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VOLUME 35, NUMBER 9

©2019 Real Estate Publishing Corporation

September/October 2019

Ryan, Arcadia Break Ground on Upscale Eleven Condo Tower

By Liz Wolf

W

hile there have been thousands and thousands of new upscale apartments developed in downtown Minneapolis over the past decade, new condominium development has been sparse. Now experts say there’s built-up demand from buyers and several condo projects are in the works. “We haven’t really built any condos in the last 10

years, which created a lot of pent-up demand,” says Minneapolis Senior City Planner Peter Crandall. “It’s easy to sell units right now, because there’s a lot of interest in that type of home. We have a lack of supply.” The latest project to break ground is the luxury Eleven condominium tower being developed on the Mississippi River in downtown’s Mill District neighborhood. The site is at the intersection of 11th Avenue and West River Parkway. The new tower

will look out over the Stone Arch Bridge and St. Anthony Falls. The project is being developed by Ryan Cos. US Inc., which will also serve as the builder, and Edinabased Arcadia LLC led by Luigi Bernardi, which is the project sponsor. Ryan is partnering on the design with New York City-based Robert A.M. Stern Architects. It will be that firm’s first project in Minnesota. The firm has designed iconic residential buildings Eleven to page 12

Washington, Anoka Counties Partner to Attract Tech Firms, Data Centers along I-35W in Northeast Metro By Liz Wolf

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n a unique, first-ever concept in Minnesota, two counties, five cities and a number of private companies — including electricity providers, fiber providers, national site selectors and construction companies — have banded together to market roughly 1,000 acres of undeveloped land near Interstate 35E to attract tech-

nology companies and data centers. Connexus Energy along with Anoka County and the Washington County CDA are spearheading the effort to promote the area of freeway along Hugo, Forest Lake, Centerville, Lino Lakes and Columbus as the future “Minnesota Technology Corridor.” On Aug. 1, the public-private partnership launched the new technology corridor website, mntechcorridor.com, which is designed to be a clearinghouse of

data, or in essence, a one-stop shop for prospective developers and tech companies. Discussions around the corridor started roughly one year ago when Connexus Energy was receiving requests from tech companies seeking buildable sites near the Minneapolis-St. Paul International Airport that offered fiber access and high-energy capacity. Connexus Energy and the two counties began brainNE Metro to page 8


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September / October 2019

Featured Stories

Minnesota Real Estate Journal

SEPTEMBER/OCTOBER 2019 • VOLUME 35, NUMBER 9

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Departments PEOPLE ON THE MOVE 4

CLOSINGS

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RYAN, ARCADIA BREAK GROUND ON UPSCALE ELEVEN CONDO TOWER WASHINGTON, ANOKA COUNTIES PARTNER TO ATTRACT TECH FIRMS, DATA CENTERS ALONG I-35W IN NORTHEAST METRO

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FUTURE OF AFFORDABLE HOUSING: WHAT LENDERS CAN DO

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MINNESOTA REAL ESTATE HALL OF FAME CELEBRATES 10TH ANNIVERSARY INDUCTS SIX NEW MEMBERS

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LANDOWNERS CAN SUE STATE AND LOCAL GOVERNMENTS FOR INVERSE CONDEMNATION IN FEDERAL COURTS, SUPREME COURT DECIDES

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Minnesota Real Estate Journal (ISSN 08932255) Copyright © 2019 by the Minnesota Real Estate Journal is published monthly except combined in March & April and September & October 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 ©2019 Real Estate Publishing Corporation. No part of this publication may be reproduced without the written permission of the publisher.


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Minnesota Real Estate Journal

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

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

Minneapolis' Knutson Construction hires VP of strategic marketing Minneapolis-based Knutson Construction has added Heidi Anderson Carrozzella as vice president of strategic marketing, a new position for the company. Carrozzella will help shape and guide Knutson’s strategic vision as the company expands its presence in new and existing markets. Carrozzella brings 20 years of experience as a marketing, communications and brand development leader within the industry, most recently as director of marketing for RSP Architects.

Minneapolis' NorthMarq names new CEO

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

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

As Minneapolis-based NorthMarq continues its growth as the largest privately held commercial real estate capital markets firm, president Jeffrey Weidell will become chief executive officer on Jan. 1, 2020, succeeding Eduardo Padilla. Padilla, who served in the role for 20 years, will become executive chair. Weidell has been responsible for a number of successful initiatives as president, including an industry-leading associate producer program, the launch of the investment sales business, growth in debt production and expansion of the equity advisory business. He was promoted to president in 2013, after serving as managing director of the San Francisco office since he joined NorthMarq in 2000. He served on the company’s Executive Committee and was one of its most successful mortgage bankers. “This planned executive transition sets the stage for NorthMarq to continue to thrive, ensuring our operations, financing, and investment sales businesses maintain the highest level of client support,” said Padilla, in a statement. “I have the utmost appreciation for the opportunity I have had as CEO over the last 20 years, and the support I have received from employees, lenders, clients and ownership. I am confident that Jeff is ready for this next level of leadership.” NorthMarq is part of the Pohlad Companies, a privately held portfolio of businesses and investments spanning a

variety of industries. Under Padilla’s leadership, the company completed nearly 20 acquisitions, growing to 37 debt and equity offices with more than 50 correspondent relationships, and a loan servicing portfolio of nearly $60 billion. Additionally, he led the company’s development of toptier Freddie Mac Optigo and Fannie Mae DUS platforms.

