May 2020 MREJ

©2020 Real Estate Publishing Corporation May 2020 • VOL. 36 NO. 2

PAGE 16

Colliers International’s Jacobs: “Adversity doesn’t build character, it shows it.”

By Dan Rafter, Editor

R

Ejournals recently spoke with Jeremy Jacobs, managing director and market leader for brokerage services with the Minneapolis office of Colliers International, about the resiliency of the Minneapolis/St. Paul CRE market even during the COVID-19 pandemic. Jacobs said that commercial deals are still closing in the Twin Cities. He also said that the COVID-19 threat has revealed just how strong the Twin Cities’ economy is.

Here is some of what Jacobs had to say.

Are commercial deals still getting done in the Twin Cities market, even with the threat of COVID-19 hanging over the economy?

Jeremy Jacobs: Deals are getting done. There is no question that the velocity of deals has decreased greatly, not unlike what the rest of the country is experiencing.

But at the same time, there is quite a bit of optimism about the resiliency of certain sectors of the economy.

There is optimism about the ability of our local economy to emerge out of this maybe faster than other parts of the country.

We are focusing on key areas where we might see the light switch flipped more quickly. Most people have ADVERSITY (continued on page 11)

CSM’s big deal proves it: Commercial real estate business can get done during COVID-19

By Dan Rafter, Editor

B

lessed. That’s how Mark Kolsrud, senior vice president with Colliers International, describes being part of the largest commercial real estate transaction in Minnesota history.

That transaction, of course, is CSM Corporation’s sale of 7 million square feet of industrial real estate in Minneapolis/St. Paul and Denver. A total of 5.7 million square feet of this 59-property portfolio is located in the Twin Cities, making this transaction the largest sale in state history by square footage.

“I’m crazy blessed to be part of this,” Kolsrud said.

“I have been in the business a long time. Every client and every transaction is important. But to be a part of a transaction like this? There are no words. It’s pretty special.”

CSM announced this historic sale yesterday. And though CSM didn’t name a buyer, The Business Journal has confirmed that New York-based The Blackstone Group purchased the portoflio. The final sales price of the deal was not released.

Kolsrud said that the big deal is just the latest example of how strong the industrial market is in the Twin Cities. That strength explains why this deal was closed even as Minnesota and the rest of the country adjusts to the economic turmoil brought on by the COVID-19 pandemic.

“Industrial is really a healthy product type across the country, and especially so here in Minnesota,” KolCSM (continued on page 12)

IS YOUR OFFICE SPACE SAFE TO RETURN TO? Most office spaces have common areas, elevators, rest rooms and parking ramps accessible by the general public

THERE IS A COVID – SAFE OFFICE ENVIRONMENT SINGLE STORY / FLEX OFFICE SPACE IS THE SAFEST ENVIRONMENT • Individual private entries • Dedicated bathrooms • No common areas • No parking ramps – parking at your front door

• Special HVAC filtered air • Lower RE Taxes and CAM • Custom designed Class A space • Controlled, secure access • No contamination

The smartest, safest choice for office space Locations available throughout the Twin Cities from 5,000 – 75,000 SF Hoyt Properties Inc. is the largest flex developer in the Twin Cities

CONTACT BELOW TO DISCUSS FURTHER HOYT PROPERTIES INC. 612.338.7787 snelson@hoytproperties.com www.hoytproperties.com www.flexspacemn.com

M AY 2 0 2 0

C

O N

M I N N E S O TA R E A L E S TAT E J O U R NA L

T

E

N

T

S

3

MAY 2020

MINNESOTA REAL ESTATE JOURNAL

F E AT U R E S

6

WHERE ARE WE AND WHERE ARE WE GOING? Hoyt

Properties’ Steve Hoyt takes a deep dive into what commercial real estate might look like in the near future as the Twin Cities and nation attempt to recover from the pandemic.

12 THE POWER OF THINKING AHEAD: BRIDGEWATER BANK OPTIMISTIC ABOUT PAYCHECK PROTECTION 14 PROGRAM How NAI Legacy’s Opportunity Zone program got off to such a strong start.

: PPP loans remain popular among small businesses. Bridgewater Bank has been busy helping their clients obtain these often tricky loans.

Birdtown Flats - Page 12

1 1 4

BUILDING CHARACTER THROUGH ADVERSITY: Colliers International’s Jeremy Jacobs has a simple message about COVID-19 and the local CRE market: The industry will survive and it will thrive once again.

CSM’S BIG DEAL: Need proof that deals can get done

even during the COVID-19 pandemic? Check out the huge CSM deal that hit the Twin Cities in late March.

WILL COVID-19 CHANGE THE WAY WE WORK ... FOREVER? Big changes might be coming to an office near you.

15 16

FACING DOWN THE VIRUS AND MAKING A BIG SPLASH IN THE TWIN CITIES: CEDARst isn’t letting the coronavirus keep it from expanding its footprint in the Twin Cities.

MIDWEST ECONOMIC DEVELOPMENT SUPPLEMENT

Minnesota Real Estate Journal (ISSN 08932255) Copyright © 2020 by the Minnesota Real Estate Journal is published bi-monthly for $85 a year by Jeff Johnson, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369. Monthly Business and Editorial Offices: 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369 Accounting and Circulation Offices: Jeff Johnson, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369. Call 952-885-0815 to subscribe. For more information call: 952-885-0815. Periodical postage paid at Maple Grove and additional mailing offices. POSTMASTER: Send address changes to Minnesota Real Estate Journal, 7767 Elm Creek Boulevard, Suite 210, Maple Grove, MN 55369 ©2020 Real Estate Publishing Corporation. No part of this publication may be reproduced without the written permission of the publisher.

ADVOCATE. ADVISER. ALLY.

PATRICK

DAN

Regional Managing Director

Managing Director

JAMES

MICHAEL

Sr. Vice President

Vice President

ANDREW

BILL

Vice President

Vice President

MINEA

HOOPES

TREBIL

PADILLA

OUR UNMATCHED NETWORK OF BUYERS, SELLERS, AND CAPITAL SOURCES HELP US PROVIDE CERTAINTY OF EXECUTION IN ANY MARKET CONDITIONS. We’re the largest independently owned capital markets firm – known for our long relationships and strong results. While you can count on us as your advocate, adviser, and ally, we are your partner long after closing a specific transaction. With our unmatched network of buyers, sellers, and capital sources, we provide certainty of execution and protection of your investments.

952.356.0100 northmarq.com/minneapolis

FINN

MORK

COMMERCIAL REAL ESTATE DEBT & EQUITY | INVESTMENT SALES | LOAN SERVICING

M I N N E S O TA R E A L E S TAT E J O U R NA L

4

M AY 2 0 2 0

Will COVID-19 change the way we work … forever?

By Dan Rafter, Editor

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

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

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

www.rejournals.com

@Rejournals

COVID-19 might have longer-lasting effects on the way companies and employees interact. (Photo courtesy of photographer Jeffrey Totaro.)

A

s the firm-wide director of consulting for global design and architectural company HOK, Adam Stoltz has spent much of his 15 years in the industry thinking about the ways in which people work. Today, that means pondering how the COVID-19 pandemic might forever change our offices and workdays.

