Construction on Minneapolis' new Gateway skyscraper expected to begin soon

The Minneapolis skyline has been mostly untouched for nearly 20 years.

By the end of June, the city is expected to finalize the sale of the former Nicollet Hotel Block for the Gateway project, a 37-story, mixed-use tower that will become one of the 10 tallest buildings in Minneapolis and one of a few office skyscrapers to be built in the Twin Cities this century. Construction is expected to start soon after, though some work has already begun on the site.

Nearly five years in the making, a lot is riding on the project's success. City advocates said the Gateway will be a quality addition to downtown, bringing the city its first five-star hotel and helping enliven an ignored portion of the northern end of Nicollet Mall.

"When you are coming from the north into downtown, it is going to be an eye-catcher," said Joe Tamburino, chairman of the Downtown Minneapolis Neighborhood Association.

The $10.4 million land sale will also be a boon to the city's coffers by adding to the tax base and helping to replenish the city's development fund from which money has been set aside for affordable-housing initiatives.

"It is really going to be a landmark project," said Herb Tousley, the director of real estate programs at the University of St. Thomas.

Tousley likens the scale of the Gateway project with its array of uses to the immensity of the development of the East Town district of the city surrounding U.S. Bank Stadium.

The Gateway will be the largest single project ever undertaken by developer United Properties, which is also building the Nordic office building in the North Loop and working as a developer and investor in the repurpose of the former Dayton's store.

"Our overriding goal is to deliver an exceptional project that lifts and enriches the immediate neighborhood of the north end of Nicollet Mall and the broader community," said Bill Katter, president of United Properties Development. "And it delivers some exciting new opportunities into the region and the state as a whole."

Katter declined to provide more details about the project until after the sale closed.

What is known is that the project is expected to include a Four Seasons Hotel and Resorts, offices with a large chunk going to RBC Wealth Management and a small number of high-end condos. The Gateway is expected to be completed in 2021.

"Anytime you have a new building of this finish level and caliber there's going to be an excitement," said Jim Kenney, a broker who focuses on downtown Minneapolis for real estate firm Colliers International.

Multitenant speculative office projects have been rare in Minneapolis, where most developers now line up tenant commitments to help secure the financing needed to start construction or have clients that elect for single-tenant, "built-to-suit" office space created to their specifications.

The Gateway will bring more than 532,000 square feet of office space into a downtown market which already has plenty of empty space becoming available, including the Dayton's Project and the new hole that RBC's departure will leave in RBC Plaza, Kenney said.

In the first quarter of the year, the Twin Cities multitenant office market experienced 181,000 square feet of negative absorption after six quarters of positive growth, according to a Colliers report released last month.

Long road

It's been a long road for the Gateway development that was originally supposed to begin construction three years ago.

Back in the fall of 2014 when proposals were requested to develop the city-owned parking lot on the southeast corner of Hennepin and Washington avenues where the Gateway will be built, city officials had high expectations. The site was part of the Gateway District and used to be the location of the Nicollet Hotel, a castle-like stone fortress that was demolished in 1991.

"The city expects submitted proposals to return this block to prominence in downtown and considers this to be an opportunity to introduce an iconic, area-defining development," city officials said, in the request for proposals.

The structure had to be at least 20 floors tall and introduce a mix of uses, with a preference for green space and a design to allow for future streetcar lines and a possible skyway across 3rd Street from the Minneapolis Central Library.

At the time Mayor Jacob Frey, then a City Council member, called the block "arguably the sexiest parcel in the city, and consequently we will not settle for anything short of iconic."

Four developers submitted proposals including an ambitious but short-lived pitch to build a sleek 80-story tower that would have dwarfed the IDS Center. The city ultimately chose United Properties, whose original 36-story design featured a plaza with a webbing-like pergola and a sweeping staircase and vertical LED lighting down the tower that was supposed to resemble the movement of the Mississippi River.

But by the beginning of 2016, United Properties had sought leeway to make the tower smaller. By that time, United had not only lost its apartment developer but also the team's original architecture firm and what it thought would be its hotel brand.

While some City Council members expressed concern, United Properties later revealed that Four Seasons was involved in the development, giving the project an upscale participant. New designers had also added a nearly seven-story spire.

However, by the end of the year, United Properties requested more time from the city to secure financing as intended equity partner Goldman Sachs backed out. United Properties received a series of extensions from the city to solidify the project.

Last year the project received a big lift when RBC Wealth Management announced it would be a major office tenant in the building. By summer, however, United Properties offered new plans for the building that jettisoned a hotel, citing unfavorable market conditions.

Finally, the current plan emerged that included the hotel along with the residential and office space. United Properties and the city finally agreed in January on the Gateway design including a controversial RBC sign at the top of the building's exterior. The lighted spire was dropped, though city staff members have said the building's planned setback terraces made up for it.

"We're not trying to set records," said City Council Member Steve Fletcher, referencing the ill-fated 80-story building proposal. "But it's a pretty impressive building."

The Gateway project will stand 503 feet tall, a foot shorter than the tallest building at Fifth Street Towers, landing the Gateway as the ninth-tallest Minneapolis building when completed.

It's been awhile since Minneapolis has seen a new office skyscraper. The Foshay building had ruled the skies as the tallest building in Minneapolis from 1929 until 1973, when the glass-walled IDS Center took the crown and has reigned as the tallest ever since. The 1980s and early 1990s brought a spike of new glassy towers. Since then, it has been mostly residential buildings that have kept cranes busy, though there have been some outliers such as the pair of Wells Fargo towers completed in 2016 in what city planners call East Town.

Later this year, work will begin on more skyscrapers. A groundbreaking for the Eleven condos building in the Mill District is anticipated for this summer; site prep and utility work has already begun. Another luxury condo building called the Alia is planned to break ground across the river from downtown by the end of the summer.