understand our issues.” “I can assure our Minnesota chapter members
Minnesota Real Estate Journal
that the people who actually place our PAC dollars with candidates are well informed on the politicians and their committee involvements,” she said. “They spend the dollars we all contribute wisely, and with measurable effect.” Giving Early is Important: The Time to Contribute Is Now Throughout the past session, NAIOP members have sent thank you’s to legislators who delivered our message - on the warehouse tax and business property taxes in general - in committee hearings and floor debates. Now it’s time to show our gratitude to these good friends of NAIOP, our business tenants and of all commercial-industrial taxpayers in Minnesota by supporting them financially as well. Added Mark Nordland: “This year’s elections will affect our industry, every one of our members, and each of our business tenants for years to com. No one in commercial real estate can afford to sit on the sidelines. If you share my concerns, I urge you to get involved. Send your personal check to NAIOP Minnesota’s PAC today or contact Duane Arens at (612) 670-6715 or duane@naiopmn.org and NAIOP will be ready to help. Thanks in advance for supporting commercial real estate with as generous a contribution as you can.”
Page 21
Financing from page 19
He says that the capital markets for permanent financing are as strong and healthy as he’s ever seen them. That’s saying something: Effler has been working in commercial real estate financing since 2002. Effler says the market is healthier even than during the heydays of 2006 and 2007. “There is some needed discipline in the market today,” Effler said. “That is necessary for a healthy commercial real estate market in the long-term. By focusing on cash flow versus piein-the-sky numbers, we are seeing a market that is sounder today. It’s not like it was during the craziest of times.”
Page 22
Minnesota Real Estate Journal
Minnesota. The 590,000square-foot From page 1 project will fill nearly one square block in the Dinkytown neighborhood, just two short blocks from the University of Minneapolis campus. The project includes 29,000 square feet of retail space, including a 16,000-square-foot Target Store anchoring one corner of The Marshall. The project's name comes from its location: It sits on land that was once occupied by Marshall High School. Construction crews began demolition of this shuttered high school in December of 2012. Once the high school was demolished -- and that process included the time-consuming removal of asbestos -- KrausAnderson was free to begin construction of The Marshall. Today, despite the challenges that come with working in a crowded urban area, Kraus-Anderson is on schedule to complete the massive complex. Solberg says that most of the work remaining is interior construction, and that he is confident that the project will be ready for its student residents before fall classes begin at the University of Minnesota. "We had a particularly challenging winter," Solberg said. "That meant that we got off to a bit of a late start.
Marshall
News From page 12
and on-site, qualified staff who will develop individualized fitness programs designed to help each resident achieve their personal fitness goals and maintain their independence. Amenities for the project include luxury apartments, an elegant dining room, theater, chapel, card room, salon with barber shop, bistro, general store, library, and a club room for social gatherings and happy hour. “We have a long-standing relationship with the City of Maple Grove and are proud to be here to officially break ground on SilverCreek on Main,” said Collin Barr, President of Ryan’s NorthCentral region. “For us at Ryan, we don’t view this as just building a project brick by brick; we view this as building a community.” Ryan is providing Construction, Development and Capital Markets services for the project. Other partners include Kaas Wilson Architects and Encompass Group Interior Design. The Maple Grove project will be SilverCrest’s sixth senior community in the Twin Cities. Others include the nationally-recognized Summit Place in Eden Prairie, Parkshore Senior Campus in St. Louis Park, Village Shores Senior Community in Richfield, Brightondale Senior Campus in New Brighton, and Kingsley Shores in Lakeville. “We are thrilled to partner with Sil-
There were also some soil challenges related to the demolition of the old high school. So we lost some time to that. We had to manage through those challenges. We are now dealing with all the rains that everyone else in Minneapolis is dealing with. But we've worked quickly despite these challenges. Our exterior construction is mostly done and we are happy with the pace we've been able to maintain." Once students arrive later this summer, they find a student-housing facility that will boast 316 units that look more like high-end apartments than traditional student-housing dorms. Each unit will feature granite counter tops, stainless-steel appliances and in-unit washers and dryers. Complex amenities include a fitness center, indoor pool, indoor basketball court, computer lab and underground parking for 300 vehicles. These amenities and high-end finishes are important. They allow The Marshall to successfully compete for new student residents. New student-housing projects today can't afford to offer only bare-bone amenities. If they do, university students will simply choose other living options that provide them with more features and on-site goodies. But what's equally as important as the indoor pool and fitness center is the sense of community that GEM Realty and EdR are striving to create at The Marshall. The Marshall is made up of several buildings con-
June 2014
nected to each other and surrounding three interior open-air plazas. Some of these buildings are adjacent to each other. Others are connected by skyways at each floor. "These buildings are well-connected. You can connect with friends in another building without ever going outside," Solberg said. "You can meet friends on the plaza on the west side of the site with the terraces or the plaza in the middle with the volleyball courts. Or you can just meet inside and go to the pool or fitness facility. We think that is pretty interesting." Dotted throughout The Marshall and overlooking both the street and the project's open-air plazas are several outdoor balconies. These balconies create an airier feel to the massive project. They also help connect it to the busy Dinkytown neighborhood, a busy community filled with shops, restaurants and night-life options. "This has certainly been an interesting project," Solberg said. "I think we've created something special here, and I know that the students will appreciate this project."