“We can do a much better job of giving people support with

REjournals recently spoke with Stoltz, who is based in HOK’s New York City office, about the long-term changes that the pandemic, and the country’s response to it, might have on the world of work.

greater choices,

Let’s start with the obvious question: Now that so many employees are working from home, will we see more remote working even after the threat of COVID19 fades?

over some of the

Adam Stoltz: A lot of companies are facing the reality that they had perhaps been resisting of enabling employees to work more remotely or more flexibly. They have been forced into it today and now realize that it is certainly possible. For some companies and employees, working from home is working well. For others, while it might be working fairly well from a business standpoint, it’s not actually working from a personal standpoint, from that individual’s standpoint.

Some companies will look at this situation and tell their employees, ‘This is working out better than we thought. Guess what?

You are now going to work remotely or work remotely more often.’ It’s important for companies to realize, though, that working remotely might not be working for individuals for a variety of reasons.

Companies will have to balance what works for them as a business and what works for their employees as individuals.

flexibility and control decisions they make about how they do their best work.”

– Adam Stoltz, HOK

What do you hope companies are learning about remote working during this time?

Stoltz: In the end, I hope that what we take away from this is two-fold: That we can do a much better job of giving people support with greater choices, flexibility and control over some of the decisions they make about how they do their best work. If an employee works better when that employee works at least part of the time remotely, we must recognize that, even if that hasn’t always been company policy. If we can do that, that will be valuable.

The second thing is, when we decide to ask people to come back into the office, I hope we recognize that there are likely several

things we have to do to make them feel comfortable. The idea of tuning off a switch that has been turned on and now we are just turning it off? I just don’t think it can work that way.

What will be some of the challenges that workers might face when they are asked to return to the office?

Stoltz: Some people are enjoying the reduction of their commutes. Long commutes are stressful. Many people today are enjoying the fact that they don’t have to face that stress or waste that time sitting in traffic. These employees might not want to give that up every day of the week. Other people might now have the opportunity to be closer to family members who need them nearby, for whatever reason. If these people are still getting their work done and are now able to be there more often for their family members, it might be a lot for companies to ask them to give this all up.

We know from the research we do on work patterns and behaviors, that many jobs are focused some days on individual, concentrated work while on other days they are focused on interactions with others in group projects and meetings. Companies might think about giving people the choice of picking the setting or environment that fits best with the work they are doing that day. For some people that could mean that tomorrow they are going to work from home because they are spending most of the day in a video conference with people across the globe. Why do they need to go into the office if they are going to be in a video conference call by themselves? They can do that from home.

What about the emotional shift employees might have to make when shifting WORKPLACE (continued on page 10)

M I N N E S O TA R E A L E S TAT E J O U R NA L

6

M AY 2 0 2 0

Commercial real estate: Where are we and where are we going? Observations from a non-economist

I

have been discussing the commercial real estate market with many players, including developers, owners, bankers, mortgage brokers, investment sales brokers and leasing brokers. Also, business organizations, including NAIOP and Minnesota Real Estate Journal, have produced webinars that provide excellent insight. There is no shortage of information and opinions as to where we are and where we are going.

Having been through several dislocations and disruptions in my career, here is my opinion based upon the information available.

GENERAL ECONOMY

This will not be a V-shaped recovery unless you’re in the haircut business. It will take at least a year for any sector, and we’re vulnerable to a second wave (“COVID20”) if and when a new virus appears this winter. I think it will be a U-shaped or possibly hockey stick-shaped recovery.

Now, many experts disagree and think the economy will be V-shaped. Then there are other experts, like the chief economist at JP Morgan, who think it will be a W-shaped recovery, and the recurrence of the virus next winter will force us to shut down again. One thing we know: It will recover. Nothing has ever happened to the United States that has stopped our economy from recovering. Still, I’m firmly in the camp of a slower recovery Many small business owners may suffer but they have always shown great resilience. Many big businesses will suffer, too, especially in the retail sector. Some experts think retail anchors will fail en masse, like Neiman Marcus, Sears, JC Penney and others. Many are planning bankruptcy filings at this time. This can be blamed on Amazon, but really this crisis has simply accelerated forces already in place before the virus. If these big boxes fail, that will have a domino effect on retailers who rely on traffic generation.

GOVERNMENT RESPONSE

The PPP program is nice, but it’s not well thought-out. Why give money to companies with good balance sheets? Fortunately, Harvard University and Shake Shack have sent back their PPP money after significant protest. There is an infinite demand for this money, and it will run out quickly with every $300 million chunk that is approved. Then what happens three months from now or next winter if this re-occurs?

The government ignores upstream casualties when businesses don’t pay rent.

Landlords can’t pay mortgages, banks

By Steven Hoyt, Hoyt Properties

“Interestingly, apartment renters are paying their rent despite massive layoffs. They seem to simply move out when they lose their job or double up with a friend.” have non-performing loans, defaults, foreclosures, etc. Surprisingly, most tenants are paying rent, unless you’re in the retail sector.

And, so far the government has ignored the farmers, who own more real estate than all commercial real estate combined.

Farmers have been hammered for years, and this is just the latest punch to the gut.

RETAIL

This market segment is toast. A total of 90 percent of retailers aren’t paying rent because they are closed. If they open, it will be on totally different terms. Even an optimist like Spencer Levy at CBRE says it will take three years for retail to recover.

Three years is an eternity to me.

OFFICE

This segment is doing OK, but it’s a time bomb. Employers have adapted with work-at-home strategies, so when they renew, they will look for less space. There will always be tenants who want “different” space, but there are few office tenant prospects actually looking for more space.

If we do see a recovery, the office market could recover in two years.

We’re seeing some office users looking to lease the safest space available, which is in a flex building. No common areas, individual entries, bathrooms, workplaces, dedicated parking. Space that can be sanitized by each tenant as needed. A totally controlled environment.

INDUSTRIAL – LOGISTICS

This segment is doing well and will get better. The challenge is finding land to build these huge buildings anywhere near metropolitan areas. Requirements for 500,000 square feet are chewing up farmland in 50- to 100-acre chunks.

INDUSTRIAL – MANUFACTURING AND DISTRIBUTION

This segment will do just fine, as its products and customers are unique. There will be a movement to bring manufacturing back to the United States from Asia. The government stimuli will help small manufacturers and their customers.

INDUSTRIAL – LIGHT

MULTI FAMILY

This industry is essentially supported by the government with Fannie Mae and Freddie Mac debt. We have become accustomed to 1 percent vacancies. That will change; get ready for 10 percent vacancies as apartment renters (especially young people) double up or move home. Empty nesters hoping to sell homes and move to luxury apartments will be thwarted by an inability to sell their homes. The same goes for senior housing – seniors wanting to move will stay at home because their houses can’t sell.

If the economy rebounds, these vacancies will recover. Expect a period when developers will pause on new construction, so rents could actually go up before a new wave of construction commences.

Interestingly, apartment renters are paying their rent despite massive layoffs. They seem to simply move out when they lose their job or double up with a friend.

HOTELS

This entire industry is in work-out with their lenders. This sector will only recover when business and leisure travel resumes.

That could take a while.

