Mrej Oct 14

VOLUME 30, NUMBER 10

©2014 Law Bulletin Publishing Co.

October 2014

2014 Hall of Fame Inductees

George R. Karvel, Ph.D.

Jim Stanton

Cyril “Cy” Kuefler, Sr.

The Shenehon Center at the University of St. Thomas Opus College of Business honors these individuals for their significant contribution in real estate and leadership in their business.

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2014 Hall of Fame Inductees

October 2014

UST Minnesota Real Estate Hall of Fame Discover their stories – Honor their values Welcome to the fifth annual Minnesota Real Estate Hall of Fame induction ceremony. With the addition of this year’s three inductees there will be a total of 23 individuals in the Hall of Fame. The Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business has established the Minnesota Real Estate Hall of Fame to honor, preserve and perpetuate the names and outstanding accomplishments of real estate leaders who have made a significant contribution in real estate and demonstrated care and concern for improving their community as a business leader. To be inducted into the Hall of Fame, potential candidates must first be nominated by colleagues, co-workers, or the general public. Once a person has been nominated, a selection committee, comprised of 10 members of the UST Real Estate Advisory Board, then reviews their credentials. The nominees to the Hall of Fame are selected using the following criteria:

Hall of Fame Award Criteria The basic criterion for acceptance into the Hall of Fame is outstanding business performance coupled with a high standard of ethics. Usually the honorees are responsible for successful and/or innovative business activities and have made major life-long contributions to our industry.

• All nominees must have been retired for at least 5 years or • Must be at least 70 years of age or • Be deceased • Nominations are not limited to University of St Thomas graduates.

• Nominees can represent any discipline related to real estate in Minnesota. The Advisory Board and the real estate community are encouraged to nominate candidates from all disciplines of both commercial and residential real estate. The board is also encouraged to solicit nominations from the general public to insure a wide variety of candidates.

The Selection Committee will consider the following when making their selection of honorees: Business: the nominee has made a significant contribution as a leader in the field of real estate; - Nominees are expected to have made a significant impact in their particular area of real estate and be recognized primarily as a person that is an exceptional role model in their discipline.

- Weight will be given to such accomplishments as starting and building a business, leading an established business to significantly greater achievements, major transactions, and innovative projects.

- Among the factors to be considered are industry recognitions and accomplishments, being an industry

UST Real Estate Advisory Board Members • • • • • • • • • • • • • • • • • • •

Stephen Baker, Ramsey County Assessor Bill Beard, Beard Group Luigi Bernardi, Aurora Investments Thomas Burke, TOLD Development Company Colleen Carey, The Cornerstone Group Charles Caturia, CBRE Richard Collins, Ryan Companies Daniel Commers, Roseville Properties Management Company Thomas Crowley, Dougherty Funding LLC Daniel Engelsma, Kraus-Anderson James Gearen, Zeller Realty Corporation Gene Haugland, Haugland Company Will Hoeg, Falcon Ridge Partners LLC David Jellison, Liberty Property Trust Jean Kane, Welsh Companies Terrence Kingston, Cushman & Wakefield Frank Lang, Lang-Nelson Associates Inc. David Marquis, Target Timothy Murnane, The Opus Group

• • • • • • • • • • • • • • • • • • • •

pioneer and/or leader, and recognition by others for achievements.

Community: the nominee has had concern for improving his/her community as a business leader Ethics: the nominee has displayed the highest level of ethics in their business practices.

Beyond the criteria noted here, the Selection Committee has the responsibility and discretionary power to make their determinations from the pool of nominations submitted.

In the state of Minnesota we are fortunate to have had and continue to have a dynamic real estate community.

In addition to our 23 Hall of Fame inductees there are many people out there working and building their careers in the real estate industry. These are the people that will continue to shape the future of the built environment in the Twin Cities and Minnesota. It is from this group that our future Hall of Fame inductees will emerge. The vitality and creativity these real estate professionals will insure that we will have many great choices for future Hall of Fame inductions.

We will be accepting nominations for the 2015 Real Estate Hall Fame induction shortly after the first of the year. At that time we will be sending out requests for nominations. I hope that you will all consider submitting a nomination for next year’s event.

Russell Nelson, Nelson Tietz & Hoye Kathleen Nye-Reiling, Silver Cliff Properties Ronald Peltier, HomeServices of America, Inc. Whitney Peyton, CBRE Stefanie Lenway, Opus College of Business Mark Reiling, Cassidy Turley Jack Rice, The Rice Company Mike Salmen, Transwestern Jerome Sand, Kraus-Anderson Steve Schachtman, Steven Scott Management Richard Schadegg, CBRE Jeffrey Schoenwetter, JMS Companies Jim Stolpestad, Exeter Realty Company Robert Strachota, Shenehon Company Paul Sween, Dominium Group, Inc. Scott Tankenoff, Hillcrest Development Mary Tingerthal, Minnesota Housing Finance Agency Steve Wellington, Wellington Management Mark Westra, Fabyanske Westra Hart & Thomson David Wright, US Bank Corporate Real Estate

2014 Hall of Fame Inductees

October 2014

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Cyril “Cy” Kuefler, Sr. (1925-2001)

Cyril “Cy” Kuefler, Sr. A successful real estate entrepreneur in the St Cloud area, Cy Kuefler worked hard to promote his own business and to improve his profession. He believed in the power of education and played a significant role in elevating the educational and ethical standards within the real estate industry. His progressive vision helped shape the profession as it is today.

As a University of Minnesota graduate and a life-long learner, Kuefler was inspired to improve his chosen profession by championing legislation to professionalize the real estate business and to protect consumers. He worked systematically and resolutely to pass legislation to fund real estate higher education and helped to establish continuing education and licensing requirements for realtors and brokers.

Born in 1925 in Galahad, Alberta, Canada, the sixth of eight children, Kuefler was five years old when his family moved to Stearns County, Minnesota, where he spent the remainder of his life, with the exception of time served in the

U.S. Navy in the South Pacific during WWII. Kuefler grew up near Upsala and Holdingford, among German and Swedish neighbors, learning from attentive parents the importance of caring about and respecting people as well as the land.

At the University of Minnesota, Kuefler studied real estate and majored in business. By 1951 he had entered the real estate business and in 1953 he started the St. Cloud Board of REALTORS® with his father’s assistance. There, he led as president of the organization in 1953, 1959 and 1963. During that time he also founded the Cy Keufler Property Management Company in St. Cloud.

Kuefler was a creative businessman.

David Kuefler recalls that his father used the first reflective material on his real estate signs and was quick to see the advantages of advertising his business on the ice-resurfacing machine at the rink!

Kuefler sought out opportunities to advance professionally through his own educational efforts, obtaining designations such as GRI (Graduate, REALTOR® Institute); CR13 (Certified Residential Broker); ALC (Accredited Land Consultant); and SREA (Accredited Appraiser). He published many articles on land ownership, including material for a college textbook.

He conducted seminars across the United States, Europe and Asia. In 1969 Kuefler was appointed to the Real Estate Commission by the governor of Minnesota, where he worked diligently to advance the industry.

An accomplishment in which he took great pride was establishing the original degree program in real estate in the state.

In 1973, as a Minnesota Real Estate Commissioner, Kuefler worked alongside Bernie Rice (2011 MN Real Estate Hall of Fame Inductee) to obtain passage of the Minnesota Real Estate Education, Research and Recovery Act. This legislation provided the first funding for a chair in real estate at a state college or university. Due to this effort, St. Cloud State University was able to hire a real estate faculty person to develop a degree program which offered its first classes in the fall of 1981. The concept gained momentum, and in 1995 the Opus College of Business at the University of St. Thomas created the Distinguished Chair in Real Estate, hiring the retired chair of the St. Cloud program, George R. Karvel, in 1997. From there, UST developed a Master of Science degree in Real Estate, a Bachelor of Science degree in Real Estate, continuing education programs run by the Shenehon Center for Real Estate and a Center for Real Estate Research.

“Even the creation of a real estate board of advisors at UST flows from the vision of Bernie Rice and Cy Kuefler. Although they did not speak of, or envision, a Minnesota Real Estate Hall of Fame, it, too, is a legacy of their efforts.” George R. Karvel Kuefler gave back to his church and his community as he worked with the bishops of the St. Cloud Diocese to help build low-income and elderly housing in

the city. He was instrumental in building a church in Sartell and a chapel in Crow Wing State Park. He was a 4th degree Knight of Columbus and, in 1970, became the state’s first inductee into that organization’s Hall of Fame.

