MREJ October 2015 by REjournals

VOLUME 31, NUMBER 10

October 2015

CBRE, Artis and Ryan Companies planning “premier” office tower in Minnetonka market

By Dan Rafter, Editor

14-story office tower might soon be rising from the busy intersection of Interstate-394 and Interstate-494 in the Carlson Parkway market of Minnetonka, Minnesota. CBRE, along with partners Artis REIT and Ryan Companies US, Inc., have unveiled plans for a 14-story Class-A office tower at this prime location. The tower, 801 Carlson, will offer more than 317,000 square feet of rentable space in 10 floors that will rise above an executive lobby and climate-controlled parking.

But before construction begins, CBRE will have to secure some preleases. The new office tower will not be a spec building, but will need some tenants in place before construction crews get to work, Brian Wasserman, senior vice president with CBRE, said that he doesn’t expect this to be a problem. “There has never been a question about this location,” Wasserman said. “The Carlson Parkway market has always been such a strong one. We feel this is one of the best locations in Minnetonka. It is located very close to executive housing on Lake Minnetonka. A regional mall is very close by. 801 to page 14

Opus providing a kickstart for multifamily development in Saint Paul’s Seven Corners? By Dan Rafter, Editor

att Rauenhorst refers to the location of the West 7th mixed-use development in Saint Paul as the edge of urban. This means that the development, which will bring

191 new luxury apartment units to the Seven Corners neighborhood of Saint Paul, is located close to such urban amenities as the Xcel Energy Center, Ordway Center for the Performing Arts and plenty of shops, restaurants and employers. But it also boasts some of the benefits more often associated with a suburban location: West 7th will be within walking distance of the jogging and bike paths that meander along the river

and through the more residential areas of the city. This combination is a potent one, says Rauenhorst, vice president of Opus Development Company, the developer of the project. And it's one that he predicts will spur more multifamily and mixed-use development along the West 7th corridor. Opus to page 16

October 2015

Contents

Minnesota Real Estate Journal

OCTOBER 2015 • VOLUME 31, NUMBER 10

CBRE, ARTIS AND RYAN COMPANIES PLANNING “PREMIER” OFFICE TOWER IN MINNETONKA MARKET OPUS PROVIDING A KICKSTART FOR MULTIFAMILY DEVELOPMENT IN SAINT PAUL’S SEVEN CORNERS?

MEETING THE NEED FOR WORKFORCE MULTIFAMILY HOUSING IN MINNEAPOLIS

COLLIERS REPORT: RETAIL CONTINUES TO THRIVE IN TWIN CITIES

SAME-DAY DELIVERY, MOBILE WALLETS CHANGING THE WAY RETAILERS SERVE CONSUMERS

UNLOCK EXCLUSIVE LISTINGS– A REAL LIFE STORY

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Departments PEOPLE

NEWS

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Minnesota Real Estate Journal

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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

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Joshua Simonson, MAI has joined Chadwick Appraisals LLC as the firms’ newest Senior Appraiser. “I am excited and thankful for the opportunity to leverage my experience and be a part of Chadwick. They have built a positive and vibrant work environment for its employees, and are dedicated to delivering high quality work to their clients.” Mr. Simonson is a graduate of St. Cloud State University’s Real Estate program. He has earned the Appraisal Institute’s MAI designation and has achieved recognition as an Appraisal Expert for Commercial, Industrial and Multi-Family properties. Chadwick Appraisals provides valuation services to clients in the Minnesota, Wisconsin and North Dakota markets.

Tom Mott joins Dougherty Real Estate Equity Advisors LLC as Vice President of Asset Management Dougherty Real Estate Equity Advisors LLC is pleased to announce Tom Mott has joined the firm as Vice President, Asset Management. Tom has over 20 years of experience in both property and asset management, along with extensive experience with acquisition and disposition of a variety of asset types throughout the United States, including planning and executing the strategic repositioning of several large assets. Mr. Mott previously worked with Andy Deckas at Opus Properties as a Senior Asset Manager, and most recently with Wildamere Capital Management (formerly known as Welsh Invest) leading the asset management department. While at Wildamere, Tom oversaw investments with joint venture partnerships, tenant-in-common structures and private real estate funds with assets of over 6 million square feet and a value of over $1 billion. “We are thrilled to have Tom join our team,” said Andy Deckas, President of Dougherty Real Estate Equity Advisors. “He has the exact skills and experience we need, plus we know we work well together from our

past partnership.” Tom is a member of the greater Minneapolis BOMA, IREM and NAIOP and is also a licensed Minnesota Real Estate Salesperson. He holds a Bachelor of Science in business administration from Mankato State University and a Masters of Science in Management from Boston University.