Minneapolis architecture firm BDH rebrands bdh+young, an architecture and interior design firm in Minneapolis, has completed a rebrand to reflect the firm’s progressive design solutions and company culture. The firm will now identify as BDH. The company’s logo, website, social media channels and office have been updated to convey the new brand. “BDH has transformed tremendously over the past 48 years, and our new brand identity is a reflection of how our firm has evolved,” said Kim Dennis, principal of BDH, in a statement. “We remain a team of passionate designers driven to make life better through design, but we have a renewed sense of energy and drive to push boundaries and create transformative design.” Specializing in workplace, healthcare and multi housing design, BDH’s mission is to elevate the well-being of people through their built environment. The architects and designers are committed to creating purpose-driven spaces that make aspirations possible, elicit emotion, and create a positive experience for all people inhabiting the space. In addition to rebranding, BDH moved to a new office at the beginning of October, which brought the firm to a flourishing central location. BDH is now located at 201 Irving Ave. North, Suite 200, in Minneapolis. The new office, which features exposed ceilings, an urban industrial aesthetic and an abundance of natural light, reflects BDH’s elevated brand.

Minneapolis' KrausAnderson hires VP of finance Minneapolis-based Kraus-Anderson Construction has hired Wayne Gray as vice president of finance. He will oversee the company’s accounting and

September / October 2019

financial operations. Gray comes to Kraus-Anderson with more than 20 years of experience in senior financial and operational management and corporate planning at Clark Construction Group, LLC in Bethesda, Maryland. The century-old company is one of the country’s largest building and civil construction firms. Most recently, Gray was Clark’s senior director of operations finance, and had previously served as director of internal audit and director of enterprise risk management. Gray earned an MBA from the University of Maryland University College in College Park, Md, and B.S. in Business Administration, Finance and Economics from the University of Maryland Eastern Shore in Princess Anne, Md. He is member of the Construction Financial Management Association.

RMK Management wins pair of multihousing awards in Minneapolis Chicago-based RMK Management Corp. was the recipient of two awards at the Multi-Housing Achievement in Design, Advertising and Community Support (MADACS) 24th annual awards ceremony on Sept. 6 at The Depot in Minneapolis. Presented by the Minnesota MultiHousing Association, MADACS awards recognize property management professionals who have made significant contributions to multifamily marketing and management through exemplary achievements. Two Minneapolis-area RMK-managed communities and teams were recognized during the ceremony. The Churchill Apartments in Minneapolis received an award in the Team: General Members category, which evaluated the team on a number of criteria, including teamwork through the completion of a team activity, camaraderie, effectiveness, professionalism and cohesiveness of purpose at the property. The Durham Apartments in Edina, Minn., won in the Partial/Project Remodel: Unit category, which was based on the achievement of the renovation objectives, return on investment, impact on the financial performance of the property and the overall quality of the upgrade.


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Minnesota Real Estate Journal

September / October 2019

Future of Affordable Housing: What Lenders Can Do housing across the state. The need for more affordable housing nationwide is apparent, but how its being delivered varies from community to community. Here are a few ways lenders can continue improving access to affordable housing:

By Marsha Goff, Executive Vice President of Merchants Capital in Saint Paul

L

ow wages, a severe shortage of affordable rental units and other factors leave many residents in the U.S. unable to afford quality housing. More than 70% of extremely low-income renters are severely housing cost-burdened, spending more than half of their limited incomes on housing costs, which forces them to cut-back on other basic necessities like adequate food, health care and transportation and also puts them at risk of housing instability. This affordable housing crisis can also be felt right here in our backyard. According to the 2019 Out of Reach survey by the National Low Income Housing Coalition (NLIHC), the state of Minnesota ranks 22nd for the most expensive two-bedroom housing in the nation. The most expensive states include Hawaii and California, with the most affordable states listed as Arkansas and West Virginia. Even the least expensive states require residents to make more than $14 per hour in order to afford a two-bedroom unit.

New loan types

Marsha Goff A broad range of programs to provide affordable homes for workers, lowincome renters, homeless individuals and seniors have been implemented across the state of Minnesota, but renters would need to make a minimum hourly wage of $19.74, or work 80 hours per week, at the current state minimum wage of $9.86 to afford a twobedroom unit. This leaves many renters working two or more jobs to afford

Government officials and developers across the U.S. have been searching for the answer to affordable living, and one new loan product creates a unique solution. Freddie Mac’s Non-Low Income Housing Tax Credit (LIHTC) Forward loan is “an unfunded, forward commitment for affordable housing developed by nonprofits and subsidized, rentrestricted affordable housing developed by for-profit developers for new multifamily construction or substantial rehabilitation.” This loan program allows developers to secure favorable terms for affordable and workforce housing projects. Workforce housing allows people who work in a neighborhood to live nearby when they’d typically be either priced out by luxury apartment units or wouldn’t qualify for traditional Section 8 units. Workforce housing developments

reduce barriers to being successful at work and increase employee retention. On the flip side, affordable housing is reserved for individuals or families earning 30–60% of AMI. The median income for all cities across the country is defined each year by U.S. Department of Housing and Urban Development. One Saint Paul-based firm, for example, recently broke ground on a new workforce housing complex in Rochester called Technology Park Apartments. The 164-unit project was one of the first new developments to be funded with this loan product in the state of Minnesota. The product is creating quite a buzz among the broader housing sector, as it reduces the amount of unknown variables for developers and gives them the tools needed to reduce the shortage of affordable housing.