Kuefler was active in many civic activities including holding positions as director of Norwest Bank in St. Cloud (1971 – 1993), member of the board of trustees with the St. Cloud Hospital (1969-1979), past president of the Central Minnesota Boy Scout Council, president of the Senior Volunteer Committee, the St. Cloud Chamber of Commerce, Exchange Club and Sierra Club of St. Cloud. His special awards include: REALTOR® of the Year – Minnesota 1966 and 1968; Land REALTOR® of America – 1978; Distinguished Service Award – Minnesota 1966, 1969 and 1971; Life Membership in the National Association of REALTORS® & Minnesota Association of REALTORS® – 1992.

Cy Keufler worked tirelessly to promote the common good during a life committed to learning, teaching, leading and inspiring others. We can see his legacy in the standards of ethics and expertise in the real estate profession today. His progressive vision included real estate programs in higher education and his efforts have had far-reaching and long-lasting benefits for real estate students, consumers and companies in Minnesota.

UST Real Estate Advisory Board UST Real Estate Advisory Board The UST Real Estate Advisory Board guides the activities of all of the UST real estate programs. Members of this advisory board are prominent leaders of the real estate community from the Twin Cities area.

Board members are instrumental in advising the program in areas such as: • • • • •

curriculum review providing new program suggestions supporting activities of each program coordination of mentors to connect students and alumni with industry professionals job and internship placement

2014 Hall of Fame Inductees

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October 2014

George R. Karvel, Ph.D.

George R. Karvel, Ph.D. George Karvel, one of Minnesota’s best-known authorities in real estate, will be remembered by many for hosting a popular Sunday morning real estate program broadcast by WCCO. Here, Karvel made complex real estate topics easy for all to understand. He also wrote a real estate column for the St. Paul Pioneer Press and held the Arnold and Leonard Mikulay Distinguished Chair in Real Estate position, where he was instrumental in establishing real estate

programs at the University of St. Thomas. Karvel is well regarded for his work as author or co-author of many articles, monographs and books, including several editions of Real Estate Principles and Practices.

Karvel earned his bachelor’s, master’s and doctoral degrees in 1969, 1972 and 1979, respectively, from the University of Colorado, Boulder. In August 1980, after teaching careers in Colorado, Wisconsin and Illinois, Karvel found his way to Minnesota, where he accepted a professorship position at St. Cloud State University. There, he was credited for developing bachelor’s and master’s degree programs in real estate, the Minnesota Real Estate Research Center and the Minnesota Center for Real Estate and Housing Education. In 1997, after his December 1996 retirement from St. Cloud State University, Karvel was

named SCSU Emeritus Professor of Real Estate.

Shortly thereafter, in January 1997, he was chosen to hold the newly created Distinguished Chair in Real Estate at the University of St. Thomas. During his 15year tenure at UST, he taught, worked with local and national real estate organizations, and helped develop the university’s Master of Science program in Real Estate, the Bachelor of Science program in Real Estate Studies, the Shenehon Center for Real Estate and the Institute for Real Estate Research. In April 2013, in recognition of his outstanding service and extraordinary contributions to the atmosphere of collegiality that is St. Thomas’ hallmark, the University of St. Thomas conferred upon him emeritus status.

In addition to his teaching career, Karvel was appointed to several state

panels and task forces such as the 1997 Minnesota Flood Recovery and Redevelopment Task Force. He was lauded for his board service to dozens of local, state and national real estate, professional, academic and nonprofit organizations such as the Minnesota Habitat for Humanity, which he chaired.

Over his 40-year career in real estate, he also served as a litigation consultant for more than 90 corporate, civic and industrial entities.

George Karvel’s various achievements over the past several decades have indeed left indelible marks in the Minnesota real estate sector. In a letter addressed to Karvel on June 11, 2012, Reverend Dennis Dease, former president of the University of St. Thomas, stated “I know the world is better for your efforts.”

frequently teaches courses and gives presentations on land development and related topics.

A 37-year member of the Builders Association, Stanton served on and chaired the Governmental Affairs/Public Policy Committee. He also served on the board of directors for both Builders Association of Minnesota and National Association of Home Builders (NHAB).

He was state president for two terms and is currently a director at NHAB. He is also a founding member and contributor to the Builder’s Association of the Twin Cities’ legal action committee.

Stanton’s commitment to the Real Estate industry also includes giving it a voice in the political arena. He is presently one of the top three REALTOR® Political Action Committee contributors in the nation and is a Platinum member of the REALTORS®

Political Action Committee.

A quiet supporter of his local community, Stanton is a generous contributor to Toys for Joy, a nonprofit organization supporting Anoka County families. He is also a patron of Bethlehem Academy, the Faribault, Minn., school he attended as a child. A supporter of the North East Minneapolis Arts Association, Stanton provides affordable rent to more than 190 artists and arts related businesses and another 30 entrepreneurs and nonprofit organizations in his Northrup King Building.

During his long career Stanton has made a significant contribution to the real estate industry through the projects he has completed and through his extraordinary service work with industryrelated organizations.

Jim Stanton

Jim Stanton Jim Stanton is among the few who can take credit for shaping the terrain of a large metropolitan area. From Coon Rapids’ Riverdale Village in the north to Prior Lake’s Wilds Golf Course in the south, Stanton has developed more than 6,000 home sites in 28 different metro area cities. His numerous commercial and residential buildings dot the Minneapolis skyline.

A real estate veteran of more than 52 years, Stanton currently has residential

and commercial projects in 10 different cities within Minnesota and Wisconsin.

In addition, he has developed nine lofts projects in downtown Minneapolis.

A role model for students and industry practitioners alike, Stanton combines a keen ability to envision the future markets—even in down economies— with a straightforward, “tell it like it is” approach that brings projects to fruition.

Stanton strongly believes in giving back to the industry that has brought him success. He is an active REALTOR® Emeritus member of the St. Paul Area Association of REALTORS®, serving on the governmental affairs committee for 38 years. In addition to serving as president of his local association twice and president of the Minnesota Association of REALTORS® once, he has held numerous roles with the National Association of REALTORS®.

He

2014 Hall of Fame Inductees

October 2014

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Real Estate Programs at the Opus College of Business Shenehon Center for Real Estate www.StThomas.edu/Shenehon The Shenehon Center for Real Estate serves as a resource to the commercial, industrial, residential and corporate segments of the real estate industry and the community to advance the public interest in real estate issues. For more than 15 years, the center has supported improvement in real estate leadership and management by creating and developing real estate leadership and management programs for undergraduate and graduate degree programs and professional development, providing a neutral forum to convene real estate professionals to share best practices, supporting and working with local real estate industry organizations, conducting real estate research, and developing mechanisms to transfer leading edge business practices to the real estate industry.

Programs and events developed and/or sponsored by the Shenehon Center for Real Estate include: • Real Estate Executive Insight Series: Invites speakers from the real estate industry to provide valuable information and discussion about hot topics and current trends. This is a free program and is open to the public.

• Professional Certificate in Commercial

A certificate series for experienced professionals who wish to advance their career and refresh their understanding of current trends in the commercial real estate market.

Real Estate:

• Appraisal Institute Master's Degree Program: Graduate students focusing on

real estate valuation can apply education and experience credits toward the requirements needed for the Appraisal Institute MAI Designated membership.

Students currently enrolled in the University of St Thomas MSRE program are eligible to join the AI Master’s Degree Program and become Candidates for Designation with the Appraisal Institute

• CCIM Designation Coursework: A nationally recognized designation program in commercial and investment real estate. The University of St. Thomas and the Minnesota-Dakotas CCIM chapter offer coursework required for this designation.

• Commercial Real Estate Specialist

A certificate program that enhances the career development of individuals from groups (African American, Latino, Native American and other under-represented groups) that are disproportionately absent from employment in the commercial and investment real estate industry.

Program (CRESP):

from this conference help to fund scholarships for students in the UST MS degree in Real Estate and UST BS degree in Real Estate.

• Affordable Housing Conference: An annual one-day conference bringing together various professionals related to financing, for-profit development, nonprofit development, housing authorities, housing officials, housing advocates, economic development officials, property managers, real estate attorneys and elected officials to exchange ideas, network, and learn from one another’s successes.

• Women in Commercial Real Estate

An annual morning conference discussing a variety of topics and relevant issues to women working in the field of commercial real estate. This event is co-sponsored by the Minnesota in Commercial Real Estate Women (MNCREW).

Conference:

•

The

Annual

Business

Valuation

An annual one-day conference offered each year in late January or early February.