CBRE NAMES DAN O’NEILL AS ASSET SERVICES MANAGING DIRECTOR CBRE selects Dan O’Neill to succeed Matt Nicoll as the Managing Director of Asset Services for Minneapolis. O’Neill will begin his new role on October 12. Nicoll, who will retire at year-end after 23 years at CBRE, will work with O’Neill over the next several months for a smooth transition. O’Neill will bring a strong and diverse real estate and leadership background to Asset Services. Currently, O’Neill is a Minneapolis-based employee working with the CBRE Global Workplace Solutions (GWS) team assisting in a business development role with one of our emerging healthcare clients. His recent experience within GWS includes his role as the alliance director/relationship manager for the Ameriprise Financial account, with responsibility for integrating the delivery of facilities management, project management and transaction management services. In his new position, O’Neill will lead CBRE’s Asset Services business in the Twin Cities area with a focus on operational excellence and business growth as CBRE continues its efforts around client relationships and business development moving into 2016. “We are excited about the addition of Dan O’Neill as our Twin Cities Asset Services leader.

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Dan brings a diverse background in property management, facilities management, and corporate services that will be beneficial to our market-leading asset services platform,” said Norman Bertke, executive managing director of Investor Services for CBRE. Prior to joining CBRE, O’Neill served in a series of progressive leadership roles for Jones Lang LaSalle. As the relationship manager for Kindred Healthcare, he led the start up for the 250- person outsourcing, and then operated the $125 million business through its transition and stabilization. Before his role at Kindred, O’Neill served as a Global Facility Management Director. There, he had full profit and loss accountability for a $120 million business operating at 475 United Health Group sites totaling 16.5 million square feet across 40 states and nine countries including Europe, India, and South America. “Dan is a dynamic leader and a seasoned real estate expert. We are extremely excited to have him lead our Asset Services team,” said Blake Hastings, managing director for CBRE’s Minneapolis office. O’Neill began his Minneapolis real estate career by developing and leading property management and leasing teams. He served as the general manager for several Class A properties in downtown Minneapolis including Fifth Street Towers, LaSalle Plaza and twice at the IDS Center. In addition to his experience downtown, he spent eight years in the land development business gaining expertise in financing, sales, marketing and project management. O’Neill is a graduate of the United States Military Academy at West Point and spent five years as a U.S. Army officer where he held several leadership roles. In addition, O’Neill is a Six Sigma Certified Green Belt.

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News Cushman & Wakefield | NorthMarq Finds ESCO Corporation a New Home on the Iron Range Cushman & Wakefield | NorthMarq www.cushwakenm.com recently assisted Portland, Oregonbased ESCO® Corporation in finding a new office-warehouse location in Virginia, Minnesota, bringing its product and brand closer to its Iron Range customers than ever before. The team of Clint Miller, Executive Managing Director-Transaction & Advisory Services, and Jonathan Juris, Director-Brokerage Services, worked with the client and Gary Randles, Senior Director-Brokerage for Cushman & Wakefield of Oregon, to evaluate the existing industrial real estate market in Virginia – more than 200 miles from Cushman & Wakefield | NorthMarq’s Twin Cities headquarters -- and locate an ideal site for its new facility near the mines. The group led a strategic search to

Minnesota Real Estate Journal

locate a former gym and daycare building on the corner of Park Ridge Drive and Nichols Avenue in Mountain Iron, Minnesota, with strategic access to ESCO’s clients, and helped arrange an acquisition and renovation of the property. “We provided ESCO a world-class service and spoke their language to create an opportunity where there was none,” Juris said. The Cushman & Wakefield | NorthMarq team also identified Northward Properties, a prominent northeast Minnesota real estate investment and development company, to lead the project. The building is under construction and will open in November.

Marcus & Millichap ARRANGES THE SALE OF a 15,000-SQUARE FOOT NETLEASED 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 Arête Surgery Center, a 15,000-square foot net-leased property located in Johnstown, Colorado, according to Craig Patterson, Regional Manager of the firm’s Minneapolis office. The asset sold for $9,100,000. John White, Adam "AJ" Prins, Cory Villaume, Sean Doyle and Matthew Hazelton, investment specialists in Marcus & Millichap’s Minneapolis office, had the rights to list and market the property on behalf of the seller, a tenants in common. The buyer, a REIT, was also secured by John White, Matthew Hazelton, Sean Doyle, Adam "AJ" Prins and Cory Villaume. Richard Bird, Regional Manager and Broker of Marcus & Millichap’s Denver office, assisted in closing this transaction. Speaking with Mr. White, “This beautifully designed two-year old building, the outstanding surgical practice and a team of world-class physicians made this an attractive property to many REITs and individuals.” Arête Surgery Center is located at 4397 Ronald Reagan Boulevard in

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Johnstown, Colorado.