verCrest to bring this senior living project with its unique health and wellness center to the Maple Grove community,” said Eric Anderson, Ryan’s Vice President of Senior Living Development. “The Arbor Lakes area is full of activity and will be a great fit for SilverCreek on Main.” In the attached photo from left to right: Tim Gray, Chairman, Secretary and Treasurer, Ryan Companies; Jack Collins, Vice President of Marketing and Development, SilverCrest Properties; Mike Gould, President, SilverCrest Properties; Phil Leith, Maple Grove City Council; Al Madsen, Maple Grove City Administrator; Karen Jaeger, Maple Grove City Council; Eric Anderson, Vice President of Development, Ryan Companies; Collin Barr, President, NorthCentral region, Ryan Companies.
winds Hospital campus. The 75,873-square foot Red Rock Senior Living facility will consist of 77 units, including 14 independent living apartments, 24 assisted living apartments, 32 memory care apartments, six care suites, one guest suite, and a 25stall lower level parking garage. The facility will be operated by Ebenezer in partnership with Fairview Health Services. “This is an exciting new focus for Oppidan,” said Joe Ryan, president of Oppidan. “We welcome the opportunity to bring our development expertise to the senior housing market with Ebenzer and other senior housing providers on future projects.” Construction on the facility will begin in June of 2014, and the facility will be fully operational by June of 2015.
Oppidan Investment Company Marks Entrée into Senior Housing with Red Rock Senior Living Facility in Woodbury
NorthMarq Capital Negotiates $22 Million Loan for Solhavn Apartments in Minneapolis
Minneapolis-based Oppidan Investment Company, a national property development firm offering a full range of real estate services, today announces plans to develop its first senior housing project. Red Rock Senior Living is located on 3.5 acres at 2195 Century Avenue in Woodbury, near the intersection of Lake Road and Interstate 494 and in close proximity to CornerStone Medical Specialty Centre and the Wood-
Dan Trebil, senior vice president/managing director of NorthMarq Capital’s Minneapolis based regional office arranged $22 million in financing for the Solhavn Apartments, a 137-unit multifamily property located at 815 North Second Street in Minneapolis. The transaction was structured with a 14-year term and 2-years interest only period followed by a 30-year amortization. NorthMarq arranged financing for the borrower through its relationship with a life insurance company lender.
CBRE ANNOUNCES SALE OF ROSEVILLE INDUSTRIAL CENTER CBRE announces the sale of Roseville Industrial Center, a 122,000 square foot office/warehouse building built in 1979. Located on County Road C near I-35W in Roseville, Minnesota, the property was 100% occupied by three tenants at the time of sale. Big River Real Estate Fund, LLC, a private equity real estate fund led by Ryan Mallery, purchased the property for $5.4 million. Big River Real Estate Fund has been actively seeking investment opportunities in the Minneapolis/St Paul market since 2012. Steve Lysen, Mindy Rietz, Jim Leary and Jeff Budish of CBRE’s Minnesota Investment Properties Group and John Ryden of CBRE’s Industrial Group represented the seller in the transaction. The CBRE Minnesota Investment Properties Group specializes in the disposition of office, industrial and retail properties throughout the Upper Midwest.
Christopher Dolan
REAL ESTATE SERVICES Continental Property Group, Inc. 1907 Wayzata Blvd, Suite 250 Wayzata, MN 55391 Tel-952-473-1700 www.leasespace.com
Monroe Moxness Berg 8000 Norman Centeer dr. #1000 Minneapolis, mn 55437 952-885-5999 www.mmblawfirm.com
REAL ESTATE EDUCATION MN Real Estate Exchangors Henry votel 651-426-1610 Www.mree1031.com Info@mree1031.com