This conference covers topics of interest to attorneys, accountants, business brokers, business owners, commercial real estate brokers, lenders, investment bankers, appraisers, and others who regularly encounter business valuation issues.

Conference:

An annual competition between university undergraduate real estate departments and clubs from University of St. Thomas, Marquette University, St. Cloud State University, University of WisconsinMadison and University of Northern Iowa. This annual event takes place in April and is co-sponsored by the Shenehon Center for Real Estate.

• NAIOP University Challenge:

• Minnesota Real Estate Hall of Fame: An annual ceremony to honor, preserve and perpetuate the names and outstanding accomplishments of real estate leaders who have made a significant contribution in real estate and demonstrated care and concern for improving their community as a business leader.

An annual halfday conference presented by Integra Realty Resources and the Shenehon Center for Real Estate. This conference brings together local and national experts to discuss the outlook for various areas of real estate in the upcoming year. Profits

• Real Estate Outlook:

Master of Science Degree in Real Estate www.StThomas.edu/RealEstate The Master of Science Degree in Real Estate is one of seven graduate business degree programs offered through the Opus College of Business. This parttime, evening program provides students with a comprehensive understanding of real estate financial and quantitative decision making processes, and advanced issues in valuation and land economics, knowledge of critical legal issues, and techniques for market and feasibility studies and real estate investment analysis. Students in the UST MSRE program come from a variety of different backgrounds including appraisal, brokerage, property management, finance, development, engineering, design, facilities management and corporate real estate. The program produces alumni with strong leadership abilities, aptitude for sound decision making, focus on ethics and social responsibility, and a solid network of real estate professionals. MSRE coursework includes: • Real Estate Decision Making • Urban Land Economics

• Market Analysis and Feasibility Studies • Commercial Real Estate Valuation • Investment Property Analysis • Real Estate Development • International Real Estate Development • Statistical Methods for Decision Making • Legal Issues in Real Estate • Business Ethics • Geography for Business and Planning (GIS) • Corporate Real Estate • Negotiation Skills Management

Bachelor of Science Degree in Real Estate www.StThomas.edu/Business/B SRealEstate The Bachelor of Science Degree in Real Estate is one of 13 undergraduate concentration areas in the Opus College of Business. This four-year degree program provides students with a background in general business and real estate theory and practice. Students study the many factors involved in property assessment and sales, how they change and how these changes affect real estate and individuals. Recent graduates hold positions in the government, nonprofit, construction and private business sectors, including leadership positions in real estate brokerage, investment management, property management, appraisal, construction management, land-use planning, and land development. The BSRE program coursework includes: • Liberal Arts Curriculum • Business Core Courses • Real Estate Principles • Real Estate Property Management • Real Estate Market Analysis • Real Estate Finance and Investments • Real Estate Appraisal • Real Estate Development • Geography for Business and Planning • Regional and Urban Economics

VOLUME 30, NUMBER 10

©2014 Law Bulletin Publishing Co.

October 2014

Transwestern: Making a success out of Dakota Landing

By Dan Rafter, Editor

T

he Bakken region of North Dakota is booming, what with rigs pulling a seemingly endless stream of oil from the earth here. And with a boom comes new residents both permanent and temporary. It’s easy to think that anytime a new hotel, supermarket or convenience store opens here, it will automatically succeed.

But that’s not always the case.

Just ask Michael Houge, vice president of the investment services group of commercial real estate company Transwestern.

Bakken Properties, LLC opened the Dakota Landing long-term stay hotel in Williston, N.D. – the heart of the oil-producing Bakken region – in the early

fall of 2013. The 240-room hotel would seem to be a perfect fit for the area: All those workers called in to help remove the oil from the ground here would need a place to stay.

But for months, this hotel had far too many vacancies each night. So Houge and his team at Transwestern were called in to market the property.

“The hotel came into the market a bit late,” Houge said. “If you had built a hotel in Williston two years earlier, it would have been an easy sell. It could have just sat there and it would have leased up in no time. Both corporate users and oil-company tenants would have been happy to lease its rooms on a longterm basis.”

This wasn’t happening at the Dakota Landing. But that’s changed. Today, Dakota Landing to page 15

Liberty Property Trust betting on strength of Twin Cities industrial market

By Dan Rafter

O

fficials with Liberty Property Trust have faith in the industrial market in and around Minneapolis/St. Paul.

On Oct. 20, Liberty Property celebrated the groundbreaking of Dayton Distribution Center I, a 247,004square-foot spec distribution center in the city of Dayton, Minn.

The building is expected to be complete by the

spring of 2015. And Dave Jellison, vice president and city manager for the company, said that he and his fellow officials aren’t worried about filling the space once the new center opens for business.

“A number of people have contacted us about the space,” Jellison said. “There is real good activity in the Northwest marketplace right now. So far, we have seen strong interest in this building. We are confident that we will find the right tenants.”

Jellison’s confidence is not misplaced. The industrial market in and around the Twin Cities today is a

strong one, with plenty of demand for modern distribution-center space.

And that’s exactly what Liberty Property Trust is delivering with the Dayton Distribution Center.

Jellison says that prior to the last 18 months, there was little new construction in the industrial sector for five or six years. That has left plenty of pent-up demand for industrial space, he says.

“A lot of companies are now looking to upgrade the quality of their buildings,” Jellison said. “They want Dayton to page 17

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Minnesota Real Estate Journal

Contents

OCTOBER 2014 • VOLUME 30, NUMBER 10

October 2014

Departments PEOPLE

4

NEWS

6

RESOURCE GUIDE

1

TRANSWESTERN: MAKING A SUCCESS OUT OF DAKOTA LANDING LIBERTY PROPERTY TRUST BETTING ON STRENGTH OF TWIN CITIES INDUSTRIAL MARKET

10

PRESENT AND FUTURE PROMISING FOR ST. CLOUD

12

THE CHALLENGE OF FIXING (AND PAYING FOR) THE STATE’S TRANSPORTATION SYSTEM WILL BE FRONT AND CENTER IN 2015 SESSION

14

POP-UP STORES KEEP POPPING UP

16

DLA PIPER: REAL ESTATE EXECUTIVES ARE AN OPTIMISTIC LOT TODAY

18

FIVE STEPS TO GROWING A HOTEL BRAND

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

October 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

Bridgewater Bank promotes Nick Place to Senior Vice President Bridgewater Bank, a Minnesota bank which focuses on meeting the unique needs of successful real estate and small business entrepreneurs, has promoted Nick Place to Senior Vice President Commercial Lending. Nick will continue to be responsible for maintaining and developing new client relationships, but in addition, Nick will now share his expertise as he leads and mentors the emerging members of the bank’s growing lending team. As the youngest member of the Bank’s Senior Leadership Team, Nick will be actively involved in guiding the bank’s strategic initiatives.

Nick has been with Bridgewater Bank since 2007 and has made significant contributions to growing the bank’s loan portfolio. During his tenure, his broad understanding of commercial real estate, financial analysis, loan underwriting, and small business lending have been integral factors to growing the bank’s loan portfolio which now is in excess of $570 million. Since 2011 Nick has originated over $175 million in new loans.

In addition, his ability to understand the demands of more sophisticated clients has enhanced the bank’s reputation as one of the most responsive, real estate focused banks serving the Twin Cities.

CEO Jerry Baack stated “Nick is a top performer that has a proven track record of developing and growing Bridgewater’s client base. In the market we serve, Nick is regarded as one of the most knowledgeable lenders with an inherent aptitude to close the more complex deals.”

Ryan Companies US, Inc. Hires Connor T. Lewis as Vice President of Development, Health Care Minneapolis-based Ryan Companies US, Inc. is pleased to announce Connor T. Lewis has been hired as Vice President of Development, Health Care in the SouthEast Region. In his new position, Connor works closely with health systems, physician groups, and other healthcare providers across the nation facilitating their growth strategies through strategic real estate acquisitions, development, and construction. He is responsible for site selection and acqui-

sition, municipal use permits and approvals, design and construction coordination, financial packaging and lease or sale negotiation.

“Connor is a thought leader in the health care industry and brings a lot of diversity to his position, having worked in executive positions with medical companies, health care systems, and clinical laboratories,” said Doug Dieck, President of Ryan’s SouthEast Region.

“He has a great sales mind and will be a huge asset as we expand deeper into the health care sector.”

Lewis is hardworking and solutiondriven. He has an in-depth understanding of the current health care environment as well as changes that are occurring and will occur in the future. Prior to joining Ryan Companies, Connor worked for such notable employers as Mayo Clinic and LabCorp / Integrated Oncology.