Northridge Capital And The Fortis Companies Close Financing And Begin Construction On Pullman Place Northridge Capital, LLC, an independent real estate asset management firm based in Washington, DC, announced that a joint venture with Washington, DC based, The Fortis Companies, closed on debt and equity financing for Pullman Place, a 42-unit luxury condominium project in the NoMa/H Street submarket of Washington, D.C. Pullman Place, a six-story building located at 911 2nd Street NE, will feature studio, one bedroom and two bedroom floor plans. The moniker of the property is for George Pullman, an American engineer who designed and manufactured the Pullman sleeping car. "Pullman Place is ideally situated, within two blocks of two Metrorail stations (Union Station and NoMa-Gal-

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Minnesota Real Estate Journal

ludet), three blocks to the H Street Corridor, one of the most exciting development neighborhoods in Washington, and a five-minute walk to Washington's version of NYC's Meatpacking District, in Union Market," said David W. Jackson, President of Northridge Capital. "The Property fits with our investment thesis that well-located, urban infill projects near major employment centers and transportation nodes is where young, educated Millennials want to live." Unit finishes and amenities at Pullman Place will include: gourmet kitchens featuring white lacquered cabinet finishes, stainless steel appliances, Silestone countertops, contemporary ceramic tile backsplashes and Grohe plumbing fixtures and high-end bathroom finishes. Common area amenities will include a rooftop deck with outdoor lounge and BBQ area, secure bicycle storage, landscaped patio area at the front of building and reserved parking for 14 vehicles. Eagle Bank is providing the construction financing, Eichberg Construction is

the General Contractor and R2L Architects is the architect of record. Pullman Place is already zoned and construction will begin immediately, with delivery expected in the Fall 2016.

CBRE CAPITAL MARKETS PROVIDES $14.5 MILLION IN NON-RECOURSE PERMANENT FINANCING FOR 1800 LAKE STREET IN MINNEAPOLIS, MN CBRE Group, Inc. (CBRE), through its FHA lending platform, announced the successful financing of 1800 Lake Street, a 57-unit market rate apartment complex located in Minneapolis, Minn. The loan for this Class A mid-rise property is insured through the U.S. Department of Housing and Urban Development’s (HUD) Section 221(d)(4) pursuant to Section 223(a)(7) streamline refinance mortgage insurance program providing 40-year, fully-amortizing permanent loans. The property is located in the heart of the Minneapolis Uptown retail area which appeals to people living and working in Minneapolis and the

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surrounding metropolitan areas. Murray Kornberg, Senior Vice President of CBRE Capital Markets, Minneapolis, Minn. office originated the loans in partnership with Monica Newman, Senior Vice President of CBRE Capital Markets, Denver, Colo. office.

Three New Members of Minnesota Real Estate Hall of Fame announced Dan Dolan, Lary Laukka and James Solem will be honored at a Nov. 5 ceremony. The Minnesota Real Estate Hall of Fame, established in 2010 by the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business, will add three new members in a morning ceremony Thursday, Nov. 5, at the Golden Valley Golf and Country Club. Members of the Minnesota Real Estate Hall of Fame are chosen for their outstanding business performance, high standards of ethics and community activities. The three new members are: · Dan Dolan

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For more than 50 years, Dan Dolan has pursued a career in real estate. He was a leader in improving the professional and ethical standards in real estate and was an early promoter and employer of women in real estate sales. His real estate developments include the Evergreen Community, an upscale residential development in Woodbury, and the Oakdale Crossing Business Park. Throughout his career, Dolan has been actively involved on boards and with fundraising, including the merger of Cretin and Derham Hall high schools, fundraising for the University of St. Thomas, and serving as King Boreas XLII for the 1978 St. Paul Winter Carnival. He may be eligible for retirement, but Dolan is just as passionate as ever about real estate development and continues to receive offers of employment in the industry. · Larry Laukka Since 1962, Larry Laukka has actively served in all aspects of the real estate industry, but primarily in the building News to page 22

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Minnesota Real Estate Journal

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Meeting the need for workforce multifamily housing in Minneapolis By Dan Rafter, Editor

inneapolis has seen plenty of new multifamily units hit the market in the last three years. But the vast majority of these apartments have been luxury units, catering to wealthier renters. When it comes to apartment units that are affordable to the average working people of the Twin Cities? There hasn't been much of that type of housing hitting the market. That is now changing, at least a little. Lupe Development and Rose Development are now developing Broadway Flats at the northwest corner of Penn Avenue North and West Broadway in North Minneapolis. The project will bring 19,000 square feet of commercial space and 103 units of affordable multifamily housing to an area that was hit hard when a tornado swept through in 2011. This location was once home to several buildings owned by the Rose family, the family behind Rose

Development. These buildings were among the 3,000 or so properties that the 2011 tornado damaged.

Saint Paul-based Oak Grove Capital has played a key role in this mixed-use project, originating a

$9.3 million FHA construction loan for it. Ken Dayton, managing director at Multifamily to page 18

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Colliers report: Retail continues to thrive in Twin Cities By Dan Rafter, Editor

he retail market in the Twin Cities is a strong one today. For proof, just look to the Minneapolis-Saint Paul third-quarter retail report from Colliers International. And leading the way for this surging sector? Grocers. According to the report, retail vacancy rates in the MinneapolisSaint Paul market fell to 4.3 percent in the third quarter. Retail absorption rates actually picked up significantly during the third-quarter months when compared to the start of the year. Colliers reported that only 68,246 square feet of retail space was absorbed during the first quarter of the year. In the second quarter, the Twin Cities market saw a more robust 376,299 square feet of retail space absorbed.