The backbone of the multi-tenant industrial market, these are usually small businesses with niche products. They may suffer in the short term because they have weak balance sheets, but they will survive. New business formation has been sparse for a long time due to government regulations, a shortage of employees and lack of capital. Expect more start-ups if the November election retains the present administration because employees will be abundant and capital should loosen up.

I call hotels “real estate” because most people do. But, really, they are operating entities. They rent their space out a day at a time. They are marketing and operating machines with high structural overhead that need 70 percent occupancy to break even. There is no alternative use for a hotel, other than a homeless shelter.

INDUSTRIAL – FLEX

BROKERAGE

This segment looks a lot like office, but with a twist. Tenants may need less space if they are office-oriented, but they will also need manufacturing, production, lab and hybrid space. They can’t manufacture widgets from home. There won’t be any more of this flex product built, so existing product will continue to be upgraded and re-purposed. When this occurs, these buildings are essentially “new” on the inside, with higher rents, longer lease terms and higher values.

New demand is now occurring from office tenants – even downtown highrise tenants – who want COVID-safe, controlled-environment office spaces.

Flex buildings are uniquely positioned to offer separate entries and safe office environments, free of common-area public contamination. Expect some movement from pure office tenants to flex product.

I think there is a lot of capacity in this sector, so no need for new construction, and a longer recovery period.

Even though brokerage fee structures have increased dramatically, less deals equals less commissions. Tenant representation will continue to thrive because all tenants have leases expiring, and they will need someone to help them sort out their needs given the current disruption.

Buyers and sellers will start doing deals when the banks resume lending.

POST PANDEMIC

Economic policy makers will struggle with how to address our new levels of debt. Higher taxes will obviously be required, but that would stifle a recovery.

Punishing China sounds good, but they hold a huge percentage of our Treasury bonds and other Federal debt. The Fed has few tools left in the box. They can’t HOYT (continued on page 8)

WHEN THE WORLD TURNS UPSIDE DOWN,

IT’S TIME TO REDRAW THE MAP

In times of disruption, tried-and-true solutions won’t do. You need more — more innovation, broader perspective, keener foresight. We’ve learned this in our three decades of service to the real estate community. Through ups and downs. In good times and hard times. We’re ready to put our experience to the test again and help you find the way forward.

Visit us at: MMBLawFirm.com

M I N N E S O TA R E A L E S TAT E J O U R NA L

8 HOYT (continued from page 6)

lower interest rates below 0 percent. They shouldn’t print more money, but they will.

The result will be inflation, which isn’t bad if you’re in the real estate business. In fact, it’s good for the economy in general because it encourages people to spend, and our country can pay back the debt with inflated dollars.

Our recovery depends 100 percent on consumers resuming their spending.

Hopefully, they still have jobs and money to spend. If they don’t, this could be a longer recovery.

LOANS

Lenders are quoting loans at 50 percent LTV down from 75-80 percent a few months ago, which might re-introduce mezzanine and bridge debt to fund the gap between equity and conventional debt.

Life companies are active but selective.

Banks are scared to death, but they’re herd animals and if things loosen up later this year, they’ll resume lending.

EQUITY

Equity is always seeking a home. Return expectations may increase, so investors

M AY 2 0 2 0

DEVELOPMENT

“Our recovery depends 100 percent

Current developments will be completed – you can’t stop a train. New developments will need to make sense to get financing: build-to-suits, strong credit, pre-leasing, etc. Even then, construction lending will be difficult. Developers will need more equity to get deals done.

on consumers resuming their spending. Hopefully, they still have

SUMMARY

jobs and money to spend.” will be more selective. Seasoned sponsors will be more valuable than ever.

PRICING OF ASSETS

Modest reductions in values will occur simply because of lack of capital for buyers. Buyers with cash can drive pricing.

Buyers will scrutinize rent rolls to figure what they’re buying. Lenders will worry about COVID effects on the tenants and will ask a lot of questions. Deals will get delayed and many will blow up. Stabilized, quality assets will be more valuable than ever. Sellers, faced with no investment sales market, will elect to hold and possibly refinance. There’s nothing wrong with cash flow!

Cap rates are really irrelevant this year, as smart sellers will hold off and not bring properties to market. If we have inflation and continued low interest rates, we will actually see values go up from cap rate compression.

Some investors foresee huge distress opportunities; I do not. Lenders will be reluctant to throw assets on the market because they don’t have to; their balance sheets are strong. There aren’t really that many distressed owners. If anything, their equity may take a haircut the next year or so, but it also rose quite a bit over the last two to three years.

Everyone needs to chill, buckle up, hunker down and ride this out. Chances are good we will get through this and the market will “normalize,” but there will be a re-set.

Everyone knew this bull market in real estate would end, but nobody thought a plague would be the cause.

The year 2020 will be a time to focus on your properties, micro-manage, work on relationships, accumulate knowledge and try to be a better real estate professional.

Protect and preserve the value of your assets and look for opportunities. Don’t force deals to get done. Be patient. Work on your golf game.

“When there’s no wind, you can always mend the sails” P. S. This all could change in a second.

Steven Hoyt is chief executive officer of Minneapolis-based Hoyt Properties.

from good TO GREAT

Office building with convenient location between West End and Ridgedale Center BUILDING WIDE RENOVATIONS COMPLETE

E XC E P T I O N A L ACCESSIBILITY

BUILDING WIDE

&

HIGHLY VISIBLE to I-394

WEST RIDGE

RENOVATIONS

Q1 2020

ON SITE

AMENITIES

Fully renovated building CARPET TILES TARKETT CONTOUR II - LP337-220

Fitness studio with Peleton bikes and shower facilities

UNPARALLELED A R E A

AMENITIES

Building lounge with liquor lockers for all tenants

A C C E S S to

TOP TA L E N T

Convenient front door, visitor and covered deck parking with an above market 4.2 per 1,000 parking ratio

WEST RIDGE LUXURY VINYL TILE TARKETT TRANSEND - "SURESET"

1 A1.1

Building conference center

VIEW FROM THE ENTRY

C LO S E P R O X I M I T Y

to HOTELS and

Free building Wi-Fi

HOSPITALITY WILKUS ARCHITECTS

RENDERINGS + SELECTIONS

SD-V3 2019-10-11 A1.1

Foodsby food delivery service

REMARKABLE

VIEWS OF MINNEAPOLIS

for leasing information:

Brent Karkula +1 612 217 5153 brent.karkula@am.jll.com

Immediate highway visibility

Laura Farrell +1 612 217 6744 laura.farrell@am.jll.com

BOMA GREATER MINNEAPOLIS ANNOUNCES THE

2020 BEST OF BOMA AND TOBY AWARD WINNERS The 7th Annual Best of BOMA Gala was held on February 13, 2020 to recognize and celebrate professionals and outstanding properties in the Greater Minneapolis Commercial Real Estate Industry.

BEST OF BOMA AWARD RECIPIENTS

Often the public only sees architecture without recognizing the tremendous amount of work and dedication exerted to make buildings energy efficient, comfortable for tenants, and high performing assets for their owners and communities.

