As Alex Duval sat in a downtown diner recently, a shaggy-haired server in skinny jeans caught a glimpse of the glossy image of an 80-story tower on the table and pulled back the coffeepot for a moment.
“Wow, that’s cool,” the server said.
Duval, the man behind the audacious plan to alter Minneapolis’ skyline with the tower, is out to prove the idea isn’t just something that appeals to young dreamers. It’s got economics, strategy and engineering behind it, he says.
His company, Duval Development, is one of four Twin Cities firms with ideas for developing a prime block at the end of Nicollet Mall with, as city officials have asked, an “iconic” building and public park.
Each developer’s plan has garnered praise and scrutiny, but Duval’s proposal has gotten the most feverish response because the building would soar above its competitors’ — and everything else.
At 900 feet, it would be 100 feet taller than the IDS Center, Minnesota’s tallest building, and defy the conventional wisdom that no new skyscrapers were likely in the Twin Cities.
“I want to disabuse the notion that we are just a bunch of people dreaming up pretty pictures,” Duval said over coffee at the diner. “The market is strong, the proposal is sound and all of the people at the table are serious, analytical people who are ready to make it happen.”
The city’s requirement for the so-called Nicollet Hotel Block, named for the building that stood there for decades until 1991, was for a building of at least 20 stories. The other developers propose buildings ranging from 30 to 36 stories.
Commercial real estate experts are skeptical Duval could find enough office tenants to fill it. Duval says they wrongly assume he wants to build an office tower.
The building he calls Nicollet Gateway will be primarily residential. There would only be about 20,000 square feet of office space on the first six floors, which he says may be leased by a multinational company he’s been talking to but isn’t ready to announce publicly.
Duval said demand for housing downtown continues to grow and pointed to the Minneapolis Downtown Council’s 2025 Plan, which has made doubling downtown’s population from 35,000 to 70,000 residents its top priority.
“That would mean about 3,000 new residents moving into downtown every year for the next 10 years,” Duval said.
He said the number of apartment units in Nicollet Gateway, 225, is similar to the competing proposals. Of the 50 floors planned in Nicollet Gateway for apartments, 25 would have five units per floor and 25 would have just four, each with a corner view.
“Really, the footprint of this building is very small, and so it’s slender,” Duval said. “Why is it so slender? It’s to have the largest public space possible.”
The park will take up about 35,000, or nearly half, of the 74,000 square foot block. “The idea is for that to be significant, not some token, pocket park,” Duval said.
The 42-year-old developer, a relative newcomer to the Twin Cities, believes the affluence and productivity of the local economy can support the tower.
He also said his team is capable of pulling off the project. For several years in the early 2000s, he designed super-tall buildings in China for a firm run by one of his former Harvard graduate school classmates. After moving back to the U.S., he worked for John Portman & Associates in Atlanta, first as a project manager and then in its capital markets group for real estate development.
His architect is Perkins + Will, an international firm with a local presence. The global head of the company’s design, Ralph Johnson, personally conceived Nicollet Gateway as it’s presented. The structural engineer is Thornton Tomasetti, a global company that builds structures of various scale and is currently constructing in Saudi Arabia what will be the tallest building in the world. And Minneapolis-based Cuningham Group will serve as landscape architect.
“What’s unique about our project is we’ve put together a specialized team … a consortium of experts,” Duval said, which he feels is the proper mix of inside and outside market perspectives. “Sometimes people wait to bring a structural engineer and contractor onboard until it’s too late. We brought them in on Day One to make sure we have a design we can afford to build.”
Duval hasn’t said how much it will cost to build Nicollet Gateway. And the other companies involved in the competition — Doran Development, M. A. Mortenson and United Properties — haven’t revealed cost estimates for their projects either.
Without that information, other players in the real estate business say it’s difficult to know for certain whether Duval’s big tower will work.
“The question people want to ask then is, ‘How much more high-rise downtown residential is going to be needed?’” said Craig Patterson, regional manager of Marcus & Millichap’s Minneapolis office. “There’s still a fair amount of constraint and some pent-up demand for multifamily [homes]. But there’s certainly some cautionary tales out there … but then you look at the new Wells Fargo towers in Downtown East and see there may be a higher demand downtown.”
And when it comes to financing, Andy Deckas, executive vice president of Dougherty Funding, says there’s enough outside interest in Minneapolis that all of these proposals will be on the radar of large investors.
“For a properly conceived, underwritten deal, the Twin Cities are on several people’s target list. So any deal that has that prerequisite and thoughtfulness would get a look,” Deckas said. “People need a place to put their capital and real estate is a very good place to invest right now.”
Institutional investors traditionally put their money in the real estate of bigger U.S. markets, like New York, Los Angeles and San Francisco, Deckas said. But Minneapolis-St. Paul has the demographics and favorable-enough cap rates, or return on a property, to attract them.
“I don’t think anyone proposing on this site will have any problem getting an audience with investors,” Deckas said. “It’s a good site in an improving city.”
Deckas added Minneapolis has risen “a notch or two” in the way that investors categorize prospective investment locations. “It’s more of a grown-up city now than it was ever before,” he said. “The big question is, ‘Has the city grown up enough to handle this?’ ”
Minneapolis had a record year of new construction last year, surpassing the $2 billion mark for building permits. Costs for labor and building materials have risen as a result of the construction frenzy, something all the developers of the Nicollet Hotel Block are considering in their planning.
Duval said he estimates some costs will drop in 2016 when much of the work on the new Vikings stadium and Downtown East office towers will be done. More construction workers will be available after those projects end, too, he said.
City staffers will spend the next two months reviewing the proposals, collecting further information from the developers and hosting neighborhood and community review meetings. The City Council is expected to choose from among the four proposals by April.
Council members Lisa Goodman and Jacob Frey, whose wards split downtown, are expected to weigh in on their preferred plans in the coming weeks.
“I’m extremely excited about the height, but talk is cheap and whiskey costs money,” Frey said. “Right now we need to see the numbers to assure that any of these are feasible.”