And in the third quarter? Retail activity picked up even more, with 431,920 square feet of retail absorption during the quarter. That brings the total amount of retail absorption, through the first three quarters of the year, to 876,465 square feet. Like in many markets across the Midwest, grocers are leading the way. Colliers reported that although Rainbow Foods closed its Minnesota stores in 2014, the spaces they left behind didn't remain empty for long. Grocers Lunds & Byerly's and Cub Foods filled many of these empty stores. Jerry's also made a play in the Twin Cities, opening a store in Woodbury during the first half of the year. In the third quarter, HyVee opened a pair of stores, one in New Hope and another in Oakdale, while Fresh Thyme Farmers Market opened a store in Blaine. And that's just the start of grocer

activity in the Twin Cities. Colliers reported that several planned or under-construction grocery stores will bring even more supermarket choices to area residents: a Cub Foods in White Bear Lake; Fresh Thyme Farmers Market in Plymouth, Saint Paul and Minneapolis; and a Whole Foods in Woodbury and Saint Paul. Next year looks to be a big one for grocers, too. Colliers says that HyVee plans to open new stores in Lakeville and Brooklyn Park in 2016. The grocer's long-term plans call for opening four to five grocery stores every year for the next few years. Of course, the news isn't as good for all retailers. Colliers reported that certain quick-serve restaurants will see slowing growth in the near future. Colliers predicts that burger, pizza and yogurt restaurants will see their growth slow in 2016. But quick-serve restaurants that sell

fresh salads and soups should thrive. According to the Colliers report, those quick-serve restaurants with an emphasis on organic and farm-totable ingredients are expected to see plenty of growth in 2016 and beyond. Examples? Freshi, Modmarket, Cafe Zupas, Greenfield Natural Kitchen, Sprout Salad Company and MAD Greens are all expected to open new locations in the Twin Cities market in the near future. Sit-down casual restaurants are struggling, though, as Millennials demand what Colliers terms "faster, cheaper and better" dining options. This means that national restaurants such as Red Lobster, TGIF, Chili's, Applebee's and Ruby Tuesdays are now facing tougher times. Gourmet burger chains are also struggling a bit, with Colliers reporting that Five Guys and Smashburger are starting to close stores in the Twin Cities market.

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801 From page 1

The area hasn’t been overbuilt. We feel that this is a very desirable location for an office project.” The tower's location will certainly prove a selling point. 801 Carlson will be the only large block opportunity on the Interstate-394 corridor west of Interstate-494. The well-known Carlson Towers are located right next door. Wasserman said that the aesthetic of 801 Carlson will build on the now-iconic look of Carlson Towers. But the building will distinct enough to stand on its own, he said. The office tower will feature more than 17,000 square feet of eastern and western balconies on levels five through 14. This is an important amenity. These balconies will provide views of downtown Minneapolis and Lake Minnetonka.

Minnesota Real Estate Journal

Plans also call for a future restaurant with an outdoor seating area that will wrap around the southeastern corner of the project's parking structure. Developers are also planning a covered walkway that will connect 801 Carlson to an 876-stall parking garage and the nearby 601 Carlson Tower, a 16-story Class-A office tower. In all, 801 Carlson will have 1,271 parking stalls, which works out to a ratio of four parking stalls for every 1,000 square feet of space. Ryan Companies is serving as the developer on this project, while Artis owns the site. Artis is also the owner of the adjacent 601 Carlson Tower. Wasserman said that the timing is right for a new office tower in the Minnetonka market. The demand is high for quality ClassA space, he said. At the same time, Minnetonka has not seen many spec office buildings in recent years. “The I-394 market from a Class-A perspective is very

tight,” Wasserman said. “There are not very many large blocks of Class-A office space available in that market. Over the next three years, there are going to be plenty of tenants who are now leasing more than 25,000 square feet of office space in the suburbs looking to either renew their leases or find new locations. If we can work with just a small number of those tenants, we’ll have a full building. This is a pretty good time, then, to start marketing this building.” Wasserman points to the office building’s proposed location as one of its strongest selling points. 801 Carlson will be located just a 12-minute-or-so drive to downtown Minneapolis. It’s also a five-minute drive from the shores of Lake Minnetonka. “That makes this site very appealing,” Wasserman said. CBRE just began marketing the office tower in mid-October. It didn’t take long for the inquiries to start coming in, Wasserman said. No tenants have been final-

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ized yet, but Wasserman said that he is encouraged by the early response to the plans. If CBRE is able to get a lead tenant relatively quickly, construction on 801 Carlson could start soon enough so that the office tower would open by the end of 2017. “Based on the design, this is going to be the premier office tower in Twin City suburbs,” Wasserman said. “It is going to be pushing the upper limit of rents in the suburbs. A smaller pool of tenants will be looking at this building, but they’ll choose it because it is the best location in the Interstate-394 market.”

