North Minneapolis Is Poised For New Growth
With three current projects in the pipeline, St. Paul-based Wellington Management Inc. has emerged as the busiest private real estate developer in North Minneapolis, the most challenging corner of the metro to draw new investment.
- At 2101 W. Broadway Ave., Wellington plans a two-story, 35,000-square-foot medical office building. City documents estimate the Wellington project budget at $12 million.
- At 212 James Ave. N., the developer is planning to overhaul a former warehouse space into 50,000 square feet of “creative” office space; Minneapolis-based Artspace, a developer of affordable apartments for artists, is planning 110 apartments at the site as well.
- In January, the St. Paul firm was the lone developer to respond to a city request for proposals for three city-owned parcels at Van White Memorial Boulevard and Second Avenue North.
For decades, this area in the Twin Cities has grappled with the metro area’s highest poverty, unemployment and crime rates,—all of which have discouraged new investment from commercial real estate developers, as well as other businesses. It has the highest concentration of African-Americans (50 percent of the population), with 42 percent of its black residents living below the poverty line, according to a 2014 report from the Local Initiatives Support Corp. and Center for Urban and Regional Affairs at the University of Minnesota. This compares with a poverty rate for white residents across the city of Minneapolis of 12.9 percent.
So if competitors remain wary, why does Wellington like the neighborhood?
David Wellington of St. Paul-based Wellington Management Inc.
“The urban nature of these sites doesn’t scare us away,” says David Wellington, director of acquisitions and development for Wellington Management. He says that his company takes a long-term view of real estate and is not banking on a quick payoff from the projects.
Wellington previously developed Penn Lowry Crossing, a North Minneapolis retail project home to an Aldi grocery store and five other tenants. “For us the investment horizon is lengthy,” says Wellington. “That’s a different orientation than a lot of folks.”
In South Minneapolis, Wellington notes that the company has done a series of investments and developments in the area around Lake Street and Hiawatha Avenue, another area with its share of economic challenges. Wellington says that the company’s incremental but consistent investments there for more than a decade have helped to improve the area.
Wellington points to the increase in tax value generated by the company’s investment and developments there. When the company first acquired the Hi-Lake Shopping Center in 2004, it was about 40 percent vacant and had an assessed tax value of $6.1 million.
Today Wellington says that the Hi-Lake retail property is 100 percent occupied and has an assessed value of $10.5 million. Wellington also developed a condo project (Corridor Flats) and a senior housing building (Lake Street Station) on previously vacant parcels next to the center. Wellington says that today the combined retail and housing elements have a combined assessed value of approximately $28 million.
Wellington’s plans on the north side are encouraging for neighborhood residents who want to see projects that aren’t driven solely by nonprofit or public sector entities. Too often, development in North Minneapolis depends on public subsidies, says Minneapolis City Councilmember Blong Yang, who represents a section of North Minneapolis.
“The folks that are doing the work [in north Minneapolis] require some sort of government help … a subsidy or a loan or a grant of some sort,” says Yang.
Thor Cos.’ $36 million mixed-use project at 1256 Penn Ave. N. is the biggest project on the north side right now. Thor founder and chairman Richard Copeland first floated the ambitious plan a year ago, with a plan to relocate Thor’s headquarters from Fridley to the North Minneapolis project. (Twin Cities Business was the first media outlet to report on Copeland’s plans, in “Spurned Turf,” March 2016, about the North Minneapolis business climate.)
Minneapolis-based retailer Target Corp. stepped forward as a partner on the project in January, a significant shot in the arm for both the project and the larger neighborhood.
“We decided we should really lean in here,” says Brian Cornell, Target’s chairman and CEO. “We really want to make sure we’re making a difference in the north side of Minneapolis. . . . We’re really going to help bring this to life with the Thor team.”
In fall 2015, the Target Foundation pledged $3 million to support the Northside Achievement Zone, a nonprofit group working to help break the cycle of multigenerational poverty in the area by helping kids do better in school and graduate from high school “college ready.”
The connection between Thor and Target emerged from discussions as part of the Itasca Project, says Thor CEO Ravi Norman. The behind-the-scenes Itasca Project brings together local CEOs to focus on community issues.
Thor’s project will include more than just its own company: The multi-tenant project calls for 92,000 square feet of office and retail space. From Norman’s perspective, he hopes that that new development is just the beginning, calling it “kind of an initial piece for the broader work that we’re all trying to do to really develop a healthy community here, focused on North Minneapolis.” Thor’s project is slated for completion in spring 2018.
Target entered a master lease agreement that in turn helped conclude overall financing so the project could move forward.
The Thor project is one element of a larger redevelopment project at the intersection of Penn and Plymouth Avenues. Hennepin County is also undertaking a $67 million project to expand its NorthPoint Health & Wellness Center clinic at the corner. The county is a key partner for Thor: Hennepin County is paying $14.3 million to own 420 of the 620 parking stalls in Thor’s project.
But there is more in the pipeline beyond Thor’s and Wellington’s projects. The long-empty building at 4414 Humboldt Ave. N. is slated to house the North Market grocery store, set to open in October 2017. The grocery store will be about 16,000 square feet and will be owned and operated by Pillsbury United Communities, a Minneapolis-based nonprofit. The building will also include wellness and community space.
PUC has raised $3 million of a $6.3 million capital campaign for North Market. Business backers who have provided financial support so far include Target ($300,000), Cargill ($500,000), Best Buy ($250,000), General Mills ($250,000) and other partners.
A short-lived Kowalski’s Market had operated out of the building, but it has been vacant since 2005. The project grew out of comments from the community about the lack of grocery options on the North Side.
“The reality is that there’s 67,000 residents and one grocery store,” says Chanda Smith Baker, PUC’s president and CEO, in reference to the Cub Foods store on West Broadway Avenue. “We continue to look for investors in the project. . . . We are knee-deep in a capital campaign.”
At another site, the craft beer boom has apparently reached the North Side. The former Glenwood Inglewood Water Co. facility along the Glenwood Avenue corridor now houses Utepils Brewing Co., which has its production facility and a taproom on the site. Utepils is the anchor tenant in the renovated project and is spending $4 million on its space, including equipment. The unique site was a big draw, says Dan Justesen, president and founder of Utepils.
“I wanted a site people would drive by other breweries to go to,” says Justesen.
Wellington’s site on West Broadway Avenue is next door to the Capri Theater, a nonprofit performance and community space, which has a $9 million expansion slated to start in 2018.
While North Side residents and boosters are encouraged by Thor and other projects, much work remains to be done.
“I wouldn’t say we’ve gotten to that tipping point . . . we still need some catalytic movement,” says Tawanna Black, executive director of the Northside Funders Group, a nonprofit collaborative of foundations, companies and government agencies that financially support programs and projects in North Minneapolis.
As the only respondent to the city’s RFP for its parcels at Van White Memorial Boulevard and Second Avenue North, David Wellington says that the sites could be home to a project similar to the Greenway Office Building that the company owns near Lake and Hiawatha. The 60,000-square-foot Greenway building in south Minneapolis combines office and warehouse space. If Wellington’s plans move forward, it would become the company’s third current north Minneapolis project in the pipeline.
With an eye toward potentially developing a “Greenway North” project, Wellington says, “It’s got the potential to be a prime corner.”