From reimagining the once-vital retail hub Southtown Center to downtown conversions and keeping offices leased all over the metro, Peter Diessner has his work cut out for him as the newly appointed CEO of Kraus-Anderson Companies. The 127-year-old family-owned company comprises four KA businesses specializing in construction, realty and development, insurance, and financial services. He succeeds his uncle, Bruce Engelsma, who remains chairman.

Diessner, who describes himself as a “recovering attorney” —for Fredrikson & Byron, and then Speeter & Johnson with a focus on real estate law— joined KA in 2018. He served in director and vice president roles in KA Financial Services Group and KA Realty & Development before being appointed chief operating officer of KA Companies in March 2023. The company owns and manages a portfolio of 5.73 million square feet, which includes more than 70 commercial real estate properties throughout Minnesota and the upper Midwest.

Diessner talked to TCB about leading the enterprise that his grandfather, Lloyd Englesma, bought from Matt Kraus and Amos Anderson in the 1930s, when it was little more than “a truck, a wheelbarrow and a couple of shovels.” Today, KA manages $1.4 billion in construction.

It’s a heck of a time to be in commercial real estate. What’s the overall state of the Kraus-Anderson portfolio today?

We are actually better off today than we were in 2020. I stepped into leadership right in front of Covid and at that time I was overseeing real estate. You know the saying, “never waste a good crisis?” It was an awful time, but it gave me a chance as a new leader to show people who I am by doing right by tenants. We negotiated rent deferrals with about 90% of our [commercial] tenants and set up a new structure and system to monitor it. Within 18 months, we had 98% paid back. Since about the third quarter of 2023 we’re down to single digit vacancy.

You just recently demolished several of the old empty big box stores at Southtown Center in Bloomington. What’s next?

I affectionately refer to Southtown as the crown jewel of our retail portfolio. It’s one of the most important corners (at I-494 and Penn Avenue South) in the metro. It’s an amazing opportunity to envision what it could be today. We’re still working through plans.

We’ve heard rumors of a “sports anchor.” Care to confirm? Will Southtown remain a retail center?

That’s one of the things we are trying to evaluate. We are not completely locked into retail. Nothing is signed.

You also own and manage a lot of smaller retail centers—what’s working in retail today?

We’ve worked with Cub Foods for 40 years. We just completed a Cub Foods in Rochester. As bricks and clicks go toe-to-toe, we find service oriented centers work well—nail salons, hair salons—things you can’t order online.

Your headquarters are in downtown Minneapolis—are employees coming in?

We were pretty early on getting people back. We instituted a three day minimum policy. It’s evolved since then, some teams come in more often; other specialized individuals not as much, but we’re pretty good on attendance. People see the value in being together. It’s really busy Tuesday-Thursday. I come in every day, and it’s getting harder to find parking where we are in East Town, which is a good thing. Most of our downtown properties are residential and overall, the activity is positive. The Larking, one of our newer residential properties, is leasing up well.

But there are a lot of offices sitting empty. Does the future of downtown depend on building conversions?

We are the contractor on the Northstar project. That’s a real life example of converting an office tower to residential. It’s a very challenging endeavor. We have to be careful thinking that we can make all offices into apartments. It’s a heck of a risk, and sometimes you don’t know what you’ve got until you open it up.

What’s one new development you’d love to see in downtown Minneapolis?

A monument for the Timberwolves’ future championship trophy.

In all seriousness, one of the things that makes our city great is the skyway system. With so much new residential, it’s an opportunity to tie together skyway connections.