Local financial support Cities across our state are using tax increment financing (TIF) and tax abatement programs to help neighborhoods overcome market challenges and make affordable housing transactions Housing to page 16


Page 8

NE Metro From page 1

storming on ways to market the corridor as it offered many of these assets site selectors are seeking. The partnership has since expanded to include several energy companies and

Minnesota Real Estate Journal

fiber providers including Great River Energy, Xcel Energy, Midco, Comcast, CenturyLink, Arvig, Zayo Fiber and Parallel Technologies. “It’s creative. It’s not something that we’ve seen other counties or cities, internet providers or even power companies all working on together,” says Washington County Economic Devel-

opment (CDA) Director Chris Eng, who’s leading the CDA’s efforts in the initiative. Eng says this area along I-35 is abundant with fiber, water and power access, and project sites range anywhere from 10 to 250-plus acres of contiguous land. The collaboration is marketing the area’s convenient location and proximi-

September / October 2019

ty to the Minneapolis-St. Paul airport as well as its available tech talent. “Everybody has an industrial park and a business park, but what’s different and unique about this is it poses an opportunity for tech companies — including data centers, research and development NE Metro to page 10


Page 10 NE Metro from page 8

companies, software development firms and call centers — any type of company needing to store or transmit large volumes of data or that use a lot of electricity,” Eng says. “We have the infrastructure, the partners, the land and the workforce.” Nearly a quarter of a million people leave Anoka and Washington counties daily to commute to work elsewhere. “We know we have the talent, and finding employees is one of the greatest challenges companies have, and they’re driving out of these two counties to work every day,” Eng notes. According to the Minnesota Technology Corridor website, the Twin Cities area is home to more than 136,000 tech jobs. Additionally, Forrester Research named the Twin Cities a Top Market for Tech Talent and Minneapolis is on Cushman & Wakefield’s list of the Top 25 Tech Cities. Initiative fits Anoka County’s economic development goals Jacquel Hajder, Anoka County’s economic development specialist, says the Minnesota Technology Corridor complements the county’s focus on economic development, which includes attracting tech companies, specifically data centers. “This absolutely makes sense for our

Minnesota Real Estate Journal

entire region, and the goals of the Anoka County Regional Economic Development (ACRED) partnership” Hajder says. “There’s not a better spot in our county to attract this industry, and then we started doing the larger picture study with Washington County.” Hajder notes the variety of sites available in the corridor is an asset for attracting different-sized tech businesses. “The advantage of having a whole corridor is when you work with tech groups or data center projects, some clients might be looking for 10 acres and some for 250 acres,” she says. Hajder says the tech corridor creates a huge competitive advantage for the entire region during the site-selection process to help find the right site that fits a company’s needs. Hajder says the collaboration aligns closely with its state and regional partner’s goals (Department of Employment and Economic Development and Greater MSP) to retain tech talent and promote innovation in Minnesota. “This corridor changes the whole perception of the north metro,” Hajder notes. “And it’s not just the opportunity to create a tech hub but also bring more attention to the region and the opportunities for business development.” Meeting the needs of the tech industry Bruce Sayler, principal of community and economic development at Connexus

Energy, says over the last few years, he’s been getting requests for information from the Minnesota Department of Employment and Economic Development (DEED) and Greater MSP from companies looking to locate in Minnesota. “Many of these requirements, especially from high-tech companies, are looking for great energy capacity, fiber capacity and land within 30 minutes of the MSP airport,” Sayler says. “This particular region along the I-35 corridor, from Lino Lakes up to Forest Lake,” fulfills those requirements. Sayler continues that being proactive about advertising the region’s assets is key to making it a success. “And the thought was why should we wait for the phone to ring to really start promoting our sites?” he says. “What could we do to actively promote these sites to a national and international audience? We need to promote this region more aggressively.” The answer was the Minnesota Technology Corridor, and they hired the Golden Shovel Agency to create the brand and website. Something else unique is while some of the partners in the Minnesota Technology Corridor are traditionally competitors, Sayler says they recognize that it’s not a competition. “The great thing is typically you have

September / October 2019

cities and counties fighting for different businesses, but we don’t see that here,” he notes. “Both counties and all of the cities realize if we do land a company on one side of the fence, the others are going to benefit either from additional rooftops or retail and restaurants. It has been exciting to see this happen.”

It’s the northeast metro’s time to shine Much of the tech firm development activity has been occurring in other areas of the Twin Cities metro. “Nothing really was happening on the north side,” Sayler notes. “We have been a sleeping child here, and we want to put the north metro area on the map.” After launching the corridor’s website, the partnership began receiving reports on who’s visiting the website. They’re already seeing an impact. “The exciting thing was in the first month a little over 50 people looked at the website, and of those, 16 were outside the state of Minnesota and two were outside the country,” Sayler notes.


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Minnesota Real Estate Journal

September / October 2019

Eleven From page 1

around the world including New York City, Chicago and Toronto. A $190 million financing package set the stage for Eleven’s development, which officially kicked off on Oct. 9. The 118-unit tower will be 41 stories and stand 550 feet high and be Minneapolis’ tallest residential building. Minneapolis-based Dougherty Funding LLC, led by Executive Vice President Murray Kornberg, arranged the project financing. Ryan says it’s the largest construction loan ever secured for a multifamily project in the state of Minnesota. The funding also included participation from Related Fund Management -the private equity arm of New Yorkbased Related Cos. as the mezzanine lender -- and Bank OZK of Little Rock, Ark., as the senior lender. “The lenders are really are bullish on Minneapolis,” says Carl Runck, director of real estate development at Ryan Cos. He says that includes fundamentals for employment growth and residential growth and “downtown specifically is on a hot run. They really saw the validity of this thesis that we came up with of doing a world-class condo tower serving a market that hasn’t been

served,” Runck says. Eleven is being built on a surface parking lot along the downtown side of the river. Bernardi says when they walked the site they saw significant potential for the development of ultra high-end condos. “There have been thousands and thousands of new apartment units, and I wanted to do something different and

build something of high quality, and you can only do that by doing luxury condos,” Bernardi says. Eleven is Bernardi’s first condo development. “What helped us with our ambitious vision was we sent a drone camera up [over the site] a couple summers ago, and we could set it at any height,” Runck explains. “We had it at 20 stories, 30 stories,