KRISTIN LONGHENRY

DAMON MONTHEI

TED CAMPBELL

RENEE PINKNEY, RPA

WILDAMERE CAPITAL MANAGEMENT

ACCESSO SERVICES, LLC

RYAN COMPANIES US, INC.

RYAN COMPANIES US, INC.

Property Management Professional of the Year

Engineering Professional of the Year

Senior Property Management Professional of the Year

Emerging Leader of the Year

LOU STANKUS, SMA, SMT

AMY WIMMER, RPA HINES

FRASER MORRIS ELECTRIC COMPANY

Senior Engineering Professional of the Year

Chair’s Award

Service Partner of the Year

TRANSWESTERN

DICK MORRIS

TOBY (THE OUTSTANDING BUILDING OF THE YEAR) AWARD RECIPIENTS

The TOBY Awards are the most prestigious and comprehensive awards in the commercial real estate industry, honoring the properties that best exemplify superior building quality and excellence in building management.

LASALLE PLAZA

CRESCENT RIDGE CORPORATE CENTER I

FIFTH STREET TOWERS

500,000 - 1 Million Sq. Ft. Category

250,000 - 499,999 Million Sq. Ft. Category

Over 1 Million Sq. Ft. Category

TRACTORWORKS

KRAUS-ANDERSON HEADQUARTERS

COLONIAL WAREHOUSE

Renovated Building Category

100,000 - 249,999 Sq. Ft. Category

Historical Building Category

ZELLER REALTY GROUP

CUSHMAN & WAKEFIELD

CITY CENTER REAL ESTATE SERVICES

KRAUS-ANDERSON REALTY COMPANY

ZELLER REALTY GROUP

THE EXCELSIOR GROUP

THANK YOU TO OUR PLATINUM SPONSORS

THANK YOU TO OUR GOLD SPONSORS

THANK YOU TO OUR SILVER SPONSORS ASPEN WASTE SYSTEMS | CENTERPOINT ENERGY | CLEAN RESPONSE | CSM CORPORATION DENISON PARKING | HINES | JLL | LVC COMPANIES | PIEDMONT OFFICE REALTY TRUST REEF PARKING | SCHINDLER ELEVATOR CORPORATION | SHORENSTEIN REALTY SERVICES THE RMR GROUP | XCEL ENERGY www.bomampls.org

M I N N E S O TA R E A L E S TAT E J O U R NA L

10 WORKPLACE (continued from page 4)

from working at home to returning to the office?

Stoltz: The virus is anticipated to have a long-lasting emotional, psychological impact. One of the challenges that companies have to prepare for in asking people to come back to the office is that these workers might not be ready to do so.

We have to rebuild some of that trust. We must communicate to employees what we ae doing to keep them safe. We need to focus on keeping offices clean. We might need to shift to workplace set-ups that recognize that the health and wellbeing of our employees is important when they do come back.

What can companies do to promote wellbeing when employees return?

Stoltz: Companies should think about providing more opportunities for unassigned space. This doesn’t mean that no one gets an assigned desk. It’s about giving people the freedom to move about the office to find the spaces that are most comfortable for them. Maybe an employee has a co-worker who has a sniffle or a cough.

That can be anything. It can be allergies.

It can be truly benign. But if it makes that first employee more comfortable to get up

“I do think that we are going to focus on how space is used over time. It’s not just that we will give people more space. It’s more about supporting people in their ability to not have to come into the office every day. ” from his or her desk and go to another part of the office to work, I hope employees have the opportunity to do that. I hope the work settings are there to help them do that. I think giving employees more freedom of movement and more choice is important.

I think employees would feel more comfortable if they saw surfaces being wiped down regularly or if companies provided employees the tools and equipment they needed to do it themselves. That could be a valuable change.

And I think we need to see the development of tools and technology that allow people to gain more information about how the work settings available to them were last used and when they were last cleaned and serviced. Employees could log onto a portal to see when a workstation was last used by one of their co-workers and when it was last cleaned. They can see if five other employees have booked workstations around the station they are looking at or if a workstation will be mostly surrounded by other stations that haven’t been booked, giving them more

M AY 2 0 2 0 distance from their co-workers if that’s what they need to feel comfortable.

Do you think the way offices are laid out will change?

Stoltz: We have been pursing greater density in the workplace for several years now. Companies have wanted less office space per person. I don’t foresee workspaces getting larger, even after this pandemic. But I think companies might start rethinking the spacing they have between workstations and how they arrange these stations to give employees a bit more spacing between each other.

I do think that we are going to focus on how space is used over time. It’s not just that we will give people more space. It’s more about supporting people in their ability to not have to come into the office every day. If companies do that, the density of the number of people in an office space at any given time won’t be as great.

We will relieve some of the pressure if we do that. I don’t see companies moving back to a time when offices were oversized, and workstations were 64 square feet for a laptop and a couple of monitors. Instead, we’ll see companies focusing more on putting more distance between the desks.

INTRODUCING THE NEW WILLOW CREEK Conveniently located along I-394 providing access to limitless amenities

ACCESS & VISIBILITY

RENOVATIONS

LOCATION

NEW TENANT LOUNGE

• Minutes from West End, Ridgedale Center and Minneapolis CBD • Access to endless retail, hotel, restaurant and services amenities • Directly neighbors General Mills headquarters, complementing prestigious I-394 corridor

SERENE BACKDROP • Tranquil setting on the water • Peaceful setting providing boutique environment for tenants

BIKE STORAGE FACILITY MEETING AND CONFERENCE ROOMS

CONVENIENT PARKING WITH AN ABOVE MARKET PARKING RATIO OF 4.50/1,000 SF UNDERGROUND HEATED PARKING

ACCESS • Immediate access to Hwy 169, Hwy 55, and I-394

BUILDING WI-FI

• Located at last exit before major congestion into Minneapolis begins • Premium location for top employee recruiting and retention

FOR LEASING INFORMATION:

Brent Karkula +1 612 217 5153 brent.karkula@am.jll.com

FOODSBY FOOD DELIVERY SERVICE

Laura Farrell +1 612 217 6744 laura.farrell@am.jll.com

M AY 2 0 2 0 ADVERSITY (continued from page 1)

wrapped their heads around the idea that this will be more of a U-shaped than a V-shaped recovery. The only question is how compressed the bottom of that U will be for different sectors.

It sounds, then, like you are seeing signs of hope out there.

Jacobs: We recently completed a major transaction with CSM, the sale of a portfolio of 57 buildings and nearly 7 million square feet. In other markets a deal of that size at this time might have been sidelined, postponed or canceled altogether.

The fact that this deal did close here gives a good indication of how the industrial sector will perform post COVID-19 in the Twin Cities and beyond. That the transaction was completed on time was a strong endorsement of just how attractive the industrial market in the Twin Cities has been. We look at it as a sign that our economy is poised to survive this pandemic.

Where you surprised that the CSM deal did close in this environment?

Jacobs: I can’t say I was surprised. We have had a relationship with the seller in that deal for decades. We have had a relationship with the buyer at the institutional and local level for years, too. We felt good about both sides of the transaction, about the strength of the buyer and seller and their willingness to get the deal done.

There have been moments as this crisis has unfolded where we have wondered what will happen to deals in the pipeline.