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Minnesota Real Estate Journal

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Opus From page 1

"I think this will be a real catalyst for this end of Saint Paul," Rauenhorst said. "This site meets so mnay of the items we look for when it comes to multifamily development. We are looking for live, work and play options for future residents. This location has that." Walkability is a key amenity for multifamily projects today. A growing number of renters are renting by choice, not just because they canâ&#x20AC;&#x2122;t qualify for a mortgage loan. These residents want to live somewhere where they can walk to public transportation, restaurants, shops and theaters. West 7th offers this walkability. Residents here will be able to take a short walk west to reach the hospital employment base. Those who walk east and northeast will shortly hit the downtown Saint Paul employment core. West 7th residents, then, can easily access employment centers from the Seven Corners location. "We have all the confidence that our West Seventh project will be a successful one," Rauehnorst said. "We think that the Saint Paul market is just a couple of years behind Minneapolis when

it comes to multifamily. The demand drivers for multifamily housing are in place. This project will be successful, and we think more will be coming behind it." The Opus Group started construction on the six-story luxury apartment and retail development in September. Rauenhorst says that he expects the first residents to move in during the fourth quarter of 2016 or the first of 2017.

The project will feature 191 studio, one- and two-bedroom units and threebedroom townhome-style residences. It will also include 11,500 square feet of ground-level retail space. The multifamily portion of the project will boast such amenities as an outdoor courtyard with a pool, hot tub, bocce ball court and grill areas. It will also offer a terrace-level patio and club room with impressive river views. Saint Paul Mayor Chris Coleman, in

a statement, said that the addition of the project will provide a boost to the Seven Corners neighborhood. "Projects like this one demonstrate the power of collaborative, community-focused development," Coleman said. "I am excited to see the development of this iconic street corner, and know that it speaks volumes to the energy and momentum we are seeing across Saint Paul."

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Multifamily from page 10

Oak Grove Capital, said that Broadway Flats will provide at least one more option for working-class residents who want to rent in Minneapolis. Most of the new apartment projects in the area come with rents too high for these residents, Dayton said. "It's been a challenge to develop new housing in North Minneapolis for working-class families," Dayton said. "They can't generate highenough rents to make them economically feasible for developers. This project is going to provide a highquality, professionally managed housing development that will provide the workforce housing that is lacking in this part of town." Dayton said that the new multifamily developments in downtown or uptown Minneapolis come with rents for one-bedroom apartments that range from $1,400 to $1,600 a month, far out of the budget of many working-class renters who are mak-

Minnesota Real Estate Journal

ing $30,000 to $50,000 a month. This is a problem, as many workers can't afford to live near the companies at which they work. But one-bedroom rents at Broadway Flats will range from $700 to $900 a month, Dayton said, far more affordable. "There's a big need for this type of housing all across the metropolitan area," Dayton said. The challenge? How can developers create affordable apartment housing but still make a profit? Dayton said that the development of Broadway Flats will cost about $19 million. Oak Grove Capital, of course, has already provided a construction loan to cover $9.3 million of construction costs. But developers need more financial assistance from cities and governmental agencies to make affordable-housing projects work. Fortunately, Lupe Development and Rose Development have gotten just that. Dayton said that $6 million more in

funding sources came from seven different sources affiliated with the city of Minneapolis and other organizations. The city provided TIF financing to help support the project. And a tax-exempt bond with a 4 percent credit raised more than $4 million in equity. "Without the assistance by all these funding sources, the developers could never make a high-quality project like this happen," Dayton said. As far as the overall multifamily market in the Twin Cities goes? Dayton isn’t worried that developers are over-saturating the market with new multifamily units. Demand is still high for apartments in Minneapolis and Saint Paul, he said. But Dayton is noticing that some pockets of the Twin Cities market are starting to get slightly crowed with new apartment projects. “We are still seeing strong velocity in terms of these projects leasing

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up. They are renting their units,” Dayton said. “But we are starting to see more concessions in these areas to spur the leasing activity. That is driven by the sheer number of new units coming up in certain areas of the city, by developers trying to get a quicker lease-up in these buildings.”

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Minnesota Real Estate Journal

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Same-day delivery, mobile wallets changing the way retailers serve consumers By Dan Rafter, Editor

onsumers not only want to shop online, they want the dress, shoes or Monopoly game that they order from their computer screens to arrive quickly -- often the same day. More of them are researching laptops, refrigerators and microwave ovens online before making purchases. And when consumers do shop in traditional brickand-mortar stores? More of them want the option to pay from their own mobile phones instead of waiting in line at a traditional check-out counter. Retailers and warehousers are aware of these changes. It's why they're constantly adapting their distribution routes, store locations and sizes and checkout procedures. Those are the key findings from a recent Coldwell Banker Commercial Affiliates survey run by Harris Polls and released in late September. The poll provides a snapshot of how consumers' shopping habits have changed and how Millennials, Gen Xers and Baby Boomers prefer to shop online and in traditional brick-and-mortar stores. Fred Schmidt, president and chief operating officer of Coldwell Banker Commercial Affiliates, told Midwest Real Estate News that retailers today need to take an omni-channel approach to reaching the minds -- and wallets -of shoppers today. Retailers who go the omni-channel route offer consumers a host of shopping options: They provide shopping apps that consumers can log onto from their mobile phones, e-commerce Web sites from which consumers can order products, traditional brick-and-mortar stores, mobile pop-up stores that might