40 stories and saw that no other condo building or residential building downtown captures all of the views this has in terms of the Stone Arch Bridge, the river, Golden Medal Park and the downtown skyline,” he continues. “Those drone views helped us just go the extra mile to do something worldclass and not settle for something that’s another six-story apartment building.” Eleven to page 14


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Minnesota Real Estate Journal

September / October 2019

Eleven from 12

Pricing at Eleven starts at $900,000 for a 1,400- to 1,600-square-foot unit and goes up from there. Developers won’t disclose further details on pricing, saying prices will remain confidential as well as the buyers’ identities. They will say, however, that more than half of the units have been reserved at the tower, which is slated to open in early 2022. Ryan and Arcadia hired Lakes Sotheby’s International Realty to market the tower. Tours started in May at an elaborate sales center that Ryan built at its nearby downtown headquarters. The sales center, which is 5,500 square feet and cost $1.5 million to build, offers potential buyers a taste of life at Eleven. Ryan built a six-foot replica of the building that lights up in coordination with a video presentation that shows the views from any direction for each individual unit. Visitors can tour through the entryway that leads to a fully designed living room, kitchen, master bathroom and large private terrace. The sales center also includes a “selection room” for future residents to pick out finishes for their unit. Buyers have a choice of three interior-design packages. The interior design team consists of six firms: Robert A.M. Stern Architects,

Peterssen Keller Architecture of Minneapolis, Martha Dayton Design of Minneapolis, Streeter & Associates of Wayzata, John Kraemer & Sons Inc. of Edina and Ryan A+E. Bernardi says it was important to

work with local architects to help tailor the design to the tastes of Twin Cities residents.

A slew of amenities Eleven’s units will be large. No floor

of the tower will have more than five units, with some having only one unit. Amenities will include a 75-foot lap pool, a golf simulator, demonstration kitchen, fitness suite, 24/7 doorman, a Eleven to page 17


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Minnesota Real Estate Journal

Housing from page 6

more attractive and feasible for developers. Although these programs require deeper set-asides from developers, the benefit of having very low to no taxes, or being reimbursed for taxes paid through TIF programs, brings more developers to the table. For renters, these programs are beneficial because there are more units available at a lower-than-market rate. For example, through the 4d Affordable Housing Incentive Program, the city of Minneapolis will require developers to provide at least 20% of the units at 60% of the area median income (AMI) in order to qualify. This allows the city to support projects they believe will spur additional development in the area. Specific requirements vary by community and program, but as more success is seen with these programs, additional developers will be willing to take the risk.

Private and philanthropic partnerships According to the Greater Minnesota Housing Fund (GMHF), naturally occurring affordable housing (NOAH) is often in disrepair and, when purchased and upgraded by developers, per-unit pricing no longer falls within the affordable range. To combat this issue, GMHF launched the NOAH

Impact Fund to finance the acquisition and preservation of naturally affordable rental housing to preserve the affordability of such units for the long term. The program was one of 10 across the country to be awarded the Secretaryâ&#x20AC;&#x2122;s Award for Public-Philanthropic Partnerships from the U.S. Department of Housing and Urban Development (HUD) and the Council on Foundations. GMHF was recognized for its creativity in bringing together unusual private and philanthropic partners to create unique affordable housing programs across the state. For example, Park Place of Bemidji in Beltrami County brought together various partners including the state of Minnesota, GMHF, the City of Bemidji, and Sanford Health to provide 60 units of affordable housing for residents dealing with homelessness and addiction. Through this unique partnership, Sanford Health provides on-site nursing services for residents allowing them to get the care they need while reducing the overall cost to the court, public safety and health care systems. Partnerships such as these help to bring more players to the field and get more unique groups more interested in creating and sustaining affordable housing. From on-site health care services to financial literacy programs provided by community banks, a higher level of involvement from outside parties will

Riverside, Minneapolis

September / October 2019

result in more affordable housing opportunities nationwide. The future of affordable housing is bright. By working together to preserve existing avenues and creating new opportunities for these developments, the affordable housing crisis in our state can be alleviated.

Marsha Goff is the Executive Vice President of Merchants Capital in Saint Paul. Merchants Capital is a multifamily, affordable, and healthcare lender offering a direct way to access fixed rate, long-term, non-recourse financing via its bank, Merchants Bank, all with a single point of contact.

register: mrej.com/2019affordable

Uptown, Minneapolis

Lowertown, St. Paul Reuter Walton is proud to be developing and constructing these three in-ďŹ ll, ground-up, apartment projects located in Opportunity Zones in Minneapolis and St. Paul. They will deliver much needed housing to three unique urban neighborhoods

www.reuterwalton.com


September / October 2019

Minnesota Real Estate Journal

Eleven from 14

multi-sport court and kid’s splash pad. “We’re taking the best of what the single-family home market is offering today and incorporating those things into this 118-unit tower,” Runck notes. The team toured luxury condo towers in New York, Chicago, Los Angeles and Toronto before designing Eleven. “Luigi and I and our sales team spent a lot of time touring other cities that have built condos lately to see what they’re doing differently now than they were 10 or 15 years ago. And there are differences,” Runck notes. He says, for example, residents want large units in walkable locations. Eleven will also include a groundfloor retail space on the corner of 11th Avenue and West River Parkway. The developers are targeting a restaurant for that space.

