Category Archives: Minneapolis Real Estate

Buying a Minneapolis Condo–then rehabbing it…

  There are 2 types of buyers in the Minneapolis Condo market right now.  Buyers looking for a move in ready look where the future owner merely has to unpack their items without any updates to the space.  Then there are buyers looking for a bank owned condo that will likely need a fair amount of elbow grease.  As the inventory in Minneapolis shrinks for move in ready product it becomes increasingly interesting to see some how some of the bank owned units and those in sub par condition (i.e. estate sales or investor buys) become targets for buyers looking to start with a blank slate and work with an architect and builder to customize the space.

  Going this route in a condo purchase is not an easy one.  It takes the right team of individuals to source out a condo and create a plan for the rehab that fits within a budget.  Safe to say 95% of buyers out there come to the market looking to stick within a budget!

   Depending on the size and scope, working with an architect to design the layout and create a set of plans for the build could be advantageous and mitigate a fair amount of stress in the project.  Having a builder work closely with the architect to understand what is to be built along with putting together a scope of materials used to keep the budget on par is essential.  Finding an architect who was worked with a builder and had success is critical you having a good experience.

  Once a buyer finds a condo, successfully negotiates and closes they are left with signing a contract with the builder to demo and build out the space.   What we are finding in the Minneapolis condo market is that there are a fair amount of architects out there that will take on projects on an hourly basis so as not to absorb more than 3-5% of the total budget for the build out.

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New restaurant in the North Loop!

  After years in the making a rehabbed building and restaurant open for business in the North Loop of Downtown Minneapolis. The building, NoLo Warehouse, located on North 1st St sits near the Federal Reserve building. For quite some time the owner was an eccentric older gentleman who sold in 2008 to the Dayton brothers, Eric and Andrew. They leveraged the experience of local architect James Dayton to rehab the building which is nearly complete. The brothers recently opened a new restaurant called Bachler’s Farmer complete with a speakeasy like bar in the basement of the building called Marvel Bar. Ironically few details and photos have emerged from the establishment at the request of the restaurants PR firm. In our day and age of almost total transparency this comes as a surprise yet forces anyone who is interested to stop by for themselves and check out the scene, menu and beverages. Make a date online as this new hotspot is about to get busy real fast.

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Demand for apartments could be the solution for condo oversupply in many U.S. downtowns.

It's rentals to the rescue (© Kelly Redinger/Jupiterimages)

Busted condo projects have stalled downtown revitalization efforts throughout the country. But help is on the way as these developments get restructured and are converted to rentals.

Take the case of San Jose, Calif., which has been trying to develop a vibrant downtown since the mid-1980s. Over the years, roughly 4,500 rentals and condominiums have been built downtown. The San Jose Sharks, a National Hockey League team, began playing there in 1993. Restaurants have opened, and a theater has been refurbished for opera.

But the downturn waylaid one of the critical pieces of the revitalization effort. A luxury 23-story condominium tower, which officials had hoped would help bring a critical mass of residents downtown, was originally slated to be finished by 2009, according to Harry Mavrogenes, executive director of the San Jose Redevelopment Agency.

Construction costs ran over budget, however, and developers couldn’t sell units in the $750,000 price range as hoped. Now, the curvy Three Sixty Residences is still empty after completion in early 2010, Mavrogenes says.

The gridlock is now set to ease as a Beverly Hills, Calif., real-estate company has cut a deal to buy the property’s $119 million construction loan at a discount from U.S. Bank. If the deal is successful, real-estate investment firm Kennedy Wilson plans to foreclose on the property and convert it into a rental, Mavrogenes says.

That would likely be good for San Jose. Although buyers are arguably more desirable residents than renters, getting more bodies downtown is paramount to keep the revitalization energized.

“Empty buildings stop revitalization cold,” says John McIlwain, a senior fellow for housing at the Urban Land Institute. “You want to get it occupied so you can get the people in there who can support the stores.”

Similar stories are playing out in downtowns throughout the country that are suffering from a glut of empty condos. These projects failed because developers couldn’t sell at the prices they needed to pay off their construction loans.

But opportunistic investors who buy that debt at a discount or take over the projects in another way typically can make a profit renting out units at market rates. 

Victor Calanog of Reis Inc., a real-estate research firm, says busted condos have hit Phoenix, Miami and other overbuilt housing markets the hardest. He estimates that about 6,300 failed condo units were converted to apartments from 2008 to the third quarter of 2010 nationally and that an additional 10,000 former condos are expected to be added in the next two years.