“My new position at Ryan combines all the things I have loved from my past positions into one; where I can work with hospitals, doctors, managed care organizations, ACOs, medical and pharmaceutical companies to build something that will last the test of time,” said Lewis. “I’ve always been drawn to health care because it’s a career path where you wake up every day and feel like you’re making a difference in someone’s life,” Connor obtained a Bachelor of Arts degree in Communication Studies for the University of Iowa.

Ryan Companies US, Inc. Hires Jason Hansen as Senior Project Architect Ryan Companies US, Inc. is pleased to announce Jason Hansen has been hired as Senior Project Architect. In his new position, Jason leads a team of design professionals, including design consultants, in the coordination and development of construction documents throughout the various phases of development from schematic design to construction administration.

“Jason’s expertise in the design and technical detailing of projects coupled with his experience in construction administration will be a huge asset to our team,” said Mike Ryan, Ryan’s Director of Architecture + Engineering.

Jason brings 16 years of experience in a variety of project types including Commercial, Retail, Education, Health

Care, Transportation, Housing, Religious, Historic Preservation, Government, and Public / Non-profit. His strengths include the production of wellcrafted construction documents, consultant coordination, and development of architectural details employing a multitude of construction types ranging from wood, steel, SIPS, CIP and PC concrete.

“Ryan stands at the forefront of the design, development and construction industries and I’m excited to be a part of a team that takes such pride in delivering the best product available,” said Hansen. “I believe working with the Ryan team will provide me the opportunity to grow both personally and professionally.”

Jason earned a Bachelor of Arts and Master of Architecture degrees from the University of Minnesota. He is also a LEED Accredited Professional.

Veteran Real Estate Finance Professional Andy Deckas Joins Dougherty Funding LLC as Executive Vice President Dougherty Funding LLC has announced it has hired veteran commercial real estate finance professional Andy Deckas as Executive Vice President. Andy has over twenty-five years of industry experience and got his start in the real estate business at Heitman, one of the nation’s biggest commercial real estate advisors. Throughout his Heitman tenure, Deckas held several leadership roles, including president of Heitman Advisory Corporation, where he worked with public and corporate employee pension funds and other institutional investors. Deckas then joined Opus Properties as president in 1997 and over the following seventeen years led the acquisition, financing and management of more than $3 billion in assets under the Opus/Founders Properties brand.

Page 6

News Historic Schmidt Brewery Renovation Honored by Timmy Awards Property awarded “Most Innovative Adaptive Reuse” by National Housing & Rehabilitation Association Dominium, a leading apartment development and management company, was awarded with a J. Timothy Anderson Award for excellence in historic rehabilitation (Timmy Awards).

Schmidt Artist Lofts in St. Paul, Minn. was selected by the National Housing & Rehabilitation Association for the “Most Innovative Adaptive Reuse.” With this honor, Dominium takes home its first Timmy Award, which recognizes exceptional historic redevelopment projects across the country.

The renovation of the historic Schmidt Brewery has provided 247 affordable live/work spaces for local artists. Specifically designed for the needs of artists, common amenities include a yoga/Pilates studio, dance studio, pottery studio, play/performance

Minnesota Real Estate Journal

studio, sound studios, paint studio, clay studio, kiln room, tool shop/frame room, multiple gallery spaces and art display walls. The Schmidt project shows the high demand for quality, affordable housing in the Twin Cities region, with full occupancy shortly after opening.

“We are thrilled that our work on Schmidt Brewery has been recognized by the industry,” said Jean Ferguson, vice president of property management for Dominium. “It’s a collaboration between Dominium, the city of St. Paul and community and financial partners.

We’re excited to be a part of the revitalization of the West Seventh Street neighborhood.”

“Art can be a glimpse into history – a freeze-frame of a certain culture, idea or moment,” said St. Paul Mayor Chris Coleman. “Dominium is extremely deserving of this award, for restoring an iconic St. Paul building, and creating a space for artists to be the future of the vitality and growth to the City of Saint Paul.”

The Schmidt project was completed in partnership with the following enti-

ties: U.S. Bank, Alliant Capital, Met Life, the City of St. Paul, Cornerstone Real Estate Advisors, Metropolitan Council, the Minnesota Department of Employment and Economic Development, and Ramsey County.

The Schmidt project is one of several historic renovation properties that leading apartment development and management company Dominium has undertaken, along with the historic Pillsbury A-Mill in Minneapolis and the Leather Trades building in St. Louis.

Dominium, the fifth largest affordable housing owner/manager in the country, leverages state and federal tax credits to renovate historic buildings and provide affordable housing for artists.

Bridgewater Bank Announces Arrival in St. Louis Park Bridgewater Bank, Bloomington, MN is pleased to announce their fourth branch, currently under construction, is slated to open in St. Louis Park on January 5th, 2015. Located at 4400 Excelsior Boulevard, the new location will

October 2014

serve this in-demand first ring suburb.

Bridgewater Bank’s original strategic plan, written when the bank was founded in 2005, called for a future branch site in St. Louis Park. After considering several sites the location on Excelsior Boulevard was chosen for its proximity to the newly refurbished core, an ease of access for local residents and the opportunity to continue contributing to the revitalization.

“This thriving community is energized with an entrepreneurial spirit, yet there are virtually no entrepreneurial focused banks serving the population.” said Jerry Baack, Chief Executive Officer, President and Chairman of the Board. “More specifically, Bridgewater Bank will be the only local bank to have a physical presence in the Excelsior and Grand corridor.”

Conveniently located near the corner of Excelsior Boulevard and Monterey Avenue, the branch will provide a new banking option for the prosperous residents of this area who appreciate an unconventional banking experience.

In nine years, Bridgewater Bank has

Page 8

established itself as one of the top 20 largest banks in the Twin Cities. The Bank has seen remarkable growth. As of September 30th, the bank reported assets of $662 million representing a year over year growth rate of over 22%.

The bank’s committed focus to real estate is one of the drivers of this rapid growth. The bank has built a solid reputation as a bank that understands the market and can finance several unique sectors of the real estate industry, including but not limited to; multi-family housing; commercial real estate; construction and land development; student housing; senior housing; and residential rehabs.

“As a full service bank with an unparalleled understanding of the local real estate market we wanted to be closer to many of the real estate projects we finance. The bank has been involved in financing several local projects partnering with developers, real estate investors, builders and individual home owners.” commented Jeff Shellberg.

Executive Vice President, Chief Credit Officer.” The bank plans to continue serving this entrepreneurial market and

Minnesota Real Estate Journal

is eager to have a physical presence in this neighborhood.”

IRET Selects Silver Oak Development to Coordinate Construction of PrairieCare Children’s Psychiatric Hospital in Brooklyn Park Silver Oak Development, an Oakdale, Minnesota-based commercial real estate developer and development management firm, announced that it has been selected by Investors Real Estate Trust ( IRET) to manage the development and construction of the future home of PrairieCare Children’s Psychiatric Hospital in Brooklyn Park, MN. An affiliate of the University of Minnesota’s Medical School, PrairieCare’s new 72,000 square foot hospital is being constructed on a prime 10.5 acre corner site located at the intersection of Highway 610 and Zane Avenue North, within the Astra Village master plan area of the northwest Minneapolis suburb. The new multi-story building, housing 50 patient rooms, physicians’ offices, examination rooms and related support

facilities, has been designed to expand “on our ability to provide access to high quality, patient-centered, compassionate and responsive care,” according to John Ryan, PrairieCare general counsel and project lead on the new facility.

Ted Holmes, IRET senior vice president, said his firm was excited to see the project get underway, and pleased to have Paul Reinke, president of Silver Oak Development, on board “to oversee the project through to its completion on our behalf.” A Minot, North Dakotabased real estate investment trust, IRET ranks among Minnesota’s largest investor-owners of healthcare, commercial and apartment properties.

Silver Oak Development was also recently selected by IRET to coordinate a $25 million expansion of Southdale Medical Center in Edina, MN, one of the largest medical office complexes in the Twin Cities, also owned by the North Dakota investment trust. Currently under construction, that project includes a new four-story, 57,000 square foot medical office building and parking ramp.

Other recent Silver Oak projects

October 2014

include development management of major luxury apartment complexes in Rochester, MN and Bismarck, ND, and in association with Haugland Company, 5000 France, a $32 million mixed use condominium and retail development in Edina, MN.

RJM Construction to build out offices for CenterPoint Energy RJM Construction, a Minneapolisbased general contractor, recently began work at 505 Nicollet Mall in downtown Minneapolis for CenterPoint Energy.

