Almost four months after getting final city approval, the developers of 602 North First, a high-end, 30-unit condo in Minneapolis' North Loop neighborhood, pulled the plug on the project Monday.
"We just don't see sufficient demand for this type of high-quality construction," said Curt Gunsbury, owner of Solhem Companies.
Gunsbury and business partner Robb Miller, of TE Miller Development, planned to build an eight-story glass-and-concrete building in place of two low-rise buildings that were to be demolished. The units in the new building would have ranged in size from 1,700 to more than 3,000 square feet and were priced from $700,000 to about $3.3 million, far more than most new homes sell for in the Twin Cities.
The developers made the decision just a couple of months after beginning the presale process. They needed commitments for at least half the units before they could begin construction.
The decision came despite the scarcity of condo construction in the downtown housing market and around the metro area. At the current sales pace, there are only enough listings in downtown and surrounding neighborhoods to last about two months, almost a month less than the broader metro area, according to the Minneapolis Area Association of Realtors.
Joe Grunnet, broker at the Downtown Resource Group, which is in the North Loop and specializes in selling downtown condos, said that while selling high-end condos can take much longer than more affordable units, the resale market in the area is very strong and that he was "shocked" they halted the project so quickly. He said most of his company's condo listings sell before hitting the broader market via a "pocket listings" approach.
"Those guys are smart developers, so maybe they came up against something unforeseen," Grunnet said. "It's a great location, and something great will go there."
For several years, financing condominium projects has been difficult in the Twin Cities after a spate of lawsuits against developers over alleged construction defects that, under state rules, become their responsibility. Developers say that, even though there's plenty of demand for condo units, they won't build them until the state's warranty laws are changed.
Only one developer, Jim Stanton of Coon Rapids-based Shamrock Cos., has pressed ahead with condos in downtown Minneapolis under those circumstances.
Last year, Stanton quickly sold nearly every unit at Stonebridge Lofts in the Mill District. Last month, he started building Portland Tower, a 17-story high-rise at the corner of 8th Street and Portland Avenue S. with units that will range from $300,000 to $800,000. Stanton also recently purchased a Mill District site where he plans to build upward of 400 condo units.
Last month, the developer of proposed upscale condo project in the Linden Hills neighborhood pulled the plug on the 19-unit project citing the exit of a key investor. In that case, eight of the units already had buyers.