Who are the buyers? “The majority [of buyers] are emptynesters but there are also millennials buying units,” Bernardi notes. “We’re seeing folks from all throughout the Twin Cities including downtown, Minneapolis’ Chain of Lakes neighborhood, St. Paul, the East and West metro and some folks from outEleven to page 18

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state, beyond the Twin Cities,” Runck adds.

Other new downtown condo development In addition to pent-up demand, another reason for the revival of condo and townhome construction is a change in Minnesota law that makes it more difficult for homeowner associations to sue over construction defect claims. Runck chaired a task force in 2016-17 on behalf of the Downtown Council of Minneapolis called the Housing Options Coalition that addressed this issue. A number of local developers were part of that taskforce. “We drafted legislation at the State Capitol to amend the state warranty laws, which were very toxic and a big reason why there has been very low condo production,” Runck says. The state condo law changes were successfully created, lobbied and passed with supermajorities in 2017. “That helped pave the way for us to pursue Eleven and other new condo and townhome projects that have started sprouting up again around the Twin Cities,” Runck notes. New projects include the 374-unit Legacy condo tower, also in the city’s Mill District, which opened in late

Minnesota Real Estate Journal

2018. According to the tower’s website, 90 percent of the units are sold. The tower was developed by Shamrock Development Inc. Minneapolis-based United Properties and Four Seasons Hotels and Resorts broke ground in June on the 34-story RBC Gateway tower at the north end of Nicollet Mall, which will include 31 luxury condos called the “Four Seasons Private Residences Minneapolis.” The condos will be on the tower’s uppermost floors. The development includes a five-star Four Seasons Hotel, offices, a restaurant, bar, spa and large pool deck. Completion is slated for early 2022. Cynthia Froid Group of Keller Williams Realty Integrity Lakes of Minneapolis was hired to market the units. Additionally, in Minneapolis’ North Loop neighborhood, developers have plans for TMBR, a 10-story, 79-unit, luxury condo building at 100 North Third Avenue that would use timberframe construction. Developers are Todd Simming of luxury homebuilder Kroiss Development and Colin Oglesbay of architecture firm Dwyer/Oglesbay. Meanwhile, reports are that Alatus LLC pulled plans for a condo tower

across the river from Eleven. The project was dubbed Alia Condominiums and called for a 40-story tower with 214 luxury units. The project was proposed for the St. Anthony Falls neighborhood, one block northeast of the Mississippi River and less than a mile from downtown. Alatus had worked for several years on the development but encountered legal issues from neighborhood groups over the tower’s height. While Alatus finally prevailed in court, the project was delayed for more than a year and a half. Now Alatus is reportedly shifting gears and looking at other options for the site following Eleven’s groundbreaking. The site will likely not be condominiums, Crandall points out. “It got sort of bogged down in litigation. I think they’re looking to take it forward as a rental project. I think that’s in the early exploration stage right now.”

Demand for condos There are currently fewer than 200 new and existing condos for sale in downtown Minneapolis, according to Fritz Kroll, a real estate agent with Edina Realty, who specializes in downtown Minneapolis.

September / October 2019

“I feel the market is stable and healthy now and that 2020 will be a very good year, because the Legacy and Portland Tower will be sold out,” says Kroll, who’s not marketing the new projects. Portland Tower, located in the city’s Downtown East district, is a 112-unit, luxury condo tower developed by Shamrock Development that opened in 2016. Only 17 units remain available, according to its website. “Those two buildings have been a lot for the market to absorb, especially in the $500,000 to $1 million price range,” Kroll notes. “Eleven and Four Seasons will be fantastic additions to downtown and increase competition at the top end of the market. Downtown feels very different than it did a few years ago, and it’s becoming more and more desirable.”


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Minnesota Real Estate Journal

September / October 2019

Minnesota Real Estate Hall of Fame Celebrates 10th Anniversary Inducts Six New Members

T

he Minnesota Real Estate Hall of Fame celebrated its 10th anniversary on November 5 by inducting six new members: Alan Arthur, Kim Culp, Dennis Doyle, Daniel Engelsma, Marjorie Nolan, and Ken Rothschild. â&#x20AC;&#x153;This is an usually large group of inductees, which is a testament both to the quality of nominations we received this year and the tremendous caliber of real estate talent in our region,â&#x20AC;? said Herb Tousley, who oversees the Shenehon Center for Real Estate at the University of St. Thomas. Over 300 guests attended the induction program at the Golden Valley Country Club. John Allen of Industrial Equities delivered the keynote address. Jean Kane, CEO of Colliers Minneapolis/St Paul presented the award to the following:

Alan Arthur Alan Arthur is president & CEO of Aeon, a nonprofit that creates and sustains quality affordable homes which strengthen lives and communities. The organization, which he joined just two

2019 Real Estate Hall of Fame Inductees (standing l-r) Kim Culp, Dan Engelsma, Alan Arthur, Herb Tousley (Seated l-r) Ken Rothchild, Megan Doyle (accepting on behalf of husband, Dennis), Marjorie Nolan


