Hotelier Harshal Patel launches little LuMinn amid big competition downtown

Five years after he first saw the vacant Federal Plaza building, Harshal Patel has transformed it into the LuMinn Hotel Minneapolis.

In a downtown of 200- to 500-room behemoths, Patel, 27, who hails from a Rochester motel-owning family, visualized a boutique hotel when he visited the dilapidated property. He was a business student at the University of Minnesota.

"We're the small guys," Patel said last week in the luminescent lobby lounge of the 55-room hotel. "We're trying to bring a high-end, big-city feel to an intimate setting that will be a destination of choice. The lobby is upbeat, energetic.

"And I've tried to create a concept that appeals to a broad audience."

Indeed, Patel and several close associates struggled to finance the $7 million-plus acquisition-development-construction project, which went over budget thanks to construction delays on the five-story, century-old building. He bought the property in 2014 for $1 million, a third of the price that it last traded hands for before the Great Recession.

"Things come up when you're cutting through 8-inch floor slabs," he said. "We had to order a lot more steel, and there were issues with the utilities, and it just took more time and labor."

And expense, including amenities and frills that Patel and associates believe make it a distinctive property.

"I think we've finally closed this chapter," Patel said of getting the LuMinn to the light of day and paying customers. Now the challenge is building occupancy in a neighborhood of giant competitors.

Just this month, the neighboring Hotel Minneapolis on Fourth Street at Second Avenue, was sold for $46 million to KHP Capital Partners, a San Francisco investment outfit. It was part of the Marriott "Autograph Collection." An extensive remodel is planned. It's unclear if it will retain the same brand.

The last several years have been boom times in the hotel trade.

Minneapolis room occupancy peaked at a record 74 percent in 2015, the same year that the average daily hotel rate hit $153 a night, according to Meet Minneapolis, the city's convention and visitors bureau.

The rate slipped to 71 percent last year. Anything over 70 percent is considered good in the business.

The Downtown Council's "Downtown 2025 Plan" in 2011 called for 1,100 hotel rooms by 2025. That goal was met by 2016, as hoteliers rushed to meet the downtown expansion as a business and entertainment center.

"I can't really remember a time when we have seen this kind of hotel boom," Steve Cramer, head of the Minneapolis Downtown Council, said last year.

Patel said the market doesn't faze him, although the goal is to exceed the Minneapolis occupancy average. Several metro-area banks shied from the project because of downtown competition. And Patel, although experienced, is not exactly a big brand.

His principal partners, Minesh Patel and Jayesh Patel, hail from a large group of Indian descent in the hotel trade. They also own a Holiday Inn Express in Woodbury and a Holiday Inn in Bloomington.

Federal Plaza once housed a Montessori school on the main floor and offices on the top four floors. It's dwarfed by the Hotel Minneapolis on the west and a parking ramp at Third Avenue and Fourth Street, on the east.

Regardless, LuMinn is proof a century-old hulk can be transformed into a stylish, contemporary boutique hotel.

The surprisingly spacious rooms, complete with refrigerators and microwaves, boast a standard rate of $150 to $250 a night, except for the larger suites.

There's a bright, comfortable lounge and an exercise room. There were discounted rooms available recently. The new team has just started to market, following a soft opening to get the bugs out.

"This is our baby," Patel said of his dream to own a downtown hotel.

"We plan to be a long-term owner."