By the time our deal with CSM closed, many of our peers in the industry had seen dozens of deals get sidelined and canceled. It would have been foolish not to wonder what could have happened with the CSM deal, too. At the end of the day, the deal closed, and all parties were happy that it did.

When you look at the industrial sector, are you hopeful that its underlying strength will help it survive these difficult times?

Jacobs: I think that the reason industrial will be strong in the future is a bit different than why it has been strong historically. I think what the COVID-19 experience has taught us is that our country’s supply chain isn’t nearly as resilient as we all thought it was. If you were accustomed to ordering essentials, food or dry goods like cereal, paper towels and other items, online before the pandemic, you’ve discovered that the supply chain isn’t operating the same way right now. Amazon has had delays across the supply chain in delivering some of those goods.

Compare that to the state of the supply chain in China. China has been more or less able to ensure that those goods have been delivered in two days or less to a huge swath of the country. I think the focus on the resiliency of the U.S. supply chain is going to be crucial in the future.

M I N N E S O TA R E A L E S TAT E J O U R NA L There will be a renewed focus on last-mile delivery. There will also be a focus on strengthening our distribution channels, on warehousing our goods closer to us in greater quantities. There will be a focus on making our supply chain pandemic proof.

You will see a lot of investment, I believe, in industrial product to make sure we are able to weather a storm like this again with less impact to our economy. That is one driving force why industrial will rebound faster than some other commercial sectors.

Secondly, in the Twin Cities the life sciences part of our economy is destined to explode. So much of the PPE that is manufactured for global use is manufactured in our backyard. That will catalyze growth exponentially as the world tries to become more resilient to the pandemic. There will clearly be other regions of the country that will be winners in that field, too, but our region certainly stands to grow.

The third prong that will benefit industrial is a possible return of jobs from overseas, with many of those jobs being manufacturing jobs, jobs that have been in China and India and other parts of the world. Many companies are seeing the inability to control their workforce as a factor that was underweighted preCOVID-19. Post-COVID, the ability to ensure that you can keep a workforce in place and a warehouse open will have significant value. I think that will be a value proposition that companies will be willing to invest in. This might not be unique to the Twin Cities, but it is a third prong of why the industrial sector should rebound the fastest and highest after this crisis.

Many multifamily assets are owned by pension companies, the teachers’ unions, firefighters, life insurance companies and police unions. At the end of the day, those pension companies are left holding the bag on this. They have been investing in multifamily as a stable asset for a long period of time. Suddenly, that stable asset looks a lot more volatile.

On the whole, though, I think multifamily can remain strong. This should be a blip in the short run for multifamily. I think we will continue to see that sector grow.

How has COVID-19 changed the way you work?

Jacobs: It is a delicate balance. It’s an oversimplification, but the ABCs of commercial real estate are advisory, brokerage and consulting. In traditional brokerage, the transactional form of what we do is just one leg of that stool. In times like these, you have to increase your focus on advising and consulting. They often get lost in the mix when the economy is spinning and everyone is happy.

What are the best advisors and consultants doing today? Who are they talking to? They are probably talking to their existing clients. They are probably focusing on their existing clients and serving as

11 advisors and consultants to them. They are trying to help them through things like the Paycheck Protection Program.

They are sharing stories about how other companies and retailers are enduring this process. If there is a need for rent relief, they will advise their clients on what options they have and how they can navigate through the process as smoothly as possible.

There is really an attitude of solidarity right now in the industry. Everyone is cognizant that this wasn’t prompted by anything other than the hand of God, if you will. There is genuine compassion out there. More than ever, we are seeing the best of our area. People are rising to the occasion to be as fair as they can. We are seeing people coming to the table with solutions that were quite unexpected. In one instance, we have a client who without prompting offered to their clients free of charge the resources, legal and accounting, that they might need so that they could pursue anything they needed, such as PPP help. They extended that olive branch without any prompting. It goes to show you that adversity doesn’t build character, it reveals it.

Advocacy. Information. Education. Innovation.

Multifamily has been a strong sector, too. What do you see for the future of this sector post-COVID-19?

Jacobs: So many different types of assets get rolled into multifamily. Setting aside seniors housing and student housing, both of which stand to suffer a bit for a while, I think we’ll see different recovery periods for the different classes of traditional multifamily. In the Class-A product, we are still seeing rent collection rates that are lower than they have been historically but are still at about 90 percent. In Class-B and Class-C multifamily, though, that is where we are seeing the most volatility with collections. That makes a great deal of sense as that is where a large swath of the nation’s workforce resides. In some instances, collection rates are as low as 50 percent already.

Another change has been for the large multifamily operators. They have been in hyperdrive since this crisis began. There has never been a time before when all your residents have been at home 24 hours a day together doing everything at your properties. That is placing a huge burden on those buildings. Multiply that by the fact that not everyone is paying rent or paying their rents on time, and there is a lot of stress in multifamily right now.

We are here for our members who strive to do what’s best for their residents, their businesses, and Minnesota communities.

We believe that by broadening partnerships, seeking new opportunities to collaborate, deepening relationships with our current members, and by building authentic relationships with member residents and the larger community, we can provide more Minnesotans with multi-housing as a solution for home.

For the resources you need, visit www.mmha.com

COVID-19 UPDATES & RESOURCES u CLASSES, CERTIFICATION PROGRAMS, WEBINARS u DOWNLOADABLE LEASES, FORMS u VOLUNTEER COMMITTEES u OUTSTATE EVENTS u FAQS u NETWORKING u COMMON INTEREST COMMUNITIES u TRADESHOWS u OUTSTATE EVENTS u AFFORDABLE HOUSING STRATEGIES u www.mmha.com 952-854-8500 & MUCH MORE

12

M I N N E S O TA R E A L E S TAT E J O U R NA L

M AY 2 0 2 0

Forward thinking: NAI Legacy’s Opportunity Zone program starts 2020 strong

By Dan Rafter, Editor

C

dog-wash station, underground parking, an automated package system for tenant deliveries and a business center.

Duane Lund, chief executive officer of NAI Legacy, said that he and other executives at the Twin Cities commercial real estate firm looked hard at Opportunity Zone legislation way back in the summer of 2018. They studied what Opportunity Zones could mean for NAI Legacy’s business model.

Lund said that the suburb of Robbinsdale was also an attractive location for NAI Legacy’s Opportunity Zone fund. The suburb is about a 15-minute drive from Minneapolis, making it what Lund calls a first-tier Twin Cities suburb.

all it planning ahead. But when the Tax Cuts and Jobs Act of 2017 unveiled the Opportunity Zone program, officials with Minneapolis’ NAI Legacy saw potential. And the firm acted on that potential.

And that foresight? It’s paid off. Since launching its Opportunity Zone program, NAI Legacy has completed four Opportunity Zone investments totaling about $50 million.

“We educated ourselves on the program from the business side,” Lund said. “We surrounded ourselves with law firms and accounting firms that were diving deep into it, too. We’ve since given many of the investors in our program comfort with the assets we’ve targeted.”

“We haven’t seen an amenities package like this before in Robbinsdale,” Klisanich said.

Not only does the suburb attract Millennials who want to be close to downtown Minneapolis, it’s also attractive to people in their 50s and 60s.