disappear after two months and even old-fashioned telemarketing. "If my daughter wants to buy a pair of pants at a women's apparel store, if they don't have them in supply they will find that product and deliver it to her within 24 hours," Schmidt said. "That changes the whole merchandising mix." The key for success today? Retailers need to be able to sell their products in a variety of ways to meet the shopping preferences of consumers of all ages. And then they need to be able to deliver those products to shoppers as quickly as possible. That's why some retailers are choosing to increase the number of locations they operate. They want to be closer to their consumers. But these same retailers are opening smaller versions of their traditional stores. Walmart has adopted this approach in many markets. Changing shopping habits are also forcing retailers to update the locations of their warehouses. Again, speed is the key here. Retailers need enough warehouses located close to their consumers so that they can offer 24-hour or sameday delivery. Same-day delivery has become especially important. According to the Coldwell Banker survey, 50 percent of U.S. adults are more likely to make a purchase online if the Web site offers a same-day delivery option. The survey found that 40 percent of adults now expect this option. The numbers are even stronger for Millennials. According to Coldwell Banker's survey, 64 percent of Millennials are more likely to make a purchase online if there is a same-day delivery option. For Gen Xers, this number falls to 56 percent. For Baby

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Boomers, it drops to 40 percent. The survey found, too, that 63 percent of parents are more likely to make a purchase when same-day delivery is offered. Only 46 percent of non-parents are more likely to make purchases when given the option. This doesn't mean that traditional shopping is dead. The survey found that 69 percent of U.S. adults still prefer to make their purchases in a store. But if consumers don't find what they're looking for in these stores? They're more likely to order their products for delivery. And when they do, they are looking for quick delivery. It's why traditional brick-and-mortar retailers are increasingly offering same-day delivery options, opening warehouse space immediately outside large urban areas. While the mobile wallet still remains largely a novelty, the Coldwell Banker survey shows that a growing number of consumers like the idea of checking out with their phones or mobile devices instead of at traditional check-out counters. According to the survey, 33 percent

of Millennials said that making purchases with technology such as Apple Pay, Google Wallet or Visa PayWave is important to them. Just 21 percent of the total survey population said this same thing. The survey found that 33 percent of parents compared to just 17 percent of non-parents said that the ability to make purchases with a mobile wallet program is important. This might lead retailers to cut down on the number of or even eliminate their cash registers as consumers make their purchases immediately through mobile wallet apps. "We don't know yet how mobile wallets will change the way stores look," Schmidt said. "But we do know that the trends are shifting, that this technology will only become more important. Will we get to the point where more retailers don't have the check-out counter that you traditionally see at store? Consumers are growing more accepting of that. What does that mean in terms of configuring stores? What does it mean in terms of security? We don't know that yet."

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Minnesota Real Estate Journal

Ocober 2015

Unlock Exclusive Listings– A real life story By: Tom Opsahl Get Exclusive Listings Through An Exit Strategy The life blood for every real estate agent is Exclusive Listings. Most every real estate agent has heard of the 1031 Exchange. But, as a real estate professional, do you know that a 1031 Exchange is a powerful tool in unlocking Exclusive Listings? We have all heard our prospects lament, “I can’t afford the taxes if I sell!” Your immediate reply should be: “I have an exit strategy for you! You won’t pay any current taxes and you won’t lose the “step up” for your heirs. It’s called a 1031 Exchange.” Look Professional – Provide a solution Every real estate agent has a prospect who won’t sell because they can’t envision an exit strategy. The prospect is tired of the real estate they are strapped with and would love to sell, but they need your help to see the finish line. OK then, help your client see the finish line…provide the key to unlock the Exclusive Listing! Bring in

a Tom Opsahl 1031 Exchange professional to educate your prospect and help provide a pathway to your Exclusive Listing. What could be better than to introduce a 1031 professional to your customer who will educate them and who also understands your expertise with Exclusive Listings!

A Real Life Story I have a client who is a real estate agent. The agent specializes in a niche market of commercial real estate. He and his wife were owners of a property in the agent’s specialized niche. The couple had owned and operated the property for about ten years. They wanted to be done with the intensive management responsibilities of owning and operating the property. The real estate agent knew a little bit about 1031 Exchanges, but he was uninformed about syndicated fractional ownership of real estate. After a few telephone conversations with the real estate agent and his wife, they went full throttle into due diligence on multiple fractional interest 1031 Exchange properties. The real estate agent and his wife narrowed their search and decided to go on a property visit to a multifamily property in Colorado. The property was a 2013 build with beautiful vistas of the Rocky Mountains. The property had a fully equipped workout room, tenant lounge (with wifi and coffee), pool, a dog park, and more. The two decided together to 1031 Exchange into the multifamily property. It was easy. They

were excited and relieved with their decision. The best part was that they had no management responsibilities whatsoever. Since then, the monthly distributions have been exactly the same every month and the property is achieving the sponsor’s projections. But, that is not the end of this story, so keep reading. A Light Went On Roughly a year after the agent completed the 1031 Exchange, he called me on his way back home from a meeting with a property owner who had a property my client wanted to List. The agent told me he had been trying for at least five years to get a Listing on the property. He also added that he may have two possible buyers for the property if he could just procure the Listing. He said to me, “I gave the property owner your name. He needs to talk to you about 1031 Exchanges. He should do what I did with you.” A light went on for the agent. He realized that I might be able to help him unlock an Exclusive Listing. He asked if I would be willing to speak with his Listing 1031 to page 23