The conversion strategy is working partly because the rental market is faring better than most other commercial property types. Average vacancies in the major apartment markets nationwide fell to 7.1% in the third quarter of 2010, from 7.9% in the same period in 2009, and average monthly asking rents increased 0.5% from the second quarter to $1,037, Reis says. At the same time, U.S. office, retail and warehouse vacancies and rents are still deteriorating or stabilizing.

Part of the reason for this strong performance is that new development of rental apartments has been limited in recent years.

New supply is coming on the market from busted condos and single-family homes now for rent. But in many cities, this source of supply hasn’t been enough to halt rising rents, given the size of the market. There are an estimated 10 million apartment units in major U.S. cities, Reis says.

“In many markets, the recovery is just powering through the repurposed condos,” Calanog says.

Kennedy Wilson is betting that San Jose will be one of those markets. The San Jose rental market does look particularly promising: At 3.9%, its third-quarter vacancy rate is the third-lowest of the nation’s major metro areas. It also reported the 10th-strongest asking-rent growth, rising 1.1% from the previous quarter to average $1,515.50 a month, Reis says.

By contrast, the median sale price for resold condos in San Jose’s Santa Clara County fell 4.5% to $320,000 in October from about $335,000 in October 2009, and sales volume fell about 25.9% in the same period, according to MDA Dataquick.

Three Sixty Residences was built by Mesa Development LLC of Chicago. The project is one of the most luxurious apartment buildings downtown, with a pool, kitchens featuring Italian cabinetry and views of the Santa Cruz Mountains. Analysts predict two-bedroom units could fetch between $2,600 and $3,200 a month as rentals.

It is also one of four downtown condo towers that were conceived near the peak of the housing boom and that bring more than 800 units to the market. But those projects are faring somewhat better. A spokesman for the 88, one of the other new downtown towers, says more than 55% of its units have sold.

By Maura Webber Sadovi of The Wall Street Journal

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A New Roof That Works for a Living

There are green roofs, and then there are green roofs.

So when residents of Zeckendorf Towers, the condominium complex at One Irving Place on the east side of Union Square in New York City, voted to replace an aging conventional roof with an environmentally friendly one, they decided that a basic installation at $10 square foot — essentially sod and unlandscaped greenery — would not do. Instead, they chose elaborate landscaping with small hills, a wide variety of vegetation, pathways with paving stones and dramatic lighting.

The result is what the condo board believes is the city’s largest green roof, at 14,000 square feet. Installation of the seventh-floor rooftop, over a branch of Beth Israel Medical Center and bookended by four 29-story condo towers, began in April and was finished in October.

Although it is in winter mode, residents are already enjoying the visual benefits of the roof, which cost $330,000, or about $23.50 a square foot (minus a $60,000 one-time tax abatement from the city). The condominium paid for it from their reserve fund, said Hazel MacMurray, a board member at Zeckendorf Towers.

Residents, other than a handful who have private terraces, don’t have access to the roof, but for the rest, “The beauty is looking at it,” Ms. MacMurray said, adding, “You can see them just looking out. They’re experiencing the garden, and it just changes their lifestyle.”

Ms. MacMurray said she also anticipated that the green roof would benefit property values at Zeckendorf Towers. Currently, studio, one- and two-bedroom condos in the 670-unit full-block development, which was built in the 1980s, are listed at a median price of $1,315 a square foot, according to Streeteasy.com.

But any increase in values will last only as long as it takes for other buildings to catch on and retrofit their own rooftops, said Darren Sukenik, a managing director at Prudential Douglas Elliman and a top agent in Zeckendorf Towers. Many new residential developments are planning green roofs, he said, and they will eventually become the standard.

Zeckendorf Towers’ roof designer, New York Green Roofs, went to great lengths to make an all-season attraction for residents, said Amy Falder, a partner in the company. Witch hazel will burst into small yellow flowers in January, and striking plants like Japanese maple will have brilliant red foliage throughout summer and fall. Dogwood will display white blooms in spring, and anemones and balloon flowers will add to the profusion of color in summer and fall. Rhododendrons and upside-down ferns remain green year round. For the holidays, lights have been strung from tree branches.

Advocates say that green roofs, which have been common in Europe for years, offer a variety of benefits. First, the vegetation protects the roof’s membrane from cycles of freezing and thawing that can tear it, as well as from ultraviolet light that can wear it out, Ms. Falder said. This doubles the life of a green roof over a conventional one.