The lobby area of Birdtown Flats.

NAI Legacy partnered on this project with Minneapolis-based The Beard Group, the project’s developer; Minneapolis’ Steven Scott Management, which will provide daily property management of the building; and Minneapolis-based CliftonLarsonAllen Wealth Advisors, which assisted in raising capital.

One of those assets? Birdtown Flats, a new luxury apartment building in the Minneapolis suburb of Robbinsdale.

This apartment complex opened for initial occupancy in February of 2020, and is located near downtown Robbinsdale.

This project is just one example of the success that NAI Legacy has experienced with its Opportunity Zone fund. It’s unclear how COVID-19 will impact the fund. But NAI Legacy has been successful with it so far because the company is careful about which buildings it targets.

Birdtown Flats includes 152 units and features amenities that include a rooftop deck, fitness center, business center, common area, underground heated parking, dog walk and bike-storage area.

Michael Klisanich, managing director of investments with NAI Legacy, said that Birdtown Flats is a good example of the type of asset that the company targets.

Klisanich said that new apartment sup-

ply had been lacking in Robbinsdale for decades.

And Birdtown Flats wasn’t just new. It also came with features that made it stand out among the stock of existing apartment products in Robbinsdale.

“Birdtown Flats came with some amenities that don’t currently exist in Robbinsdale and the surrounding communities,” Klisanich said. “It features amenities that you see in Minneapolis’ newer apartment products. But these amenities don’t exist in the Robbinsdale market. The leasing activity we’ve seen in this development solidifies our belief that there is a demand for a new building with high-end amenities in this market.”

What are these amenities? Birdtown Flats features a high-end fitness center, a spacious rooftop deck, dog-walking paths, a

As Lund says, renters here, both young and old, are a quick trip away from the center of Minneapolis. But they can also enjoy the quieter atmosphere of Robbinsdale.

“Birdtown Flats fills an interesting niche,” Lund said. “It is not too dependent on one class of consumers or tenants.”

The results bear this out. Lund said that Birdtown Flats is already nearly 70 percent occupied.

Holmes and his company have long been major players in the Minneapolis/ St. Paul CRE market. Holmes was the recipient of the 2019 Minnesota Real Estate Journal Lifetime Achievement Award.

CSM (continued from page 1)

srud said. “It’s not surprising that this portfolio looks so good to a buyer. The industrial properties in it were of such high quality. The buyer is a strong one, too. The buyer said what it was going to do and did what it said it would do.”

Kolsrud said that the deal shows that business can still get done even during the COVID-19 pandemic.

Gary Holmes, president and chief executive officer of CSM, said selling the portfolio was not an easy decision.

“The decision to sell these properties was a difficult one for me,” Holmes said in a statement. “It took time for me to reconcile with the fact that I was parting ways with a portion of my life’s work. Many talented people had a hand in developing and managing these properties and I am profoundly grateful for their efforts.”

“People who are entering their empty-nester stage are selling their homes right now. They want to live in an area that has restaurants and shops and grocery stores, but they might not want to live in downtown Minneapolis,” Lund said. “A suburb like Robbinsdale gives them an alternative.”

The North Star Distribution Center at 19730 S. Diamond Lake Road in Rogers, Minnesota, was one of the industrial properties included in CSM’s big sale.

After the sale, CSM still holds hotel, residential and commercial properties.

In a press release, CSM said that it plans

to continue to grow its business in the Twin Cities and other markets.

“We are very fortunate in Minnesota,” Kolsrud said. “We have the kind of work ethic and businesses that can get you through tough times. I can’t think of any other town that has the ability to pull through changing economic times like we do. I’m very confident that if anywhere has a chance to come out of this strong, it is us.”

14

M I N N E S O TA R E A L E S TAT E J O U R NA L

M AY 2 0 2 0

Bridgewater Bank: Optimistic that Paycheck Protection Program will continue to help businesses through the pandemic

I

By Dan Rafter, Editor

t took just 13 days for the Paycheck Protection Program -which provides grants and loans from the federal government’s Small Business Administration to small businesses that typically have fewer than 500 employees -- to run out of money. Congress did vote to refund the program, providing $310 billion in available loan money during the PPP’s second round.

Demand has been strong, too, for the second round of PPP funding, with small businesses hoping that the funds will help them retain employees, pay their rent and cover their utilities.

Bridgewater Bancshares based in Bloomington, Minnesota, has been particularly busy with the Demand has been high for the government’s Paycheck Protection Program.

PPP. According to information provided by the bank, Bridgewater had successfully processed more than Place said that Bridgewater started with zPlace said he has been pleased with how 594 SBA-approved applications for loans five loan officers to handle PPP requests. quickly the SBA has reviewed applicaunder the first round of the program. If As of earlier this week, the bank had tions. He said that SBA approvals had closed, these loans will total $152.6 mil- upped that number to 14. The bank’s been coming in quickly, in some cases lion to help businesses in the Twin Cities analyst group started with six people almost instantaneously. area that are struggling to survive during helping with underwriting and approval. the COVID-19 pandemic.

As of earlier this week, that number had “This has been a pleasant surprise,” Place jumped to 21. said. “They are not delaying the approval Nick Place, chief lending officer for side of this. They are getting the loans to Bridgewater Bancshares, said that he is Bridgewater’s staff, though, hasn’t had to clients quickly.” optimistic that Congress will make addi- do much to underwrite these loans. Most tional funding available for the program. of that work is being done by the SBA. Place said Bridgewater is also helping He also recommended that businesses in The bank’s job instead has been to help clients with another big question: How the Minneapolis/St. Paul area continue business owners understand how the many people do they have to rehire after to submit PPP inquiries on its website in program works and what steps they need getting their loan dollars? anticipation of the day when more fund- to take to apply for a loan. ing is available.

Say you’re a small business owner oper“A lot of the work we are doing is help- ating a coffee shop. You apply for a PPP Bridgewater Bank began accepting PPP ing clients understand how the program loan. Before you applied for the loan applications on April 3. As of noon on works, how to calculate the amount of you had 10 employees. Thanks to the April 16, the bank had received more loan dollars they are eligible for, what COVID-19 pandemic, you now have just than 1,250 loan inquiries, of which the supporting documents they need,” Place one worker. If you get your PPP loan, you SBA had approved 594 applications. said. “Then we have to help them un- might have to rehire all your previous derstand what they can use those loan employees to meet the 75 percent payroll One recipient of a PPP loan was Sam proceeds for.” threshold.

Navab, owner of St. Louis Park, Minnesota-based Navab Brothers, a merchant As Place says, loan recipients must spend If your former employees were successful that sells Persian and other high-end 75 percent of their loan dollars on pay- in applying for the enhanced unemployrugs. roll during the eight weeks following ment benefits that the government is now the funding of the loan. If they don’t do offering, an extra $600 every week, some “I’m in touch with colleagues in our that, a portion of the loan might not be might not want to return to your coffee industry from all corners of the United forgiven. shop. They might make more money by States, and we are the only ones I know receiving that extra $600 a week for the who have received this loan in record “We want to make sure our clients un- next four months. This means that you time,” Navab said in a written statement. derstand that and that they aren’t going might struggle to hire enough employees into this thing thinking that they are get- to meet the 75 percent payroll requirePlace said that he isn’t surprised by the ting a $50,000 loan that will be entirely ment. demand for the program. He said that forgiven and they can use it to pay their Bridgewater Bank began preparing for rent,” Place said. “You can use some of “If they can’t rehire enough people, busithis demand early. The bank adjusted its the loan dollars to pay rent. But if you ness owners need to be mindful of how staffing needs, too, as applications came are not using 75 percent on payroll, you they use their loan,” Place said. pouring in. will have to pay some of that loan back.”

