Tougher sell at Whitney

The transformation of the former Whitney Hotel to a 25-unit condominium is drawing to a close, and by all accounts, it's been a marathon.

Real estate investor and developer Ned Abdul bought the property in a foreclosure auction for $4.65 million about three years ago. Today about half the units have been sold and are occupied. Some unsold units are being finished, and others won't be completed until they're sold.

How soon that happens is anybody's guess. Michael Roess, a real estate broker and partner in the project, acknowledges that the redevelopment took longer than expected and was begun at the peak of what is now a weaker condo market.

"We underestimated the length of the city process," said Roess of the approvals required for some changes to the property in the St. Anthony Falls Historic District.

This isn't the first time the Whitney has been plagued by bad timing. When it opened as a hotel in 1987, it sat amid vacant warehouses and mills. It attracted celebrity guests like the Rolling Stones and Janet Jackson but struggled to generate enough ongoing business and closed in 2003.

Abdul acquired the property after another group of investors that had purchased it and planned to convert it to luxury condominiums faltered. For a while, he considered renovating it and keeping it as a hotel.

"It's probably one of the worst business decisions I've ever made," Abdul says of the choice to convert it instead to condos. "It won't be one of my most lucrative projects."

Steve Roland, another Whitney partner, is more blunt: "In today's economy I would not see ourselves making a profit."

$30 million conversion to condos

The post 9/11 boom in travel and the riverfront's revival as a cultural and entertainment hot spot, including the opening last year of the new Guthrie Theater, could have made the Whitney an ideal place for a hotel. Keeping it a hotel also would have greatly lowered the project's $30 million cost, Abdul said.

To pull off the conversion to condos, the developers had to add balconies and larger windows in the original part of the building, constructed in 1879 as the Standard Mill. City planners had to review those alterations and changes to a riverfront plaza to accommodate underground parking. Another proposed change -- a three-story addition to put nine units on top of a newer section of the hotel -- had to be approved, although it later was dropped by the developers because of the slowdown in condo sales, Roess said.

For Abdul, the Whitney could be a departure from a string of successes in repositioning older, sometimes distressed buildings.

In Minneapolis, Abdul's holdings include the Lumber Exchange Building on Hennepin Avenue, which was only half-full when he and sometime partner Ken Sherman bought it out of receivership in 2004. As of June 30 the building was nearly 90 percent occupied, according to United Properties.

Abdul and Sherman also have redeveloped several Warehouse District properties, including the Wyman building, where advertising firm Colle + McVoy relocated from Bloomington.

Abdul, on his own or with partners, also has acquired and redeveloped properties in Uptown, St. Paul's Lowertown neighborhood, and area suburbs. Abdul won't disclose the size of his holdings but says he also has properties outside Minnesota.

Abdul and his company, Swervo Development, also have been associated with some of Minneapolis' most notorious recent developments. They include 607 Washington Av. S., where several units have been foreclosed, and the Sexton, where development partners have sued each other and also face foreclosure on project loans. However, in both cases the problems arose after Abdul sold the properties.

Sherman said Abdul is controversial because he doesn't fit the button-down developer stereotype.

"He's part Egyptian and part Puerto Rican. He has a shaved head, dresses like a hip-hop guy and drives expensive cars," Sherman said. "He might not stick out if he was in Miami, but he does in Minneapolis."

Faceoff with union task force

Abdul and Swervo also have gained notoriety because of an ongoing dispute with the Twin Cities Development Task Force, a group of about a dozen building craft unions that claim Abdul cuts costs by employing workers who are sometimes inexperienced and ill-equipped.

"Everything Ned builds is on the cheap, and he exploits workers," said group organizer Al Kearney of the Laborers District Council of Minnesota & North Dakota.

Kearney said the task force was formed early in 2005 after they heard reports of untrained workers doing demolition at night at the Sexton. The group blamed Swervo, although Abdul said his company did no work at the building, because he already had sold it.

Since then the task force has made its case against Abdul more public in a YouTube video and by demonstrating in front of some developments. That includes the Whitney, where Kearney says some workers told his group they didn't get training or proper equipment and received substandard wages. Kearney said his group has met with Abdul but made no progress in getting him to change.

Abdul vehemently denies the group's claims, which he says are aimed solely at his practice of sometimes employing nonunion workers. He said more than 70 percent of the construction money at the Whitney has gone to unionized subcontractors.

Occupational Safety & Health Administration (OSHA) records show that Abdul and Swervo have been cited for exposing workers to unsafe conditions at the Whitney and projects in the Warehouse District and Uptown. The violations mostly centered on exposing workers to "fall hazards" like unguarded openings in walls or floors.

At the Whitney, the OSHA violations occurred in the summer of 2005 when Swervo was in charge of demolition. OSHA has continued periodic inspections at the Whitney but has issued no citations since work was taken over in the fall of 2005 by St. Louis Park-based Diversified Construction.

Abdul, Roess and Roland said they don't believe the group's protests, which include a banner displayed most weekdays and on weekends during open houses, have had much of an impact on sales. Roess said the marketing team lowered prices on some units after realizing there wasn't enough buyer interest over $1.5 million. Those now are priced at about $1 million to $1.3 million, and one was sold just a couple of weeks ago. The building's condos range from $300,000 to $2.8 million.

"This is one of those projects where if something could go wrong, it did," said Barbara Brin, a Coldwell Banker Burnet agent who is marketing the Whitney.

For example, workers once neglected to cover the roof with a tarp at the end of the day. "Wouldn't you know, that night it rained," she said. The water poured through floor openings straight down to the ground-floor lobby, damaging some work that already had been finished.

"But the end result is gorgeous," said Brin of the honey-colored brick building where the units incorporate many features of the original mill, like brick and limestone walls.

With other riverfront projects being shelved because of the depressed condo market, Brin said the Whitney could be among the last in the Mill District for quite some time.

Susan Feyder • 612-673-1723

Susan Feyder • sfeyder@startribune.com