The four-story building was acquired by CenterPoint Energy earlier this year.

RJM Construction will completely renovate more than 100,000 sq. ft. of the building to accommodate more than 300 employees. The project will be complete by the end of the first quarter of 2015.

Once renovated, the new office space will include a customer call center, collaborative meeting spaces, and management and administrative space. Features will include a four-story staircase that News to page 20

Page 10

Minnesota Real Estate Journal

October 2014

Present and future promising for St. Cloud Growing number of businesses targeting this key Minnesota city

By Dan Rafter, Editor

C

athy Mehelich is never surprised when a business decides to move to St. Cloud, Minn., or when a developer begins turning dirt for a new distribution center or retail building. This city, a little more than hour's drive from Minneapolis, offers plenty of advantages for those who want to do business here.

Mehelich, economic development director for the city, points to its central location in Minnesota and its proximity to other major markets across the Midwest. She points, too, to St. Cloud's location right on Interstate-94.

Then there is the workforce here, a pool of talent that Mehelich calls St. Cloud's strongest selling point. The city is home to St. Cloud State University and St. Cloud Technical & Community College, among others. Mehelich says that the city boasts more than 30,000 college students attending six

different colleges and universities.

"Many employers are looking for the right kind of labor to help grow their companies. Having that labor force right here is a key draw for us," Mehelich said. "The collaboration between business and education here is a key benefit for companies. That is a key draw especially for industrial users.

These users are looking for that skilled workforce."

And the good news? St. Cloud economic development and government officials are committed to attracting even more new businesses and developments to their community. It's all part of a plan set in motion a little less than four years ago.

Changing the strategy About four years ago, the leaders of the city of St. Cloud made a key decision: They needed to change the way the city pursued new business and development opportunities.

To do this, the city created the Greater St. Cloud Development Corporation, an entity charged with promoting the city's benefits and bringing new business development to its borders.

So far, the results have been impres-

sive.

During the last three years, Canadian bus manufacturer New Flyer and German farm-implementation manufacturer Geringhoff have both chosen to open new industrial facilities in the city.

Geringhoff, a 150-year-old company, in 2012 selected St. Cloud as the home for its first North American manufacturing facility. Officials with the Greater St. Cloud Development Corporation helped the company find a 100,000-square-foot manufacturing facility that had recently been vacated.

New Flyer opened a medium-duty bus-line production facility here in 2013. The company brought 138 new jobs to the community.

Another big success came in May of this year when SkyWest, an airline that partners with United Airlines, reinstated direct service from Chicago's O'Hare International Airport to St. Cloud Regional Airport. SkyWest now offers twice-daily flights, seven days a week, between the two airports, something that Mehelich says makes St. Cloud an even more attracive location for businesses.

"Restoring commercial air service is important," Mehelich said. "We had

lost it five or six years earlier. The business community strongly supported our efforts to attract commercial air service back to St. Cloud. Succeeding in that will be important for future economic development and growth here."

A city on the move St. Cloud's downtown has also benefitted from the efforts of the Greater St. Cloud Development Corporation, seeing an increase of 70 percent in new retail and dining establishments in the last three years.

Others have noticed. Such diverse sources as Forbes, Livibility.com and the Milken Institute have all ranked St. Cloud as a top location in which to live and do business.

St. Cloud Mayor Dave Kleis, in his 2014 state of the city address, said that the city is no longer simply known as the "Granite City" for its important role in the granite industry. Instead, business leaders are recognizing St. Cloud for its skilled labor force and diversifying economic base, he said.

"We offer one of the most highly skilled and educated workforces in the state and a robust supplier network," Kleis said, "giving businesses the St. Cloud to page 17

Page 12

Minnesota Real Estate Journal

October 2014

The Challenge of Fixing (and Paying for) the State’s Transportation System Will Be Front and Center in 2015 Session

By Brandon Champeau Vice President, United Properties Chair, Public Policy Committee NAIOP, The Commercial Real Estate Development Association

O

ver the years, there have been few challenges to legislators with as many complexities as how to pay for the state’s transportation infrastructure.

The upcoming 2015 session, now just two months away, will be no different.

In fact, it may be much worse. As one pundit said, the coming debates, likely to dominate the session, will be driven by two issues which have captured the voting public’s attention like never before: “potholes and congestion.”

Whatever the outcome, the result is likely to have a significant impact on future real estate development in the state and on the commercial real estate industry in general.

Anyone who has driven on Minnesota roads recently knows the problem well.

Brandon Champeau And the condition of the state’s hundreds of deteriorating bridges is obvious as well. What voters may not be aware of is the complexity of the challenge: providing a transportation system for the 8th largest state in the union, with widely scattered urban centers; divided responsibilities for maintenance, spread among federal, state,

county, city and township owners; a predominance of “old pavement,” existing highways and roads that in many cases are more than 50 years old and routinely described as being “unpatchable; existing funding sources –fuel taxes and motor vehicle sales taxes (MVST) --that have been losing revenue for years as automobiles have become more fuel efficient; and the overriding problem of balancing urban, suburban and rural interests.

On top of all of these complexities, the challenge to legislators is that the scope of the needs projected by the Minnesota Department of Transportation (MNDOT) and transportation advocates is much greater than projected revenue.

How much greater? MNDOT says to maintain the current performance of state roads and bridges will require $2.5 billion more over the next 10 years than the $9 billion currently scheduled to be spent. To create what it calls a “world class system”of roads and bridges, one that is economically

competitive, would require an additional $5-6 billion over 10 years. That money would buy improved bridges and pavement, a reduction in congestion, some safety enhancements, such as lane additions, and a modest number of new roads in high priority areas.

Similar gaps in funding overshadow metro transit, where current funding over 10 years is scheduled at $4.5 billion. To maintain its performance, estimates by MNDOT call for an additional $900 million, while the additional cost of creating and maintaining an “economically competitive” system would require $2.3-2.9 billion.

Charles Pfeffer, Jr., president of Pfeffer Company, Inc., a Maple Grovebased land specialist, and a member of NAIOP’s Public Policy Committee, is a close observer of transportation issues. “Goods movement and access are the lifeblood of our real estate industry,” he says. “The gas tax is simply no longer adequate to fund our infrastructure needs. That is why we NAIOP to page 19

October 2014

Minnesota Real Estate Journal

Page 13

Oil and gas royalties can energize your 1031 exchange with zero drilling risk

By Parker Hallam, president of Crude Royalties

S

o often we come across folks who are unaware oil royalties or gas royalties qualify for like – kind exchanges.

Indeed, they’ve been utilized for years, contributing to a well-diversified investment portfolio of stocks, bonds, cash and traditional real estate while also helping to defer taxes through a 1031 exchange.

Here are just a few examples of the guidance provided by the IRS for utilizing oil and gas minerals and royalties as replacement property: Private Letter Ruling 8135048 The exchange of overriding royalty interests for an apartment building, office building and 50 percent interest in a condominium is of like-kind.

Revenue Rule 55-526 IRS held that a royalty interest in oil and gas in place constitutes real property for federal income tax purposes.

Revenue Rule 73-248 IRS held that a royalty interest is an interest in real property for federal tax purposes.

We’re helping with a 1031 exchange right now for a gentleman who is in retirement and looking for both growth and income from his exchange dollars.

While he’s selling a mobile home park he’s able to exchange in to a couple of different properties including a multitenant property and oil and gas royalties.

Our client is interested in oil and gas royalties because of the diversification and potential for monthly income and

Parker Hallam growth. He’s also savvy enough to be interested in taking advantage of the rapidly developing shale oil and gas plays that are presenting so much opportunity today.

We’re helping him to identify opportunities in the Haynesville Shale area, located in North Western Louisiana where there have been over a million acres leased by the biggest and the best operators and there continues to be a tremendous amount of natural gas drilling.

Quietly, almost overnight, the United States has seen an oil and gas land grab unlike any in the history of domestic oil and gas production. During the last three years, billions of dollars have been invested in shale oil and gas leases by all of the major operators such as ExxonMobil ($40 billion acquisition of XTO), Shell and many others. Even China, Spain and many other foreign national companies have invested literally billions of dollars into our U.S. shale plays within the last 12

months.

What are known as “blanket” shale formations have for years been known to hold significant quantities of hydrocarbons but production from these zones has been dormant due to the lack of ability to make them economically productive. This recent land grab, buying up or leasing the areas containing blanket shale, is being driven by advances in drilling technology known as hydraulic fracturing. That, coupled with advanced horizontal drilling technologies, has made millions of acres of minerals, containing trillions of cubic feet of natural gas and millions of barrels of oil, economically attractive. If you follow the money trail, huge amounts of money are being invested by major oil and gas companies, which bodes well for the future of domestic energy production and the benefits of owning the minerals.