If that same coffee shop owner gets a $50,000 PPP loan, for example, the owner might spend the money on rent, utilities or interest on bank loans if that owner can’t spend the required 75 percent on payroll. That might mean that only $20,000 of the loan is eventually forgiven.

Place recommends that business owners in such a situation save the additional money – in this case, $30,000 – and use that money to pay back the now-unforgivable portion of the loan.

This owner would then still be able to use the other $20,000 to pay for rent and other expenses.

Place said that the business owners Bridgewater has worked with span the entire gamut, everything from 1099 independent contractors to restaurants and beauty salons, from small one-person shops to businesses employing hundreds of workers.

Bridgewater is accepting PPP applications from business owners who have an existing relationship with the bank, of course. But Bridgewater is working, too, with business owners who have never worked with the bank before.

“We are happy to work with everyone,” Place said.

Place said as of earlier this week that none of the PPP applications Bridgewater has sent to the SBA have been denied.

Bridgewater is doing its due diligence work at the start of the process, vetting business owners whom they haven’t worked with in the past.

But from an underwriting perspective?

The SBA’s goal is to provide a financial lifeline to as many businesses as possible.

“A company could have lost $2 million a year for the last three years and they can still get one of these loans,” Place said.

“It is a non-secured, non-recourse loan to the business, backed 100 percent by the SBA. We haven’t seen any parameters where that loan wouldn’t get approved.”

M AY 2 0 2 0

M I N N E S O TA R E A L E S TAT E J O U R NA L

15

CEDARst faces down COVID-19 while making a splash in the Twin Cities

By Dan Rafter, Editor

CEDARst had already announced plans for the Duffey Lofts multifamily development – pictured here – before making its latest acquisition in the North Loop submarket of Minneapolis.

O

fficials with Chicago-based CEDARst Companies aren’t letting the COVID19 pandemic slow their development plans. And they’re not just targeting their home market of Chicago. CEDARst has big dreams for Minneapolis, ready to bring more than 500 new apartment units to the city.

CEDARst earlier this year announced plans to transform the buildings that served as the home for the C.J. Duffey Paper company into The Duffey Lofts. This project will bring 190 new multifamily units and 20,000 square feet of commercial space to Minneapolis’ busy North Loop neighborhood at 500-528 Washington Ave. N. But that’s just one project. CEDARst has also acquired two adjoining historic properties and a land site in the North Loop neighborhood. The company will redevelop the property as 6th and 3rd, a 345-unit multifamily complex, one that includes a variety of high-end amenities, including a rooftop ice rink.

Will Murphy, chief executive officer and managing partner with CEDARst Companies, said that Minneapolis had long been on his company’s radar. Why? The commercial real estate market here has been so strong for so long, that Minneapolis is a natural target for any company looking to expand into a new and bustling slice of the country.

“Minneapolis, perhaps better than many Midwest markets, has mirrored the top coastal cities, places like Los Angeles

and New York City, when it comes to the strength of the market, rent growth and occupancy trends,” Murphy said. “It has one of the best unemployment rates in the country. It also has a very educated, affluent demographic and workforce.”

Murphy said that the strength of the Minneapolis market coupled with the commercial growth now taking place in its North Loop submarket made the area a desirable one for CEDARst. CEDARst acquired its latest North Loop site for about $21.1 million, buying the property from a consortium led by the Martin Falk Paper Company. The seller was represented in the sale by Pat Minea and Dan Trebil of NorthMarq, who facilitated acquisition financing from First Western Bank & Trust. Lamar Newburn of Lee & Associates represented CEDARst in the transaction.

This latest acquisition by CEDARst includes two multi-story warehouses. The first is an eight-story, 275,000-square-foot property and the second is a five-story, 108,000-square-foot building. CEDARst also acquired an adjacent 32,000-squarefoot surface lot.

According to CEDARst’s development plans, the renovation of the larger warehouse includes 260 residential units, 15,000 square feet of retail space and underground parking. The smaller building will be transformed into a 20,000-squarefoot amenity space along with 7,000 square

feet of retail space, 50 residential units and underground parking.

CEDARst’s plans for the surface lot call for the development of 34 residential units, 20,000 square feet of ground-floor retail and parking for 284 vehicles.

Murphy said that the sheer size of 6th and 3rd sets it apart from other new multifamily developments throughout the Twin Cities. Then there’s the fact that CEDARst will be returning two existing buildings back to their former glory.

“They are both beautiful buildings,” Murphy said. “We truly think this project can be iconic within the Minneapolis market.”

CEDARst expects to break ground on the project in the fourth quarter of 2020. The construction cycle on 6th and 3rd should last about 20 months, which means CEDARst should begin delivering apartment units in the summer of 2022.

What helps set this project apart is the amenities package. This includes a rooftop ice skating rink/icehouse featuring views of the Minneapolis skyline. The rink can be converted to a soccer field or other uses in the spring and summer.

Other amenities include a bowling alley, paddle courts, swimming pool and coworking center. The complex also will feature coffee and grab-and-go food through CEDARst’s Heritage-branded affiliate.

“We believe that our amenities will differentiate this project from the rest of the market,” Murphy said. “We want to be a market leader when it comes to amenities.”

That rooftop ice rink is an example. Murphy said that the amenity was a natural fit for Minneapolis, a town dotted with passionate hockey fans. Murphy said that the rink, when complete, will offer expansive views of the Twin Cities skyline.

Of course, it’s difficult to discuss any major development project without wondering how the COVID-19 pandemic might alter plans.

Murphy said that CEDARst did pause briefly to consider whether it’d make sense to push back construction on 6th and 3rd.

But the company spent nearly 12 months of due diligence when planning for the project. It had long studied the Minneapolis and North Loop markets. And Murphy says that CEDARst is confident that the North Loop and Minneapolis will emerge in a healthy state once the pandemic passes.

“We felt comfortable in our ability to execute this project,” Murphy said. “When we need to capitalize this project in seven to eight months, we think the debt and equity markets will be back. When we bring the project online in two years, the idea is that COVID-19 will be a distant memory. We are in this for the long-term.”

Midwest Economic Development Supplement

WHY WASHINGTON COUNTY?

LOCATION ADVANTAGES

• 15-minutes from the MSP International Airport • 10-minutes to downtown St. Paul with lots of land • 4-Hours to Madison & Des Moines, 6-Hours to Chicago • Centrally located within the US. Easy access to Canada and the rest of the United States

CONTACT

Christopher Eng Washington County CDA Director of Economic Development 7645 Currell Boulevard Woodbury, MN 55125 (651) 202-2814 ChrisE@washingtoncountycda.org

For more information, visit www.EastMetroMSP.org

A STATE FULL OF RESOURCES. A FULL-SERVICE RESOURCE TEAM READY TO HELP.