September / October 2019

Minnesota Real Estate Journal

years after its founding in 1986, has built, purchased, or renovated more than 4,300 apartments and townhomes in the Twin Cities area that provide stability for 9,000 people each year. Under Arthur’s leadership, Aeon has won praise for its high design and construction standards, and for ensuring its homes will become community assets for generations. Arthur himself has been lauded for what one Aeon board member called the ability to “lead the organization to do what is right, always.” Arthur’s strong leadership is rooted in nearly 50 years of experience in housing and real estate development, including construction, project development, lending, code enforcement, and city planning. He is known for his ability to spot opportunities and adapt to changes in the community and political landscapes, such as Aeon’s recent focus on acquiring naturally occurring affordable housing, or NOAH, properties before they are sold to market-rate developers.

property management for institutional clients, as evidenced by his success as president of the Shelard Group, which grew more than tenfold under his leadership and managed more than 10 million square feet for companies such as Prudential, Principal and Travelers. Culp went on to form The Excelsior Group (TEG) in 2005 as a full-service real estate firm offering boutique-level services in management, real estate investments and advisory services, homebuilder lending, and development. TEG also manages an affiliated family of investment funds for Opportunity Advisors, overseeing more than $350 million of commercial assets to date. One of Culp’s biggest strengths is his ability to recognize talented people. He has a keen interest in mentoring that talent while still allowing people to lead in their own way. Virtually every top commercial real estate company in the Twin Cities has a Kim Culp disciple in its employ, a testament to his mentorship, leadership and vision.

Kim Culp

Dennis Doyle

Kim Culp has a unique talent for reading the real estate market, understanding where the industry and relevant business is heading, and being there when it arrives. He was a pioneer in expanding the concept of third-party

Dennis Doyle began his career in real estate while still a teen, working construction for his neighbor, George Welsh. After completing his education, Doyle returned home, and he and his childhood neighbor formed the Welsh

Companies, a full-service commercial real estate firm. Doyle has said that Welsh taught him two very important lessons: do the right thing, and work hard every day. Doyle eventually sold the Welsh Companies to Colliers International and built Wildamere Capital Management, a full-service commercial real estate company that offers development, management, and investment services and opportunities. At the same time, Doyle funneled his and his wife Megan’s passion for helping people into the creation of MATTER, a nonprofit that distributes corporate surplus to organizations around the world. Since its inception 20 years ago, MATTER has given away more than $650 million through food programs and hospital furnishings.

Daniel Engelsma During his 50 years with KrausAnderson, Dan Engelsma has helped grow the company into one of the top developers and property managers in the region, with more than 100 holdings comprising over 5 million square feet. Despite having no formal real estate training, Dan joined KA’s nascent real estate team in 1969 as its third member and learned by doing: leasing, managing properties and assets, handling financial and mortgage place-

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ment duties, and even – on the weekends – renting apartments. Eventually, Dan was steering a real estate and development enterprise that extended from coast to coast. As the scope of business expanded, so did his expertise, which grew to include public utilities, medical office development, senior housing, and historic tax credits. And through it all, he has adhered to the tenets of judicious growth, adaptability, integrity, and investing in people that guided another Kraus-Anderson leader and Real Estate Hall of Fame member: Dan’s father, Lloyd Engelsma.

Marjorie Nolan As a native of the Brainerd Lakes area, Marjorie Nolan is perfectly positioned to help lead Kurilla Real Estate, which lists and sells premier lakeshore in the region. An owner of the company as well as a broker, Nolan has been expertly matching buyers and properties for nearly 35 years and is a past president of the Minnesota Association of Realtors® and a past national director for the National Association of Realtors®. Nolan is also a linchpin of the Brainerd community, having volunteered her time and talents to the area’s arboreHall of Fame to page 24


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Minnesota Real Estate Journal

September / October 2019

Landowners can sue state and local governments for inverse condemnation in federal courts, Supreme Court decides Landowners affected by zoning and other regulations have new venue for receiving "just compensation." By Marc D. Simpson, Partner, STINSON LLP Ryan M. Sugden, Associate, STINSON LLP

L

andowners who claim the government took their property--whether through regulation, use, occupation or other means--can now bring a claim for just compensation in federal courts, the U.S. Supreme Court recently decided, overturning 30 years of precedent that relegated plaintiffs to bringing inverse condemnation claims only in state court. The Fifth Amendment to the U.S. Constitution prohibits state and federal governments (including cities and municipalities) from taking private

Marc D. Simpson property for public use without paying just compensation. Often, when a government entity wants to use private land for a public use (for instance, for road construction), it exercises it right of eminent domain to take the property and then commences a proceeding to determine the property's value.

Ryan M. Sugden In an inverse condemnation claim, the government has taken some action that a landowner contends effectively takes the property but without starting eminent domain proceedings or paying just compensation. For instance, landowners often contend zoning regulations restricting the use of their prop-

erty go "too far" and result in the government effectively “taking” their property by limiting how the landowner can use the property. In these cases, the landowner can file a claim for inverse condemnation against the government entity and seek a judgment for the value of the property taken, plus its attorneys’ fees, interest and costs. In Knick v. Township of Scott, Pennsylvania, the U.S. Supreme Court was called upon to answer the question of where a landowner can bring such a claim for inverse condemnation: state or federal court? Ordinarily, a U.S. citizen alleging that his or her federal constitutional rights have been violated may bring a claim in federal court. However, since 1985 the U.S. Supreme Court has treated claims for inverse condemnation differently. In Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson City, 473 U. S. 172 (1985), the Supreme Court ruled that a landowner must first try to receive “just compensation” through state court procedures Landowners to next page