Also, a green roof provides insulation that makes the building envelope more energy efficient. Vegetation protects the roof from the wind in winter, and when covered in snow, the rooftop can be particularly effective at retaining the building’s heat, Mr. Brunner said. The rooftop’s cooling effects are even more pronounced in summer, when the vegetation can cut rooftop temperatures in half.

An analysis of green and black roofs published this year by Columbia University found that an unshaded green roof of 1,000 square meters (about 10,750 square feet) could save $330 to $350 a year in heating costs and $225 a year in cooling costs. In the case of Zeckendorf Towers, the energy benefits of its green rooftop will go to Beth Israel Medical Center, Ms. MacMurray said. The hospital space is a commercial condo, and Beth Israel is not paying for the roof.

Almost the entire rooftop at Zeckendorf Towers, even the tops of bulkheads, is covered in soil and mats of about a dozen species of sedum, which will transform into a carpet of green this spring, said Chris Brunner, another partner in New York Green Roofs, which has installed 35 green rooftops in the Northeast in the past five years, primarily in New York. Some species will take; others might not, he said, explaining that the roof will evolve over the years.

Ms. MacMurray said the whole city benefited when a green roof was built, because of their ability to retain storm water. According to a 2007 report by the environmental group Riverkeeper, a 40-square-foot green rooftop can absorb 810 gallons annually. So each year Zeckendorf Towers’ roof could prevent about 283,500 gallons of storm water from flowing into the city’s sewers and its flood-prone subway system, which has a major station below the towers.

“This green roof was really done to try to progress this building from the 20th century into the 21st,” Ms. MacMurray said, “and there are enormous environmental benefits to doing that.”

Authored by Alison Gregor of the New York Times

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Snow in the City

Its no small feat that Minneapolis was able to clear itself from one of the biggest winter storms to hit the Midwest is quite some time.  Below are the photos to give you an idea if you are planning to make Minneapolis your future home.  It makes underground heated parking in any Minneapolis condo look really attractive right now!

Photos courtesy of Mark VanCleve.

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The Elusive Measure Known as the Square Foot

In the condo real estate market the tape measure does not lie.

But when it comes to measuring the square footage of apartments, the tale told by the tape can be exaggerated, massaged, misrepresented and manipulated.

There are willful — and legal — tactics to make a space appear bigger on paper, like including common spaces and elevator shafts in the calculation of an apartment’s size. There are also honest mistakes that derive from historical inaccuracies, differences in how condominiums and co-ops are measured, advances in measuring technology, changes in measuring standards, and unusual layouts. Then there are outright misrepresentations.

It can all add up to confusion or worse.

Buyers may be saddled with an apartment that the bank finds to be less valuable than assumed, because it is smaller than was thought. Deals can be delayed or even denied if lenders calculate a square footage different from the one listed, which can lower the appraised value. And developers who grossly overestimate square footage in an offering plan may find themselves being sued or losing deposits if the attorney general finds they acted in bad faith.

“There is an implied precision,” said Jonathan J. Miller, the president of the Miller Samuel appraisal firm. He prepares the quarterly market reports for Prudential Douglas Elliman, which track prices per square foot, among other indicators. In reality, he said, the measurements are anything but precise.

Mr. Miller, who said he had calculated square footage for more than 7,000 New York City apartments, estimates that measurements vary by about 10 percent industrywide. Dimensions are generally taken with a laser device, the latest in a long line of tools used to gauge the size of apartments. But the laser is only as good as the person wielding it. And sometimes the stated square footage is a willful exaggeration.

“I remember seeing a condo unit and being told it was 600 square feet,” Mr. Miller said. “And I immediately thought, if this is 600 feet, I am blind.”

Brokers are often accused of overestimating. Bank assessors, on the other hand, are widely thought to underestimate. Even when estimates are in agreement, owners are likely to resist any change that will decrease the size, and therefore the value, of an apartment.

Official oversight of square footage measurements is limited, real estate lawyers said. Condo developments are required to say how they calculate square footage in their offering plans, which are filed with the state Office of the Attorney General. But there is no similar requirement for co-ops. And even in newer condos, as the property changes hands over the years, small inflations may morph into architectural tall tales.

Brokers are often careful to say they take no responsibility for listed square footage, and owners may honestly not know how large their home is. So, often, there is no obviously responsible party when discrepancies are found.