October 2015

Minnesota Real Estate Journal News from page 8

and development business. Laukka’s experience has included the design, development, financing, construction and marketing of more than 6,000 dwelling units and home sites throughout the greater Twin Cities area, and the management of approximately 3,000 owner-occupied townhomes and condominiums. His leadership roles include president and director of the Minneapolis Builders Association (MBA), senior life director of the National Association of Home Builders (NAHB) and founder of the Minnesota Housing Institute (MHI), which served the real estate industry’s statewide needs to commercially promote homeownership and legislative action. In the 1960s, Laukka worked with the Near Northside Redevelopment Agency, a community-based organization established to guide the redevelopment of the near north side of Minneapolis. The agency focused on the growing need for market-rate housing which led to the development of single-family housing that was hailed as “the suburb in the

city.” After being approached by Gov. Wendell Anderson, Laukka helped develop the Minnesota Housing Finance Agency and chaired the Minnesota State Housing Code Advisory Board until a statewide building code was in place. Most recently, he served on the Fairview Southdale Hospital board of trustees and chaired the development of its new Carl N. Platou Emergency Center that opened in August. · James Solem For more than 40 years, James Solem provided outstanding leadership and tireless work in real estate finance and public policy and supported the development of rental and ownership housing for low- and moderate-income households. He was the executive director of the Minnesota State Planning Agency from 1970 to 1978 and served as commissioner of the Minnesota Housing Finance Agency from 1978 to 1994. He was appointed to that position five times by three Minnesota governors. As regional administrator for the Met-

ropolitan Council from 1994 to 2000, Solem led long-range planning for transit, wastewater, parks and community development in the seven-county metropolitan area. And while serving at the University of Minnesota’s Center for Urban and Regional Affairs from 2000 to 2006, he led a project to bring new ideas to the issues of affordable housing and regional growth. Now retired from the Metropolitan Council, Solem is active with consulting and volunteer service. He is chairs the boards of the Community Reinvestment Fund, the Common Bond Housing Corporation and the Greater Minnesota Housing Fund. Throughout his career, Solem demonstrated an exceptional knowledge of operations and governmental polices, brought a high level of ethical standards to the real estate industry and championed those most in need. The Minnesota Real Estate Hall of Fame program is open to the public and the cost is $60. More information is available at www.stthomas.edu/centers/shenehon/minnesota-real-estatehall-of-fame/

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The Minnesota Real Estate Hall of Fame now has 30 members. Previously named were: · 2010: Tony Bernardi, Lloyd Engelsma, Gerald Rauenhorst, William Reiling, Jim Ryan and Sam Thorpe Sr. · 2011: Robert Hoffman, Darrel Holt, Bernard Rice, Emma Rovick and five members of the Dayton family: Bruce and the late Douglas, Donald, Kenneth and Wallace. · 2012: David Bell, Robert Boblett Sr., Philip Smaby and Boyd Stofer. · 2013: Leonard Bisanz, Helen Brooks, Thomas Crowley, M.A. Mortenson Sr. and Kenneth Stensby. · 2014: George Karvel Ph.D., Cyril “Cy” Kuefler Sr., Jim Stanton

Marcus & Millichap ARRANGES THE SALE OF a 3,762-SQUARE FOOT NETLEASED 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 Hurricane Grill &

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Minnesota Real Estate Journal

Wings, a 3,762-square foot net-leased property located in Bemidji, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $783,000. Matthew Hazelton, Adam "AJ" Prins, Cory Villaume and Sean Doyle, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a developer. Speaking with Mr. Hazelton, “This sale was another great example of how 1031 exchanges are driving demand for net-leased assets. The marketing of this property generated multiple offers and the property ultimately sold to an investor from the East Coast involved in a 1031 exchange.” Hurricane Grill & Wings is located at 100 Paul Bunyan Drive South in Bemidji, Minnesota.

Marcus & Millichap ARRANGES THE SALE OF a 54-UNIT APARTMENT BUILDING Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Dean Parkway, a 54-unit apartment property located in Minneapolis, Minneapolis, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $9,000,000. Josh Talberg, Mox Gunderson, Dan Linnell and Adam Haydon, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a private investor. The buyer, also a private investor, was also secured and represented by Josh Talberg. Speaking with Mr. Talberg, “The subject property is a legacy asset that hadn’t sold in over 50 years. The property attracted both local and national

Ocober 2015

capital and will rightfully set a new benchmark for this asset vintage in the Twin Cities.” Dean Parkway is located at 2920 Dean Parkway in Minneapolis, Minneapolis.