Our client also believes, as we do, that exposure to a hard asset, outside of his gold, can help him to protect his portfolio against inflation or dollar devaluation. And, unlike traditional real estate, owning royalties provides passive income with little to no operational risk or additional capital expenditures.

Additionally, oil and gas royalties provide 1031 exchanges with a different kind of security blanket. Hard assets such as oil and gas minerals have a strong appeal to those who are experiencing anxiety about the devaluation of the dollar and hyper-inflation and want to diversify their 1031 exchange.

Blanket shales are tight geologic formations that literally blanket hundreds or thousands of contiguous acres and are known to contain potentially bil-

lions of barrels of oil and/or natural gas. Recent advances in horizontal drilling technology have created a new “oil boom” here in the United States.

During the last three years, while most of us have been trying to get through one of the toughest recessions in U.S. history, billions of dollars have been invested into our domestic onshore oil and gas shale plays by the biggest and best oil and gas companies in the world.

So, why does blanket shale present for me a security blanket? Because I can diversify a 1031 exchange into mineral properties that contain these shale oil and gas assets with a great degree of certainty that I own a very popular commodity and am essentially partnering with the biggest oil and gas producers in the world by owning those assets that they are actively producing. In doing so, I benefit from owning the hard asset of oil and gas reserves in the ground and receive monthly royalty income as the oil company sells the oil or gas that is produced from the blanket shale that I own.

Do more with your exchange than just avoid the taxes. Benefit your portfolio by increasing its level of diversification and passively take advantage of the domestic oil & gas shale boom by owning the minerals.

Parker Hallam President Crude Royalties phallam@crude.com 214-716-2200

Page 14

Minnesota Real Estate Journal

October 2014

Pop-up stores keep popping up

By Dan Rafter, Editor

S

eem like there's a Halloween popup store -- open in September, closed by early November -- in every strip center in your town? You're probably wrong. But not by as much as you'd think.

Halloween pop-up stores have become big business. Business research firm IBISWorld reported that operators opened 1,706 Halloween pop-up stores across the United States last year. That's an increase of 30 percent from four years earlier. Spirit Halloween, one of the biggest operators of these shops, is running more than 1,100 locations in the United States and Canada this year.

But here's the most surprising part: Pop-ups aren't just for Halloween, or for Christmas. Many retailers open these temporary retail locations to promote new products or services.

A good example? Shorenstein Properties LLC earlier this year signed a pair of these short-term retail leases at Minneapolis City Center, a 1.5-million-square-foot mixed-use property in

downtown Minneapolis: The Elixery, an artisan cosmetics retailer, and Indulge & Bloom, a floral design and gift store that has already operated in Minneapolis for 15 years.

Earlier this year, Ronnie Ragoff, senior vice president at Shorenstein, told Midwest Real Estate News that such pop-up leases will continue to grow in popularity as more retailers seek less expensive ways to test out unproven products, concepts or locations.

“For us, it’s a way to allow artisans the opportunity to come into a center and show their wares,” Ragoff said back in February. “Some might not have been able to do that in the past.

They might not have the money to sign a long-term lease. These short-term leases also provide additional activity in a center that we are trying to transform. It’s an opportunity, too, for our tenants at the center to have exposure to local artisans.”

What's behind the surge in pop-up shops? Joanne Podell, vice chairman of Cushman & Wakefield in retailclogged New York City, said that popup shops come with a number of

advantages for landlords.

It's true that landlords would rather sign long-term leases for their empty storefronts. But a pop-up store at least provides an influx of temporary cash.

And having a pop-up store operating in a location might make it easier for landlords to eventually rent that space to a long-term client.

"Having a store open and operating, having people walking in and out of the store, can be very helpful when landlords are trying to lease a store," Podell said. "For a broker or potential tenant to walk into a dark, closed store, that is not as exciting or inviting."

There are potential pitfalls with popup stores, too. They simply aren't good fits for every retail location.

Podell points to first-floor retail space located in high-end office buildings. Landlords might not want to set up a pop-up store in such storefronts, Podell said.

"You don't want a junky store in the ground floor of a beautiful office building," Podell said.

Podell said that she has during the last few months received inquiries from overseas clients about the poten-

tial of pop-up stores. These clients aren't sure if they can succeed in business in the United States. Opening a temporary pop-up store gives them the opportunity to discover if their business can survive here.

Expect more pop-up stores -- of greater variety -- to open in the coming years. Podell cites the National Basketball Association. During its yearly draft in New York City, the league opens a pop-up shop to sell branded merchandise. Several years ago, retail giant Target opened its own temporary pop-up shop in Times Square to promote new products.

"If an existing retailer wants to open a pop-up store for some introductory purpose, it has to be tied to a new product or timed for a specific launch," Podell said. "It has to be in a well-trafficked area. You need a lot of foot traffic. It's a tougher concept to pull off than you might think."

October 2014

Marquette From page 1

the hotel’s rooms are booked. Often, its managers have to turn visitors away because there are no vacancies.

What’s changed? The team at Transwestern rolled out some old-fashioned marketing. And soon the workers and visitors to this region knew all about the Dakota Landing.

Making a change The biggest challenge that the owners of Dakota Landing faced? They opened their hotel too late, both in the year and in the market.

First, there was the timing of opening the hotel in early fall. By this time of the year, much of the activity around the oil industry grinds to a halt. The drilling continues, of course. But everything that happens around that drilling – the construction and infrastructure work – wraps up until the warmer weather returns. Winters in North Dakota, after all, can be brutal.

At the same time, the young real estate market in Williston slowly began to mature. Two years earlier, there were precious few options for workers when it came to housing. By the time Dakota Landing opened, though, the housing market in Williston and its sur-

Minnesota Real Estate Journal

rounding areas now offered more options for workers. Dakota Landing got lost in these options.

“They hit the market in October when the season starts to slow down.

They had done very little advance marketing before opening the hotel,” Houge said. “You can talk about something, but in North Dakota if you don’t have it open already, people just consider it talk. They see a lot of projects promised that never become reality. It’s a bit of a big hat, no cattle situation.

People don’t trust until something is actually coming out of the ground.”

Dakota Landing also lacked an affiliation. The hotel was not part of a chain such as Sheraton or Marriott. This meant that the owners couldn’t take advantage of the marketing power of a larger chain.

Houge viewed all of this as a challenge. He and his team began making phone calls to promote the property.

They send PDFs highlighting the hotel’s benefits to local decision-makers. They offered discounted rooms for people to rent.

And in March? These results began paying off. It’s not rare for the hotel to be 100-percent full today. At the time that Houge and his team members received their assignment to market the hotel, it rarely broke the 20-percent full mark.

“Part of the reason is good market-

ing,” Houge said. “We really focused on getting people to try the hotel. And once they tried it, they liked it and came back. It appeals to the middle of the market.”

Worker-focused The big difference between Dakota Landing and typical hotels in its price range? This hotel focuses on amenities that appeal to the workers who are making the region’s oil economy boom.

For instance, the hotel features an indoor boot room with sinks. This might seem like a minor amenity. But it gives workers a chance to clean themselves and their clothing before they enter the hotel. It's an appreciated amenity.

The rooms themselves are large with 40-inch flat-screen TVs. The hotel's food service offers three meals a day.

It also provides packed bag lunches and a limited room service menu.

There's an onsite fitness center, pool and lounge with bar. Workers can also play cards at the hotel's poker tables.

The hotel offers laundry services and onsite security.

“There is a lot to recommend about this hotel,” Houge said. “The price point is appealing. We are not overpriced like a lot of our competitors in the area. Guests get a lot of bang for their buck. The rooms here are big. We

Page 15

have good people working here, too.

It’s a very good experience for our guests. It’s not just salesmanship that brings the guests here. They stay here because it works very well for them.”

And the owners just took what might be their last step to long-term success in the region: They affiliated with a major hotel brand. Earlier this fall, the owners affiliated with the Ramada chain. As of the writing of this story, construction workers were changing the hotel’s signs and colors. The property’s new name will now be Ramada Dakota Landing.

Houge now says that the Dakota Landing is positioned to succeed in this booming region. And he’s looking forward to seeing all those rooms rented on a near-nightly basis.

“The Bakken area is so important to the country right now,” Houge said.