Steven Wagner, a real estate lawyer, says he encourages anyone thinking about buying an apartment in a new building to hire a lawyer to read the offering plan closely in order to determine whether the square footage measurements include common space like elevator shafts and hallways — adding them in is legal in some cases, but that is not common knowledge. He said buyers of resales would be wise to have an architect or engineer measure the place before any contract is signed.

Mr. Wagner said it was more than two decades ago, when many buildings were being converted to co-ops, that he began noticing that the square footage numbers were being cooked.

“Some of the sponsors converting the buildings started measuring not from the interior wall, but from the exterior wall,” he said. “Of course, that does not work very well unless you plan on living inside the brick wall itself.”

While a certain amount of variation is tolerated, Mr. Wagner said, “the standard for fraud is a misrepresentation of material fact.”

“There comes a point where it is not O.K.,” he said. “But I can’t tell you whether it is 2 percent or 20 percent.”

One buyer, Glenn Evans, a senior vice president of Estée Lauder, is sure that he was defrauded. When Mr. Evans and his partner, Calvin Poon, moved back to New York from Shanghai in 2009, they told their broker that they wanted a place with more than 2,000 square feet.

“I must have showed them 40 or 50 apartments,” said Robert Beacham, a broker at the Real Estate Group of New York.

But it was not until they walked into a two-bedroom co-op apartment at 1200 Broadway, a former hotel built just after the Civil War, that they knew they had found their new home. The building’s mansard roof, ornate windows and high ceilings were all part of the draw. But so was the price per square foot. Mr. Evans said that the apartment was listed at 2,170 square feet.

“We did all our calculations based on the price per square foot,” he said. At the time, the broker representing the seller — who could not be reached recently for comment — insisted that the price per square foot was well below market value.

The seller was asking for $1.749 million, and Mr. Evans countered with an offer of $1.65 million, which was accepted. But as part of the loan-approval process, the bank did two appraisals, both of which flabbergasted Mr. Evans. The bank found that the apartment was either 1,634 square feet or 1,741 square feet. Admittedly, the place has an odd layout that makes it difficult to measure. But nobody was coming up with anything near 2,170 square feet. Mr. Evans hired an architect to check again. The third measurement came in at nearly 1,800 square feet, convincing him that he had been deceived.

When Mr. Evans tried to negotiate a lower price based on the bank’s assessment, the seller refused. Mr. Evans said he was told he would lose his 10 percent deposit if he backed out.

He sued the seller and the brokerage firm, Prudential Douglas Elliman. Mr. Evans claimed that the selling broker knew the apartment was not 2,170 square feet — a size given in past transactions — but continued to use the inflated figure.

“We just felt we were misled,” he said. “There was a deliberate, coordinated action by these people to rip us off.”

The case against the seller was dismissed when a judge determined that the seller had had nothing to do with the marketing of the apartment. Prudential Douglas Elliman contested the suit, which Mr. Evans recently dropped because it would have been too costly to continue, he said. A spokeswoman for Prudential Douglas Elliman said it never comments on litigation involving the company.

Mr. Evans and Mr. Poon went through with the deal. Although they say they love the apartment, they are still bitter about the experience.

“They were fighting this like a class-action suit,” Mr. Evans said of the brokerage. “It would open a whole Pandora’s box of liability.”

Because brokers are generally careful to list square footage as an “estimate” or “approximation,” there is often little recourse for buyers.

For that and other reasons it is unwise to place too much emphasis on square feet as a basis for comparison, said Douglas Heddings, the president of the Heddings Property Group.

“First and foremost,” Mr. Heddings said, “I think all the weight that is put on price per square foot, especially in Manhattan, is ludicrous.” He is particularly skeptical of comparing apartments in different buildings based on their listed square footage.

“Very rarely can you compare two units unless they are units that are in the same building and were measured using the same standards,” he said.

Frances Katzen, an executive vice president of Elliman, said a number of her clients had bought apartments that turned out to be smaller than they had been told. She counsels her clients to focus not on square footage, but on what similar properties in the same building have sold for in the past.

She is currently showing a duplex apartment at 468 West 23rd Street. The owners, who have moved to Australia, bought the place several years ago without the help of a broker. They paid $2.1 million, thinking that the apartment had 2,100 square feet. The size estimate included the 700-square-foot backyard.

When they went to sell, Ms. Katzen said, the owners were disappointed to learn that outdoor space is not typically counted as part of overall square footage. So instead of 2,100 square feet, the apartment is listed at 1,400 square feet, and priced at $1.85 million.