September / October 2019

before it could file a claim for inverse condemnation in federal court. In a later ruling, the Supreme Court held that the state court’s decision on the amount of just compensation for a taking (if any) barred the landowner from bringing the same claim in federal court because federal courts must give "full faith and credit" to state court decisions. As the Knick court (and many others before it) recognized, this resulted in a "Catch-22": landowners must first bring inverse condemnation claims in state court, but as soon as they did, they could not later bring the claim in federal court. The doors to federal courts were effectively closed to inverse condemnation litigants. Knick changed that. Under Knick, a landowner alleging that state or local government action has taken its property may file a claim for inverse condemnation in federal court in the first instance. While landowners may choose to take advantage of state and local procedures for receiving compensation for a taking instead of filing a federal lawsuit, the availability of these procedures cannot prevent a landowner from vindicating its federal constitutional rights in federal courts. The doors to federal courts have swung back open to inverse condemnation litigants. Why does it matter where an inverse condemnation claim can be filed? Some may contend that so long as a landowner has some venue to receive “just compensation,” nothing is amiss. However, the Knick decision has numerous important consequences for landowners and state and local governments alike: • Federal courts often have different procedures for managing lawsuits that some litigants may prefer • Some litigants contend that state courts are more sympathetic to local governments, and are less likely to find a local government has taken property because state courts are geographically limited to one county, whereas federal courts include “districts” that encompass many counties (or in some cases like Minnesota, Colorado and Kansas include entire states) • While courts decide if a taking has occurred, juries decide the amount of damages. Federal court juries are drawn from a larger geographic region than state courts, which some believe will make the jury more likely to award damages to an inverse condemnation plaintiff • Federal courts may be less familiar than a state court with the concepts of state land use law and municipal ordinances that are critical to deciding whether a taking has occurred, which could be concerning to either party to an inverse condemnation claim; • Lastly, the Knick decision means that a constitutional violation has occurred the moment government action results in a “taking,” meaning

Minnesota Real Estate Journal

that government officials can be deemed to have violated a landowner’s constitutional rights even if they later offer to pay compensation. This may have a non-monetary impact on government officials that is difficult to measure. A landowner should consult experienced counsel to weigh these considerations before determining whether (and where) to file a claim for inverse condemnation. A claim for inverse con-

demnation is complex and technical, and counsel can advise on the likelihood a court will find a taking has occurred, how much compensation the landowner may be entitled to receive, whether the landowner should hire other professional consultants. Counsel can also advise on the strategic implications of Knick. For their part, state and local governments should also consult counsel prior to enacting new land use regulations, floodplain restric-

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tions, and taking other actions that may give rise to a claim for inverse condemnation, or when a landowner has filed a complaint for inverse condemnation. Experienced outside counsel can advise on the likelihood the municipality will be exposed to liability, and what steps it can take to ameliorate future claims or address existing ones.


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Minnesota Real Estate Journal

Founders Properties purchases pair of manufacturing facilities in Minnesota Founders Properties, L.L.C. purchased two industrial manufacturing facilities in Rogers and Brooklyn Park, Minnesota, marking the fourth acquisition in the company’s newly launched Income Fund V, which focuses on stable, core and core+ industrial and office properties throughout the United States. Totaling 231,771 square feet, the two industrial manufacturing facilities directly mirror Founders’ foundational income fund investment strategy, centered on an overall goal of portfolio diversification, in-depth knowledge of industrial and office assets and markets, and analysis of tenants’ credit and strategic relationships. During the next three years, Founders’ goal is to purchase between

15 to 20 property assets to complete Fund V, with a focus on investing in growth markets and the right blend in assets that will generate a long-term, stable income stream.

CBRE sells 69,000-squarefoot industrial building near Minneapolis CBRE recently represented IRET in the sale of 1865 Woodlane Drive, a 69,600-square-foot industrial building in Woodbury, Minnesota, to Sterling Real Estate Trust. Judd Welliver, Bentley Smith, Ryan Watts, Sonja Dusil and Tom Holtz of CBRE Minneapolis represented IRET in the transaction. The property is located just south of the intersection of Interstates 494 and 94 and is currently 100% occupied by 3M. Dual-branded hotels by Marriott News to page 25

Hall of Fame from page 21

tum, arts center, community and technical colleges, and various women’s organizations as well as the City of Nisswa, where Kurilla is based. In addition, Nolan has 15 years of political experience at the local, state and national levels.

Ken Rothschild In 1885, brothers Henry and Val J. Rothschild founded a company to sell real estate in the rapidly growing city of Saint Paul, Minnesota. As the city matured, so did the company. By 1930, H & Val J. Rothschild had expanded into multifamily housing and mortgage financing. In 1950, Ken Rothschild – greatgrandson of Val J. Rothschild – became a third-generation employee in the family business. During his tenure, the company concluded several successful mergers in the 1960s and 70s, and before his retirement in 1989, Ken Rothschild led the transformation of the company into a large, multidiscipline residential and

September / October 2019

commercial real estate company. He was also an early advocate of open housing in St Paul, was chosen by President Jimmy Carter to serve as member of the National Housing Partnership. Ken has dedicated his life to provide safe, sanitary affordable housing. He was also active in the community having served on the boards of the Minnesota Historical Society, the St. Paul Urban League, the Wilder Foundation, and the Minnesota State University System.

About the Hall of Fame The Minnesota Real Estate Hall was established in 2010 by the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business to honor, preserve and perpetuate the names and outstanding accomplishments leaders who have made significant contributions in real estate and demonstrated care and concern for improving their communities.

University of St. Cloud Real Estate Alumni Golf Tournament Thank You Sponsors!