“So many businesses are here because of the black stuff being pumped out of the ground. We have archeologists here who have to walk every square inch of a drilling site to make sure nothing of archeological significance will be disturbed. We have people setting up electrical connections and wireless antennas. People from every state in the country are working here. The region is fueling our entire economy. Being part of it is wonderful.”

Page 16

Minnesota Real Estate Journal

October 2014

DLA Piper: Real estate executives are an optimistic lot today

By Dan Rafter, Editor

C

ommercial real estate executives are more optimistic about their industry in 2014. And they're expecting deal activity to continue to rise as the year moves on.

That's the takeaway, at least, from the 2014 State of the Market real estate survey by DLA Piper.

The survey, which measures the attitudes of 158 top commercial real estate executives, reached a milestone this year: Executives surveyed this year expressed greater optimism than in any year since DLA Piper started the survey in 2005.

Jay Epstein, co-chairman of DLA Piper's Global Real Estate Practice, told Midwest Real Estate News that three main factors have fueled this optimism: The country has seen solid job growth in the last 12 to 18 months, there is plenty of capital chasing real estate and interest rates are still at historically low levels.

"The alternative investments to real estate aren't very attractive right now," Epstein said. "People, domestically and globally, are looking to park their cap-

ital in real estate. That's providing a boost to commercial real estate."

According to the 2014 survey, 89 percent of commercial real estate executives feel "bullish" about the next 12 months.

Executives also said that several key trends will steadily change the real estate market. They pointed to reurbanization -- more people moving back into cities and downtowns -- as one of these trends, and one that is particularly powerful right now.

A growing number of people want the urban experience. They want to live in the center of cities, relying on public transportation and their own feet to get around. It's a trend that is strong now in Midwest cities such as Chicago and Minneapolis, and on the rise in metros such as Cleveland, Detroit and Indianapolis.

"The move back into cities is driving real estate decisions right now. People are building multi-family projects and retail centers in the heart of city downtowns to capture the business of all the people moving into them," Epstein said. "There is this drive toward convenience. You have Millennials who rely on Zipcars and bike-

sharing programs. People are re-imagining and re-inventing how they get to work. And it's not just how they get to work, but how they do all the other things they need to do in their lives that is changing."

This trend is even impacting traditional enclosed shopping malls. These massive indoor malls are struggling across the country and the Midwest today. Today's consumers don't want to spend all day inside a shopping mall.

In response, a growing number of owners are converting these malls into outdoor lifestyle centers, mimicking the feel of urban downtowns.

Real estate executives are also keeping an eye on the slow, but growing, intrusion of crowdfunding into commercial real estate. In crowdfunding arrangements, large groups of investors put up smaller amounts of money to purchase real estate. It allows smaller investors to sink their dollars into strong real estate investments.

According to the DLA Piper survey, 24 percent of surveyed real estate executives said that they thought crowdfunding will become an important source of real estate capital. Of course, 45 percent of surveyed executives said

that it would not become important.

But as Epstein says, no one really knows what role crowdfunding will play in commercial real estate.

"It won't play a role in the billiondollar transactions in San Francisco or Washington, D.C.," Epstein said. "But it might play a role in the smaller markets. People view real estate as an attractive investment. There is an opportunity for people to get into real estate by putting up smaller dollar amounts through crowdfunding. I think it will play a role as technology and innovation continues."

Epstein points to the steady rise of online retail sales as an example.

"Think back 15 years ago. No one thought e-tailing was going to play an important role," Epstein said. "And now look at how it has disrupted the retail marketplace. We are in the very early stages of crowdfunding. We have yet to see how it will eventually disrupt the real estate market."

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October 2014

Dayton From page 1

buildings with higher clear-heights in good locations. The Northwest market is a good example. There are many companies that have chosen to put up new buildings there.”

Industrial advantages Jellison said that the Dayton Distribution Center will have several advantages in the market. First, Liberty Property Trust has committed to hitting LEED-certified standards with the new distribution center. Secondly, the new building will be located right off Interstate-94, a strong location. Potential tenants will be able to clearly see the building from the highway.

Minnesota Real Estate Journal

And thirdly? The building will boast the modern amenities that tenants expect today.

Dayton Distribution Center 1 will feature 32-foot clear heights, trailer storage and a deep truck court. Liberty is pursuing LEED for Building Design and Construction: Core & Shell Development at the Silver level for the project.

Ed Farr Architects is the architect for the project. Anderson Engineering of MN, LLC is the civil engineer, and R.J. Ryan Construction is the general contractor.

Working relationships Jellison said that officials with the city of Dayton were key to making the new distribution center a reality. The city has a reputation for being pro-busi-

St. Cloud from page 10

resources they need to succeed."

Mehelich says that her office is now fielding a steady stream of calls from companies interested in setting up shop in St. Cloud. These companies are looking for the right location for their projects in the city, and officials with the economic development corporation are happy to help them find their ideal spots.

Economic development officials will also help

Page 17

ness, and it showed during the planning phase, Jellison said.

The warm weather early this fall helped, too, Jellison added.

“We were really working hard to get the plans done, to get everything approved with the short construction window we have in Minnesota,” Jellison said. “We wanted to get our first lift of blacktop in before the Thanksgiving holiday. We are working to hit that deadline. Getting the blacktop done is crucial to delivering the building by April or May of next year. We are working hard, fast and furious with the good weather this fall to keep everything moving forward.”

Liberty officials are so committed to the distribution center that it has already started work on plans for a sec-

companies tap into financing and incentive opportunities.

"We'll answer any questions they have about workforce availability," Mehelich said. "We'll connect them with our local colleges or universities to talk about job-skills training programs. We'll help them connect with suppliers that might be important to them in this location. It certainly cuts down on their transportation costs and inventory costs if they can get the supplies they need in the local area."

The future looks promising for St. Cloud. The city

ond potential development in the complex, Dayton Distribution Center II, a 76,978-square-foot facility. The company estimates that construction on this project, if it becomes a reality, will start in the middle of 2015.

Jellison said that Liberty now owns enough land for a second phase, the smaller distribution center. But this land can also be used for extra trailer storage if the users of Dayton Distribution Center I want it.

But if Liberty Property Trust does decide to move forward with the second smaller center? It appears that there will be plenty of interest in it.

“We have already had one prospect contact us about that building,” Jellison said. “So we know that the interest is there.”

remains one of the fastest-growing metropolitan statistical areas in Minnesota.

"In the past few years, St. Cloud's reputation for business opportunity has grown significantly," Kleis said," due in no small part to regional, national and international companies choosing the city for their operations over competing locations across the state and the country."

Page 18

Minnesota Real Estate Journal

October 2014

Guest Column

Five Steps to Growing a Hotel Brand

By Bill Morrissey, President of Morrissey Hospitality Companies, Inc. Often times when things are not quite right in a hotel business model, management is the first to come under scrutiny, as owners and lenders seek to verify and validate their investment.

Whether the property is a franchise or independent is immaterial to this discussion, although the strategies might vary slightly.

Let us first understand that management means either the property manager and/or the management company.

In the eyes of the owner, it is the same situation. A trusting and fiduciary relationship has been established to help the owner achieve their investment expectations in the hotel real estate and hotel business operations. Putting aside any obvious external or internal influences, such as outdated facilities, inadequate size for the marketplace, inappropriate brand positioning or significant need for renovation, management needs to be accountable for and responsive to developing the full business

potential on behalf of the owner.

So often the manager puts too much emphasis on measuring “what is” (i.e. market share, market position, yield indices, etc.). These are critical factors and important to gaining an understanding of where the performance of the property is in relationship to overall market performance, but it is often a rearview mirror view of performance.

One can take some comfort in knowing that similar properties face the same conditions, but it does little to ease the burden of possibility of additional investment or of the need to identify the right combination of answers to meet the owner’s objectives.

At Morrissey Hospitality Companies, Inc., we believe the biggest and most common mistake of management is overlooking the need to grow the depth and the full potential of the brand and building an uncompromising customer loyalty and desire. This can only be measured by unrealized capacity.

Capacity is the guestrooms and the seats in a restaurant, bar and catering

spaces that go unsold, regardless of market share or what occurred last year. This unrealized capacity represents real revenue and growth opportunity. When a brand is the best in class and is constantly building customer loyalty and desire, real and sustainable growth will be seen in market share, market position and the yield indices against the competitive set.

The inability to grow the brand and make gains on unrealized capacity often is the failure of the manager to understand and implement a meaningful and measureable process of growing the business long term.