Oak Grove Capital Secures $9.3M Construction Loan for Broadway Flats Tornado Ravaged Community in North Minneapolis Secures Funding for Workforce Housing and Commercial Space Oak Grove Capital, a leading national provider of real estate financial services, in the process of being acquired by JLL, originated a $9.3 million FHA construction loan for Broadway Flats, a mixed-use property in North Minneapolis. The property will feature commercial space, as well as quality workforce housing, in an effort to revitalize the community following the May 2011 tornado. The loan was arranged by Pat McMullen and Ken

Dayton at Oak Grove Capital. Broadway Flats, located on the corner of Penn and West Broadway Avenues, is less than three miles away from the Minneapolis Central Business District. Its location is the former home to a number of buildings owned by The Rose Family which were among the 3,000 properties that were damaged by a tornado that struck the area in 2011. In collaboration with Lupe Development and Minnesota Attainable Housing Corporation, The Rose Family is reinvesting in this location. “This particular community in North Minneapolis has needed renewal and a strong investor since being hit by a tornado in May of 2011,” said Ken Dayton, managing director at Oak Grove Capital. The building project broke ground on May 27, 2015 and is slated to open its 19,000 square feet of ground floor commercial space in April 2016, followed by 103 housing units on three floors which will be ready to rent by

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October 2015

July 2016. Amenities, many of which are geared toward working residents, will include a business center, fitness room, hospitality and conference room and laundry. Underground parking will be provided to residents, with bike mounts at each parking space, as well as an indoor 38 bike storage room. A metro transit shelter will be integrated into the exterior of the building to accommodate the future Bus Rapid Transit (BRT) C Line scheduled for service in 2017. In the last two years, Dayton and McMullen have closed 35 affordable housing loans, accounting for $290 million with the Minneapolis HUD office.

HFF arranges $86 million refinancing for Eden Prairie Center near Minneapolis, Minnesota

Minnesota Real Estate Journal

Holliday Fenoglio Fowler, L.P. (HFF) announced today that it has arranged an $86 million refinancing for Eden Prairie Center, a 1.14 millionsquare-foot super-regional mall in the Minneapolis suburb of Eden Prairie, Minnesota. HFF worked on behalf of the borrower, Cypress Equities, to secure the five-year, floating-rate loan with MetLife. Loan proceeds will be used to pay off the existing debt and for capital investment at the property. With more than 12 million visitors annually, Eden Prairie Center is the third largest enclosed mall in the Minneapolis metropolitan area, which includes six super-regional centers. The 98-percent-leased mall is home to anchor tenants JCPenney, Von Maur and AMC18 Theatre in addition to Target, Kohl’s and Sears, which are unowned, and multiple inline tenants, including Barnes & Noble, The Chil-

dren’s Place, Gymboree, Biaggis Ristorante Italiano, Sunglass Hut, Jos. A. Bank Clothiers, J. Jill, Yankee Candle, Eddie Bauer, Talbots, Panera Bread and Caribou Coffee. It features a threestory stone fireplace, center court and children’s play area. The mall is situated on 52.84 acres at 8251 Flying Cloud Drive in Eden Prairie, which was named in 2014 one of Money Magazine’s Best Places to Live (population 50,000 to 300,000). Eden Prairie Center is located just off Interstate 494, which loops around both Minneapolis and St. Paul, and is the only mall south of I-494 and west of U.S. Highway 169. This loan is the first investment for MetLife’s new debt fund – MetLife Commercial Mortgage Income Fund. HFF Securities served as placement agent for the fund. The HFF debt placement team representing the borrower was led by senior managing director Trey Morsbach and managing director Timothy Joyce.

Dougherty Mortgage LLC closes $11 million Fannie Mae loan for The Villas of Oak Park Senior Apartments Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed an $11,000,000 Fannie Mae loan for the refinancing of The Villas of Oak Park Senior Apartments, a 62-unit multifamily agerestricted apartment property located in Oak Park Heights, Minnesota. The 12year term, 30-year amortization loan was arranged by Dougherty Mortgage's Minneapolis office for the Borrower, Oakgreen Senior Villas, LLC

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Dougherty Mortgage LLC closes $4.3 million Fannie Mae loan for LouAnn Terrace Apartments Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $4,335,000 Fannie Mae loan for the refinancing and moderate rehab of LouAnn Terrace Apartments, a 71-unit multifamily market rate apartment property located in Crystal, Minnesota. The 10-year term loan was arranged by Dougherty Mortgage's Minneapolis office for the Borrower, Lou-Ann Terrace Limited Partnership.

1031 from page 20

prospect about 1031 fractional ownership real estate. I answered “Absolutely” and “Thank you!” Get The Exclusive Listing If you have any questions about how a fractional ownership 1031 Exchange may help you unlock Exclusive Listings, please feel free to contact us. About the author: Tom Opsahl is owner and founder of US Wealth Management. Mr. Opsahl is a Registered Representative and offers securities through Concorde Investment Services, LLC, member FINRA/SIPC. Tom specializes in fractional interest 1031 Exchange real estate. You can contact Tom at email: topsahl@concordeis.com, phone at: 612-702-3770, or visit us at: www.us-wealth.com.

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