From data centers to agribusiness, our economic development team specializes in helping businesses start and expand here.

Get started with our cost-free services:

Let’s grow your business. econdev.greatriverenergy.com

M I N N E S O TA R E A L E S TAT E J O U R NA L

18

M AY 2 0 2 0

Open for Business in Hoffman Estates During COVID-19 MIXING IT UP

Despite the economy coming to an abrupt halt due to Coronavirus precautions worldwide, Hoffman Estates, Illinois is still open for business with commercial real estate development activity continuing to push forward. The Village has earned a feather in its cap, so to speak, for how quickly and successfully it facilitated the redevelopment of the former 150-acre AT&T campus along I-90. The tech giant opted to leave their headquarter site in the fall of 2016, and less than four years later, the Village, with New Jersey-based Somerset Development, has a new plan in place on an exciting new venture.

Elsewhere in the Village, a 121-room Holiday Inn Express, the ninth hotel in Hoffman Estates, is under construction next to Cabela’s and is due to open in summer 2020. Additionally, the Village has created a new TIF district on the north side of the intersection of Higgins Road and Old Sutton Road in order to encourage commercial development in the area.

“It is also worth noting that Hoffman Estates still has approximately 1,000 acres of open land available for development, with parcels ranging in size from 2-acres to 185acres, not including our re-development sites. This is unique as Hoffman Estates is the closest community to O’Hare with that much land still available for development,” Kramer stated.

SECOND METROBURB IS COMING TO THE SECOND CITY

Somerset has confirmed they are moving forward during these unique times to redevelop the 1.6 million square foot office campus, distributed between three buildings built in the early 1990s, and the surrounding property into what it calls Bell Works Chicagoland, a “Metroburb.” When finished, it will feature office and co-working space, as well as retail and service businesses open to the general public within the main building, a conference center, public gathering spaces, and a full fitness experience. Eventually, they will also be surrounded by residences (townhouses and apartments) and a hotel, according to Kevin Kramer, Director of Economic Development for the Village of Hoffman Estates.

Somerset successfully transformed a two million square foot Bell Labs facility in Holmdel, New Jersey into a “Metroburb” called Bell Works. A Metroburb is that slice of urbanity in a great suburban location.

Kramer explained, “We didn’t want to see the AT&T buildings demolished, so we sought out an experienced developer with creativity and capital to help repurpose this large corporate campus. We are very excited about the project, so we have devoted valuable time and energy to it.”

Several years ago, “Somerset came up with the idea of converting massive corporate campuses into Metroburbs, which allow firms to rent office space above retail spaces like grocery stores, coffee shops, food halls, restaurants, hair salons, daycare, doggy daycare, libraries, and more. The concept allows corporate employees in the suburbs to enjoy the convenience of working in an urban environment, but with everything under one roof,” Kramer explained.

“The first floor of their project is open to the general public and its atriums are used to hold business expos, farmers’ markets, film festivals, dance class, school competitions, and more,” he continued. The concept plan at the Hoffman Estates project calls for 1.2 million square feet of offices,

“Currently, we are looking for mixed-use developers to develop projects next to the Sears Centre Arena and in other key areas of the Village,” he continued, to create pockets of density and enhance the growth and investment already made in the Village.

Kevin Kramer

60,000 square feet of retail and restaurant space, and 80,000 square feet of conference space within the existing buildings.

“We feel that this project will be a game-changer for not just Hoffman Estates, but the northwest suburbs as a whole” he added.

Currently, Somerset is remodeling and transforming the buildings. Public spaces, like a coffee shop and market on the first floors of the buildings, are being constructed and the spaces on the second and third floors are being transformed into “ready to wear” offices of a wide variety of sizes with co-working lab spaces.

In addition, the former AT&T cafeteria on the third floor, which features an expanse of windows and skylights, will become an event space available for meetings and lifetime celebrations like weddings or galas, Kramer said.

“It’s fantastic to watch the space opening up and glass walls being installed to offer privacy, security, and, most importantly, that open, inclusive feel,” he added. “Somerset plans to activate spaces in this unique project this summer when prospective tenants will be able to see and experience what is being offered instead of just imagining it.”

Making a major change like this to a massive office complex in only four years is an incredible feat, Kramer said.

INDUSTRIAL COMPLIMENTS

The redevelopment of the former AT&T property also led to another development group to plan a technology park across

Lakewood Boulevard to the north of Bell Works. They plan to take 53 acres of vacant farmland and transform it into a high-end technology park for office, warehouse, and production space.

“It will have a high-end look with deep setbacks, beautiful landscaping, and offer speculative industrial and warehouse spaces which can be used by many different types of businesses,” he explained. “There will be ponds and walking trails throughout, connecting to trails across the street in the Metroburb.”

“We are trying to bring the various corporate and industrial uses together, so potentially, firms could have offices in Bell Works and their warehouse facility across the street with both having easy access to the interstate and O’Hare. We expect they will begin construction later this year on the project,” Kramer added.

Adjacent to this site is another 15 acre site which the Village recently rezoned to Manufacturing for an additional 240,000 square feet of spec industrial space.

Finally, in order to encourage small to mid-size businesses within Hoffman Estates to grow to the next level, the Village has teamed up with four neighborhood communities to start a business accelerator program called Next Level Northwest, a charitable non-profit public/ private partnership for the education and development of leaders associated with established Stage 2 businesses within the municipalities in the partnership.

Companies at least three years old with “coachable” owners and at least $250,000 in annual sales are being recruited to be a part of a specialized one-on-one coaching program which is free to them.

“It is tough to attract new businesses to a community, so we have decided to grow from within - from the businesses that are already established in our communities and have their roots here,” Kramer explained. “We are aiming this program at businesses within our communities that are primed for further growth. We want to help them get over the plateau that they may have hit and give them an actionable three-to-five-year growth plan.” The first Hoffman Estates business to complete the program was Blink Tees and they have given it rave reviews.

There’s a hunger in the suburbs for more than just the typical suburban office park.

People want that vibrant, great place to work. Bell Works, Hoffman Technology Park and other great projects can satisfy that hunger right now in Hoffman Estates.

HOFFMAN ESTATES ILLINOIS Where Businesses Restaurants Metroburbs Travelers Friends Families Lives Converge

Over 100 Restaurants with Food from Around the World

20 Min to O’Hare International Airport

Available housing for all income levels

nt nda Abu ter & Wa wer Se city Capa

Among the lowest average electricity rates in the midwest

nges al ha

g I-90 on

3 Interc

Entertainment and recreation for everyone

Award winning parks and forest preserves

Community Matters Hoffman Estates is a great place to start and grow a business. That’s thanks in large part to the strong workforce pipeline, proximity to transportation hubs, housing options for all employees, reliable utilities, and a high quality of life in a supportive community.

Come check out Hoffman Estates and together we can Grow to Greatness!

www.HoffmanEstates.org or www.VisitHoffman.com LIKE US ON

| FOLLOW US ON

| WATCH US ON