1. This process has to begin with an IDEA - how is my property better or different? What physical and emotional benefits can I deliver to potential customers that others aren’t? Think big, don’t be constrained, talk to customers and staff and gain their perspective.

2. Then move on to IMAGINING what the idea can look, feel, sound,

smell and taste like…use all five senses and visualize from a customer point of view. See and imagine it! Get excited about the possibilities!

3. Through the imagination process DREAMS will form and will create the best source of energy and desire to begin the real work. From improving RevPAR or total revenue, creating a new restaurant and bar or a spa, or whatever the imagination spurs, the dream will become a belief that you start to work toward in building a business model to support it. Perform the financial analysis, the market analysis, and the feasibility – all the quantitative tests – and the dream will become reality strengthened by the belief.

4. The next important step is achieving an UNYIELDING FAITH in the dream. Doubters, restrictions of an independent or franchise hotel brand, both human and capital resources and of course time will create challenge.

Hotel to page 20

October 2014 NAIOP from page 12

have to find an entirely new funding solution, another way of applying a use tax than a per-gallon fuel tax.”

“Move Minnesota”, a coalition of more than 200 transportation advocates, is pressing the legislature for more than $700 million a year in new funding, split evenly between roads and bridges and transit, based on a 5% gross receipts (sales) tax on fuel. That increase would be on top of the existing 28 cents per gallon excise tax. It would also increase the metro area sales tax to a full 1% from the current level of .25%. Transit would receive additional money from applying the motor vehicle tax to leased vehicles, raising about $32 million.

Pfeffer points out that the state has a multiplicity of other transportation challenges, including rail and barge issues. “Transit and bicycle paths also need to be funded, but in a way other than pillaging the highway trust funds,” he says.

The Minnesota Chamber is not in favor of increased highway use taxes, but instead, has stated that it prefers “real, measurable progress on efficiencies in MNDOT operations before any new taxes are considered.” The Chamber cites the requirement passed in 2014 that MNDOT add 5% to its construction budget in FY15, solely by finding efficiencies. The department says it is finding those real savings in construction, procuring and other areas, potentially adding $40-50 million to its overall construction budget, and moving it well along the way to the 15% efficiency measures identified by the Transportation Finance Advisory Committee.

Although most agree that adding funding by identifying hidden efficiencies in MNDOT operations is a great idea, there is little agreement or understanding of where, in fact, those efficiencies can be found, and if found, can be accurately measured.

Although acknowledging the urgent need for more funding, the Chamber says that a recent survey of its members indicated they simply can’t afford it. “The bottom line is businesses know that they need a great transportation system to have a successful business in Minnesota,” said Bill Blazar, the Chamber’s interim president. “But that is tempered by the limits on their pocketbooks.”

There have been several one-time additions to funding: $10 million allocated in 2012 for local roads, triggered by the start of the “pothole debate,” followed by $331 million in 2013 in a bonding program for “Corridors of Commerce,” providing capital for improvements, and in 2014, $241 million, made up of a cash/bonding bill

Minnesota Real Estate Journal

and surplus trunk highway funds in the supplemental budget bill.

Recently, the governor also announced 13 additional projects totaling $70 million as part of the “Corridors of Commerce” program. In all, 27 critical projects around the state have received such funding since last November, including $5.5 million for design work on the I-35W Minnesota River crossing and $2 million for

designing new pavement and bridges for I-94 between Minneapolis and St. Paul. Governor Dayton said the projects involved would “reduce travel times, improve safety…and help our businesses transport their products more efficiently, but the need for more funding remains, in his words, “acute.”

“The fact is, there is a need, and it is real,” Pfeffer says. “And there is no way this issue can be solved by doing

Page 19

nothing. NAIOP and the real estate industry need to consider the recommendations and take a stand. We need to find some real, practical solutions.”

“And,” he adds,” whatever that solution turns out to be, it has to be statewide, rather than just metrobased.”

Page 20 Hotel from page 18

5. Having unyielding faith will create PASSION, and the passion will fuel a strong work ethic to turn the dream into reality. This is unavoidable and is where many managers limit their potential and consequently the business potential. This is where others will observe and be inspired by the accomplishment. This is where average people do extraordinary things. This is what is not taught in schools and overlooked by many corporate training programs. This is not a formula for the average or those looking to “do their

News From page 8

replaces the escalators, a new streetlevel vestibule and a reception area with CenterPoint Energy brand messaging and promotions. CenterPoint Energy will also seek LEED Silver certification for the building once it is complete.

The street level will include a Visitor Information Center (VIC) and retail store for Meet Minneapolis, a function of the Convention and Visitors Association. Visitors will be able to access the VIC from the shared vestibule at the cor-

Minnesota Real Estate Journal

October 2014

job” or “fulfill the contract”. This is professional leadership, entrepreneurship and a winning attitude.

The mistake of most managers is not knowing or trusting the process, giving it sufficient nurturing and passion and too easily giving up of what is the right and the strategic thing to do for the hotel. If management cannot see a better day or a different future, the property will never realize one. The job of a manager on behalf of the ownership interest and all the associates dependent upon the success of that hotel is to create visionary leadership for all segments of the hotel’s business to be the

best in class and to build long term brand loyalty.

This ability to grow through the unrealized capacity can only be achieved in a partnership with the owner, the manager and staff. Defining what roles and resources each will require will be the beginning. History is fixed; the future is able to influenced.

Work towards influencing and creating a different future for the property regardless of what the competitors do.

Those that embrace a vision and who have the will, the belief and the passion to see it through to the end are the individuals that will create real value.

MHC recommends to our clients that they get involved early in the annual planning process and involve strategic visioning as part of that process with the management team and/or management company. This process will assure the IDEA built on IMAGINATION and a DREAM is communicated. The BELIEF will be built and the UNYIELDING FAITH and PASSION will create the real growth and opportunity in the investment.

ner of Fifth Street and Nicollet Mall.

In addition to the interior work, RJM Construction has been working with CenterPoint Energy to add new energy efficient exterior windows and update the entry on Nicollet Mall. Along with CenterPoint Energy and RJM Construction, project partners include architect HGA.

a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Oak Crest Apartments, a 54-unit apartment property located in Elk River, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $3,405,000.

Mox Gunderson & Josh Talberg, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller. The buyer, a private investor, was also secured and represented by Mox Gunderson and Josh Talberg.

Speaking with Mr. Gunderson, “The units being turned over in recent months have achieved a considerable increase in rent. The buyer saw this as upside potential and plans to continue re-leasing the apartments at this new benchmark.”

Oak Crest Apartments is located at 300 3rd Street NW in Elk River, Minnesota. The property is comprised of mostly two-bedroom apartments and has had a strong historical occupancy.

tion of two-story, single-family homes.

Model homes will be complete in time for the spring 2015 Parade of Homes tour.

Meridian Land previously worked with Capstone Homes on 29 single-family lots at Mississippi Dunes in Cottage Grove. “We’re excited to be partnering again with Capstone Homes, which has a strong, successful history in Cottage Grove,” said Chris Wold, vice president, Meridian Land Company.

Marcus & Millichap ARRANGES THE SALE OF a 54-UNIT APARTMENT BUILDING Marcus & Millichap (NYSE: MMI),

Meridian Land Company begins residential development in Cottage Grove with Capstone Homes Meridian Land Company has acquired land to develop new singlefamily homes in Cottage Grove. Together with builder Capstone Homes, Inc., Meridian Land will develop Oak Cove, an eight-acre, 12 single-family lot site.

Located at the intersection of Burr Oak Avenue and 74th Street South, land development began earlier this month.

As a residential land developer, Meridian Land will oversee infrastructure improvements on the site. Once the lots are complete in late October, Capstone Homes will purchase the 12 lots from Meridian Land and begin construc-

CBRE ANNOUNCES SALE OF THE POINT RETAIL CENTER IN BLOOMINGTON CBRE announces the sale of The Point, a two-building, 34,540-squarefoot, retail center located at 3800 W Old Shakopee Road in Bloomington, Minnesota. The property was 95.4% occupied at the time of the sale with a strong tenant roster including Chipotle, Great Clips, Jimmy Johns, Metro DentalCare and The Point Family Dentistry. The sale price of the property was $7.3 million.

Constructed in 2006, The Point is located at the intersection of France Avenue and Old Shakopee Road. The three-acre retail space is easily accessible, featuring ample parking and open green space.

The CBRE Minnesota Investment Properties Group of Jim Leary, Jeff Budish, Steve Lysen and Mindy Rietz arranged the transaction on behalf of its client. The team specializes in the disposition of office, industrial and retail properties throughout the Upper Midwest.