September / October 2019

News from page 24

open doors in Minnesota A combined 96-suite Residence Inn by Marriott hotel and 84-suite SpringHill Suites by Marriott hotel in Maple Grove, Minnesota, are now open for business. Located on Arbor Lakes Parkway North, the Residence Inn and SpringHill Suites Minneapolis Maple Grove/Arbor Lakes hotels are owned and managed by TPI Hospitality of Willmar, Minnesota. The hotels share a heated indoor swimming pool, a fitness center and 558 square feet of functional meeting space to accommodate events for up to 30 people.

Venture Mortgage closes loan for purchase of Minnesota retail property Venture Mortgage Commercial Real

Minnesota Real Estate Journal

Estate Finance recently closed financing for the acquisition of a 9,260square-foot multi-tenant retail property in Minnesota. The 10-year loan has a fixed interest rate for seven years. Venture Mortgageâ&#x20AC;&#x2122;s Erik Johnson closed the loan. The client, who owns other retail properties, brought substantial 1031 proceeds to the transaction.

Liberty SBF closes $2 million hotel loan near Minneapolis Liberty SBF has closed a first mortgage loan totaling $2.2 million to borrower Mounds View Lodging LLC for the refinance of an AmericInn by Wyndham, a three-story, 69-room, limitedservice hotel in Mounds View, Minnesota. The borrower will use the funds to restructure the ownership of the property.

The AmericInn by Wyndham in Mounds View in the Minneapolis MSA opened in 2002. It underwent a $1 million+ renovation in 2018. Connected to Mermaid Entertainment & Event Center, the National Sports Center and various corporate offices, the hotel benefits from both local and regional demand.

Ryan Companies, Excelsior begin construction of 10 West End in Minnesota Ryan Companies and the Excelsior Group began construction Oct. 24 of 10 West end, a 343,000-square-foot 11story class-A speculative office building being built in the West End of St. Louis Park, Minnesota. Ryan Companies will design and build the project with co-developer Excelsior Group. 10 West End is located just four miles west of downtown Minneapolis.

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Ryan Companies and Excelsior Group closed on the construction financing on Oct. 1. 10 West End will be the first speculative Class-A office building constructed in more than 18 years in the 1-394 corridor. Ryan A+E is designing the building and Ryan Construction will build the project. The project will include walkable amenities, outdoor spaces, strong parking ratios and modern on-site amenities. Heavy brick arches below classic punched openings give way to a much lighter glass, steel and wood expression at the top of the building. The outdoor amenity is complimented by the adjacent park and public realm of the West End district. Leasing is being led by Transwestern Principal Mike Honsa. Leasable space ranges from 8,000 square feet to the entire building with the potential of a News to page 26


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Minnesota Real Estate Journal

second similar-sized tower south of the first building as part of a potential phase two

KW Commercial sells 15,000-square-foot retail center in Minnesota KW Commercial closed the sale of Delux Retail Center at 24086 State Highway 15, a 15,310-square-foot neighborhood retail center in St. Augusta, Minnesota. This building is anchored by Snap Fitness and Delux Liquor. Matthew Klein and Anthony Passanante, investment specialists in KW Commercialâ&#x20AC;&#x2122;s Eagan, Minnesota, office, represented the buyer, MSK Realty, LLC, in this transaction, which sold for $975,000. The seller was represented by Steve Feneis and Maria Berdan with Granite City Real Estate. Delux Business Center is located less than two miles from I-94 along the highly traveled Highway 15 in the St. Augusta/St. Cloud area of Minnesota. This established retail center offered a strong tenant mix and excellent visibility.

Stahl to tackle remodeling work at Minneapolis' The Carlyle Stahl was selected as a partner to remodel finishes throughout The Carlyle in Minneapolis, a luxury residence. Located on the Mississippi riverfront in Minneapolisâ&#x20AC;&#x2122; historic Mill District, Stahl will renovate the first- and fifthfloor common areas including the lobby, build a new club room and yoga room on the fifth floor and install new finishes on all residence floors in the 39-story building. Originally built in 2007, The Carlyle is the tallest residential building in Minnesota. The building is home to 249 residences with views of the cityscape, river and surrounding metropolitan area. Renovation work began in September of 2019 and is scheduled for completion by May of 2020. Stahl is partnering with ESG Architects.

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Timberland celebrates grand-opening of Elevate in Minnesota Timberland Partners, a privatelyowned real estate investment, development and management firm, celebrated the grand opening of Elevate at Southwest Station Apartments in Eden Prairie, Minnesota. Elevate features 222 upscale studio, one-, two-bedroom and penthouse apartments located steps from the SouthWest Station Metro Transit Center and the planned SouthWest Station LRT stop for the Green Line extension. The grand-opening event included an official ribbon-cutting ceremony with remarks by Mayor Ron Case, development partner Scott Carlston and Vice-President of Development for Timberland Partners Ryan Sailer. The $63.7 million, 222-unit mixedincome and mixed-use project was designed by Kaas Wilson Architects and constructed by Frana Companies, both based in Minneapolis. Elevate features a rooftop courtyard overlooking Purgatory Creek Park with pool, outdoor kitchen and bocce court.

Additional amenities include a community room, family game room, coworking space, package center, heated indoor parking with bike storage, dog run and pet spa. The fitness center includes a fitness on-demand yoga studio, plus a spacious gym with cardio, strength, and CrossFit equipment. The project also includes just more than 13,000 square feet of retail space, offering a variety of restaurants, retailers and services. It will also be home to Brick & Bourbon craft bar & eatery, which is hoping to open by the end of the year. Apartment homes feature modern, stylish fixtures in each unit. Kitchens are equipped with energy efficient stainless-steel appliances, large islands with quartz countertops, two cabinet color options, and built-in USB charging ports. Designer lighting, wood plank flooring, walk-in closets and full-size washers and dryers round out the amenities.

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