Kellogg Square, a signature apartment tower in downtown St. Paul, has been sold for $51 million, a sign of confidence that the market for downtown apartments in the Twin Cities will remain strong.
The tower was sold by Sentinel Management to Bigos Management of Golden Valley, a big player in the Twin Cities apartment market that owns or manages more than 42 apartment communities, according to its website. Company officials did not respond to requests for comment Monday. The deal was finalized Dec. 31.
The sale comes at a time when downtown living, whether in Minneapolis or St. Paul, is gaining steam among downsizing baby boomers and debt-addled millennials. Building in downtown Minneapolis has surged with the construction of a number of high-profile, multimillion-dollar luxury apartment projects.
Although downtown St. Paul hasn't seen the same furious building of multifamily units, vacancy rates for apartments there remained stable last year at 2.8 percent, according to a report by Marquette Advisors. Downtown Minneapolis' vacancy rate was even stronger at 1.8 percent; in fact, the Twin Cities has the nation's third-lowest apartment vacancy rate, according to Reis Inc.
Kellogg Square, built in 1970, has 450 apartments, commercial space featuring Señor Wong's restaurant and other stores, plus a parking ramp with 594 stalls. Located at 111 E. Kellogg Blvd., the building is next to the Central Corridor light-rail line, slated to begin service in 2014.
Bigos Management already owns a fair amount of property in downtown St. Paul, including the Mears Park Place, Galtier Towers and the Lowertown Lofts Apartments.
Gina Dingman, president of NAI Everest in Minneapolis who represented Sentinel in the deal, says downtown St. Paul is hot in the local apartment market because "there's going to be a lot of public-private investment" with the St. Paul Saints ballpark, light rail and related optimism that some retail and restaurants will follow public transit.
Earlier this month, the Mille Lacs Band of Ojibwe, which operates Grand Casinos in northern Minnesota, confirmed that it is buying two large hotels in downtown St. Paul, reportedly the Crowne Plaza Riverfront and the DoubleTree by Hilton.
However, that news is tempered by the impending departure of Macy's, leaving the downtown without a department store for the first time in more than a century. And last week, one of downtown St. Paul's major employers, Infor, said it is looking for new space in the metro area when the company's lease expires at Lawson Commons in 2015. Or, the former Lawson Software's 650 workers may stay put.
On the apartment front, the Marquette Advisors report indicates a significant amount of pent-up demand throughout the Twin Cities for "new urban apartments," with more than 14,000 units in various stages of development. "Developers are racing to get projects opened because those in the better locations" will likely have the most success, the report says.
But high rents may push some renters to become homeowners, especially since mortgage rates are at near-historic lows, the report states, adding, however, that not everyone can obtain a mortgage and some are simply renters by choice.
Janet Moore • 612-673-7752