Solomon Real Estate Group of Eden Prairie is adding to its record of buying overlooked retail developments with a hidden gem called Kensington Park in Richfield.
The property, completed in 2005 on Lyndale Avenue a block north of Interstate 494, was one of the early entrants in the Twin Cities’ current wave of residential-retail redevelopment projects. Its mix of 96 condominiums, 14 townhouse units and 28,000 square feet of first-floor retail represented an early effort by a Twin Cities suburb to generate pedestrian-friendly redevelopment.
“From the mid-1980s to the 2000s, Richfield was pioneering in the field of mixed-use development, and in our minds, Kensington Park has been a tremendously successful project in that regard,” said John Stark, the city’s community development director.
Originally built by the Cornerstone Group with the help of a Metropolitan Council grant and a tax increment financing deal from the city, the property went into foreclosure in 2011, an effect of the drop in property valuations from the financial crisis of 2008.
“Valuations fell below what was owed on the property,” Stark said. “I don’t think it was any reflection on the developer, or anything they may have done wrong. It was a victim of the changes in the market.”
But Cornerstone had brought in a strong mix of retail tenants, including Potbelly Sandwich Shop, Chipotle Mexican Grill, Starbucks Coffee and a handful of others, that remained stable.
In 2012, the retail block was purchased at a bargain-basement price of $3.78 million by Viking Partners, a Cincinnati-based fund that focuses on buying bank-owned and distressed retail properties.
Since then, the Twin Cities economy has steadily recovered, and retail properties — even those within tricky mixed-use settings — have regained their luster for certain types of buyers who have the right experience assessing market niches. That’s why Solomon Real Estate Principal Jay Scott says he seized the opportunity to snap up Kensington Park for $7 million, recognizing it as a stable asset that was still undervalued because of its troubled past.
“It has all the fundamentals that we would look for in a strong property, and personally I’ve always liked the property from afar,” Scott said. “I respect what Cornerstone put together from a design perspective and I do think it was very visionary in that regard.”
Solomon almost didn’t get the property. A California firm came in with an offer while it was putting its initial deal together. When that firm’s financing fell through, Scott said, “We jumped on it quickly.”
Solomon has found a niche in redeveloping high-traffic suburban sites and filling them with expanding restaurant chains and service-retail shops.
The firm is probably best known for developing the high-profile Windsor Plaza, a 135,000-square-foot, mixed-use effort adjacent to Eden Prairie Center that opened in 2009. It also took owns the 13,000-square-foot Knollwood Crossings in Hopkins.
Don Jacobson is a freelance writer in St. Paul. He is a former editor of the Minneapolis/St. Paul Real Estate Journal.