A Look at the $400M Harmonia Development
Over the past two and a half years, more and more people have moved to downtown Minneapolis. But, it’s no secret the number of people working in central business district offices hasn’t returned to anywhere near what it was pre-pandemic.
Despite this, there is still a great deal of optimism pumping through downtown. But the narrative has perhaps shifted lately from the belief that it will bounce back the same as it was to an understanding that developers, corporations, restaurants, retailers, and other downtown businesses will have to adjust to a pandemic-driven paradigm shift.
The Harmonia Development underway by Sherman Associates is an example of how developers are adjusting. The development calls for demolishing the building that was once the Wells Fargo operations center and erecting three new buildings on that Washington Avenue block: a 10-story, mixed-income mid-rise apartment building; an over 20-story market-rate high-rise apartment building; and a more than 25-story, mixed-use high-rise building. Sherman purchased the property in September of 2022.
As he takes on new projects, Sherman Associates president Chris Sherman says he’s asking questions like: “Can we look at some opportunities here to convert some of the office space that’s less desirable into higher and better uses? Or, demolish it to bring more opportunities for more people to live downtown and play downtown?” Sherman added: “Ultimately, as more people live downtown and play downtown, there’s going to be more demand for people to want to work downtown too.”
The existing building’s 550,000-square-foot office space is unoccupied, he noted. Matching a “tremendous demand for housing downtown,” more than 500 units on the block are expected to house around 1,000 people once the buildings on the new block are completed.
The downtown population has grown drastically over the last two and a half years, Sherman said. About 60,000 people now live in the area. That’s more than double what the population was 15 years ago, when the area’s population was about about 25,000 to 30,000 people.
“We see trends toward a higher demand for quality affordable housing each and every day,” Sherman said. “So we’re excited about the potential to deliver mixed-income housing on this block and a location that has tremendous access to jobs.”
While housing has been earmarked as a priority for the development, the mixed-use building will also include office space. Commercial real estate tenants are now leaning toward newer, high-quality spaces with an array of on-site amenities, Sherman said. Just this month, Sherman announced it will collaborate with the Fhima family to build out the development’s food and beverage district. The current plan also includes around 20,000 square feet of retail space, though this may increase depending on interest over the coming months.
Sherman is looking at an 18-month timeline to close on its first – and potentially second – round of financing for the project.
“We envision closing on at least two of the three simultaneously in about 18 months. It could end up being all three of the projects simultaneously,” he said. “We will regardless build all of the parking out as part of that first phase of construction.”
This means the current building will be demolished in 2024 to build out a 1,000-stall bellow-grade parking structure. Next, they will construct at least two, possibly three of the new buildings.
“Ideally, we’d like to construct all three at the same time for a variety of efficiencies and cost, just the impact that construction would have on the adjacent properties in the future,” he said.
The company is pursuing subsidies for its 10-story mixed-use development. The majority of units in this building would target tenants with incomes of 60% or below the area median income. This part of the project would require public-private partnerships with the city and state, Sherman said.
“We are having active conversations with the city on the overall development and certainly specifically that mixed-income project as well,” he said, noting there is a tremendous demand for mixed-income housing in the city. Delivering 150 affordable units in mixed-income housing just “scratches the surface.”
Fhima family heads block’s food concept
The Fhima family will work in collaboration with Sherman to create a vibrant food and beverage district, including a flagship restaurant they will own and operate with other local chefs. They will lead the design and recruitment efforts to deliver optimal restaurant and retail spaces within the site along South Washington Avenue.
Downtown is in a period of transition, David Fhima said. This includes bringing more residents into the area, but Fhima believes offices must also exist at the city center.
“I think we’re all looking for the recipe, no pun intended, on how hospitality businesses are going to work post Covid,” he said. “We’re all trying to find out what that recipe looks like. We think it’s really a combination of business, social, entertainment, hospitality, and residential, all working together.”
While the concept is in its early stages, Fhima said he envisions partnering with BIPOC restauranteurs and chefs to offer a range of food options within the block. He also wants to ensure food is affordable.
“It’s going to be what our country is all about,” Fhima said. “If you want to look at an American story, look no further than food. That’s where people from all over the world come in and bring that amazing, rich culture. So we want to bring that to this development.”
Fhima has been highly vocal about his support for downtown Minneapolis. He says he’s bullish on his belief that the heartbeat of Minnesota is downtown Minneapolis, making supporting the central business district paramount.
“I’ve been very vocal about corporations needing to do their part,” he said. “I am all for people working from home. I’m all for people having that flexibility. But if we all work from home, there wouldn’t be anywhere to go to, correct? I’m a firm believer that our experiences are heightened by the environments that they are in.”
More in the works by Sherman Associates
Harmonia is not the only project in the works by this developer.
Sherman Associates is planning to close on $90 million in financing next month to convert Northstar Center’s 330,000 square feet of vacant office space into 217 units of housing. Sherman just opened “Moment,” a 222-unit development on the same block as Thrivent’s new headquarters. This development also includes the first transitional burn victim healing center in the country, delivering 15,000 square feet of space to create 12 units at no cost to burn victims and families as burn victims receive services from Hennepin Healthcare right across the street.
They’re also doing a historic renovation of the J.I. Case building. The second and third level is Sherman Associates corporate office, but the main lower level and the rooftop will be used for entertainment space, restaurants, and retail, along with a spa for the canopy hotel. Chloe by Vincent, a new restaurant also just opened in Sherman Associate’s Canopy by Hilton Minneapolis Mill District hotelas well.
Eventually, Sherman said Sherman Associates is looking to bring in four to five restaurant concepts over the next year to a year and a half.
Sherman Associates currently has about 3,000 rental units in Minneapolis. About two-thirds are for incomes of 60% or below of the area median income.