Category Archives: Projects

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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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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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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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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Whole Foods + Apartments Coming to Minneapolis!

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Milliken Development, owner of the former Washington Ave Jaguar Dealership announced January 14th they plan to go before the Minneapolis Planning Commission to finalize the details of a mixed-use project. The project currently is set to include a Whole Foods on the first floor with some other commercial components. Above the ground level would be six floors of high-end apartments totaling approximately 250 units. The developers noted the block would be developed in such a way as to allow future expansion of an additional two towers reaching somewhere between 12 and 20 stories respectively. Once approved through the city Milliken Development would begin demolition as early as spring of next year. The developer plans to achieve a base LEED certification (Leadership in Energy and Environmental Design), which is a designation for sustainable design.

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Video Tour of Minneapolis Lofts

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Restaurants, Condos & Parks brewing along the Minneapolis Riverfront!

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In the past few months there has been a slew of restaurants that have opened along the Minneapolis Riverfront in Northeast Minneapolis as well as completion of the latest condo projects: Cobalt, Flour Sack Flats and the full on construction of the Phoenix on the River and most importantly the latest in a series of new parks to the Riverfront: Water Power Park on Main St SE.

The latest restaurants include Picosa on Main St SE next to some of the well dining joints along the river such as Vics, Tuggs and Pracna on Main. Picosa features a casual latino dining experience and begins serving lunch and stays open well into the night. From the outdoor seating the views of the riverfront and Minneapolis are flawless.

The Brass Rotisserie about 6 blocks north of the river on 528 University Ave and opened yesterday (6/27.) Owner/Chef Alex Roberts of Restaurant Alma–is going for a casual Carribean style menu featuring rotisserie chicken and slow-roasted pork with side dishes of grits, rice, beans and sweet potatoes.

Kim Bartmann owner of the Bryant Lake Bowl in Uptown is also opening her third eatery in Northeast called The Red Stag –a Northwoods style supper club with a green twist. The Red Stag will be the first restaurant in the state built to meet the standards of Leadership in Energy and Environmental Design (LEED), the national standard for green building.

Two weeks ago during the Stone Arch festival another park in St Anthony Main was opened: Water Power Park. The park which connects St Anthony to Hennepin Island via a walking bridge gives visitors close-up views of the falls as well as an amazing view of the city.

 

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The Master Plan of Saint Anthony Main

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It seems like only a few months ago we finally had our first urban grocery just across the River from downtown in Northeast Minneapolis. Since then the area has seen quite a uptick in traffic both in cars and pedestrians but it’s been a long time coming.

Once known as a heavy industrial working-class area from the early 1900s till only recently in the 80s when developers started seeing the potential that laid ahead as the exodus of the milling era was abandoning the riverfront. Since then the area has slowly developed all types of residential and commercial projects, most notably of recent addition would be the Lund’s Grocer that opened in the Cobalt Condominiums building off University and Central Ave.

In recent years attention has focused in terms of development on the strip of Riverfront nestled between Northeast and the University of Minnesota East Bank campus called “Saint Anthony Main”.  This is the last frontier of area along the riverfront in Minneapolis to develop and already plans have started to clearly take shape.  In the 80s this area was the place to be as recent apartments such as the Falls/Pinnacle and condominium projects LaRive and Winslow House had lured tenents and owners alike out of the burbs and into downtown Minneapolis.  Riverplace was built along Main Street that housed numerous cafes and restaurants that are still in existence today.  There are a cluster of condominium projects now on the market in the area: Phoenix on the River, The Flour Sack Flats and Cobalt Condominiums.  Despite the apparent housing glut on the metrowide level this micro market has seen fantastic sales results of pre-construction sales as well as resales in the area and the momentum doesnt look to be slowing anytime soon.

What are the significant drivers of buyers coming to this area of Minneapolis?

There are a number of reasons why this area has been well-received by the real estate market.  First and foremost the location is ideal as St Anthoy Main is set directly across the Mississippi River from downtown giving anyone proximity and amazing views of the city.  Being along the Riverfront also gives access to some of the main trails running through the city as well as parks complete with the Stone Arch Bridge connecting the area to Downtown Minneapolis.  Having the river separating the area from downtown also gives St Anthony Main a more tight-knit, neighborhood feel.  During the summer the area plays host to a number of Riverfront events ranging from fireworks displays to weekend art fairs in the parks.  The spectrum of residents living in the area varies from large collection of empty nesters that take advantage of the local ammenities to young urban professionals that see the excitement of living downtown but want more of a low-profile neighborhood feel.  A fair amount of residents are students and teachers of the University of Minnesota as well given the fact that the college is blocks away.

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