Renters are often swayed by square-footage figures, said Clifford Finn, the managing director for new developments at CitiHabitats.

“Renters don’t necessarily calculate the rent based on price per square foot,” he said. “But often, they will come in with a very specific idea of how much square footage they need.”

However, more often than not, neither the renter nor the landlord in older buildings has any idea of the true size of an apartment.

“In more than half the walk-up apartments in Manhattan,” he said, “no one knows the true square footage. And renters will come in saying they cannot live in less than 750 square feet, but will have no idea what 750 square feet is. You show them something that is 640 feet and they are like, ‘This is great.’ ”

Even for professionals, square footage can still hold surprises.

Pamela Liebman, the chief executive of the Corcoran Group, said that when her company was renewing its lease on office space in SoHo, the landlord came to her with unexpected news.

“We were paying rent based on 12,000 square feet,” Ms. Liebman recalled. “He said, ‘Your space is now measured at 14,000 square feet.’ ”

The landlord wanted to charge more based on the new calculation. Ms. Liebman replied that the space had not magically grown 2,000 feet overnight.

“We had a war over it,” she said. The landlord eventually relented.

Although it was commercial real estate — which has a different set of rules when it comes to measuring square footage, as well as its own, often more egregious, variations in measurements — it offered a reminder of just how unreliable size estimates can be.

“I think we have all become too obsessed with dollars per square foot,” Ms. Liebman said. “Smart buyers should look carefully at the offering plans or have the apartment measured themselves.” And, she added, always keep in mind that “everyone seems to have a different tape measure.”

Authored by Marc Santora of the New York Times.

For more details on the Minneapolis real estate market please visit this site.

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New building in the Mill District!

The American Academy of Neurology is the world’s largest professional association of neurologists. Founded by the chair of the neurology department at the University of Minnesota in 1948, the American Academy of Neurology has more than 22,500 neurologists and neuroscience professionals dedicated to promoting the highest quality patient-centered neurologic care. Mortenson Construction, along with ESG Architects Inc. and 20 Below Studio, will break ground on the new AAN headquarters in early 2011 with the building scheduled to be ready for occupancy in spring 2012. The five-story building features a sensory garden, roof-top terrace and state of the art meeting space capabilities. The Academy will also provide electricity to vendors of the Mill City Farmers Market through outlets strategically placed along the exterior of the LEED certified building.

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Condo inventory shrinks at the sweet spot in the Minneapolis market

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Minneapolis Condos & Lofts Foreclosures

  I have been working with plenty of Buyers these days that are asking about condo and loft foreclosures in downtown Minneapolis.  Many of them want to know how to go about seeing these units and more importantly if they are worth checking out.  Others are asking the big picture question everyone seems to want to know which is: where is this market going?  My response on this has been a few stats from 2008 and also some qualitive data that I see with the Buyers and Sellers that I come into contact with.  Looking at a few stats 2008, downtown Minneapolis started out with roughly 800 or so listings, as of 12/1/2008 70% of those listings have gone pending or sold which is roughly the same amount of activity that has occured in 2007–not amazing year over year numbers however not bad given the times.  The average (mean) price of a new-construction condo in 2008 is currently 10.8% higher than 2007; $389,094 in 2008 vs. $351,205 in 2007 for a never-lived-in 1-2 bedroom, 1,450-square-foot Downtown home.  Couple this with the fact that every weekend when I hold an open house I get the same consistent buyer demographic: everyone from all walks of life wants to make the move downtown.  Bear in mind these events are happening in trying economic times.  My point is despite this ecomonic period buyers are still making the decision to purchase downtown.

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Gas Prices driving the change to live in Downtown Minneapolis?

I have noticed more and more, when I sit down with clients to find out the reason for choosing to live in downtown Minneapolis over the burbs a big issue that comes up is: Transportation Costs.  As gas prices trend upward it has struck a nerve with Buyers and the market is responding.  We are seeing much more Buyer and Seller activity within the downtown core than anywhere else in the market right now and to be honest I don’t see this changing anytime soon.  In the past Buyers lived the urban life for a variety of reasons.  Now Buyers are being lured into city living now for some very specific economic reasons-transportation costs.  It is universally accepted that low gas prices-while they move up and down a bit-are a thing of the past in our country.  As this happens I see more Buyer’s taking a step back and asking a serious question: How much time and money do I want to spend commuting?

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