One of the last — and largest — developable parcels in the North Loop neighborhood in Minneapolis has a new owner. Again.
On Wednesday, Chicago-based Cedar Street Cos. will pay $13 million for three vacant warehouses and a parking lot that once housed Duffey Paper.
Cedar Street has submitted plans to the city to turn those buildings, which are perched along N. Washington Avenue between Fifth and Sixth avenues in the block in the former Warehouse District, into about 200 rental apartments and 20,000 square feet of retail space called Duffey Lofts.
"Cedar Street is excited to be a part of the Minneapolis community, the North Loop specifically," said Will Murphy, the company's managing partner. "We see tremendous long-term potential in the neighborhood as a work-live-play destination, a concept our brand of development aligns well with."
The 1.32-acre site includes three adjacent concrete, brick and timber buildings including a 1916 building known as the Minneapolis Iron Store. That six-story concrete and brick warehouse building has about 150,000 square feet of space. It's next to a three- and a two-story building.
Nearly 150 of the approximately 200 apartments would be studios, the rest a mix of one-, two- and three-bedroom units. The project would include 84 surface and underground parking stalls, and nearly 20,000 square feet of retail and amenity space for residents.
Murphy didn't say what is planned for the retail space, but said the neighborhood is now attracting the attention of several national retailers. Some of the planned retail space that is adjacent to a covered loading dock would be well-suited to a restaurant and/or bar.
As part of the conversion, the developer will install new windows in the original openings that are based on historic designs. One of the buildings would get a small rooftop addition and signage that will reflect the original names of the buildings.
Because the project is within the Minneapolis Warehouse Historic District, the developer is seeking approval from the Historical Preservation Commission and several variances including the ability to add rooftop signage. The company is also seeking state and federal historic tax credits that will help fund the conversion while retaining some of its historic character.
It's the first deal in the Twin Cities for Cedar Street, which specializes in adaptive reuse projects in Chicago.
Murphy said the company targets redevelopment opportunities in highly desirable neighborhoods where there is already strong demand for housing that is walkable to jobs, shopping and restaurants.
Apartment construction in the North Loop has continued unabated for the past several years. At least a half-dozen projects are in the pipeline or under construction, including a mixed-use project with 450 units in a 36-story tower that was announced last week.
This plan is one of several pitched in recent years for the site. After Duffey Paper was sold to a New York-based investment firm in 2016 and the company moved its operations out of the city, the Duffey family started shopping for a buyer for the buildings.
Several local and national developers toured the buildings with architects and designers; since then at least three prospective buyers have taken a swipe at the project. The most recent was Plymouth-based Dominium, which announced plans last summer to turn the building into about 200 units of income-restricted housing. But by December the company scuttled those plans after an impasse with the city over terms related to the long-term affordability of the apartments.
The average vacancy rate in downtown Minneapolis, which includes the North Loop, during the first quarter was 5.2%, according to Marquette Advisors. That is more than double last year's rate at the same time and one of the highest vacancy rates in the metro. At 5%, the vacancy rate is considered at equilibrium — well-balanced between renters and vacant units.
The average rent for a studio apartment in downtown was $1,156; rents at Duffey Lofts haven't been set, but all of them will be at market rates, Murphy said.
Cedar Street has been on the hunt for a suitable redevelopment site for at least a couple of years, but only started negotiating on the Duffey building a few months ago.
"We were somewhat familiar with the prior attempts to develop the property, but we fell in love the neighborhood and the building," said Murphy.
The company has its own property-management company, which will manage the project.
The North Loop Neighborhood Association will review the plans on Wednesday, followed by the Planning Commission's committee of the whole on Thursday. Murphy expects to pull a permit by the end of the year and to complete construction in early 2021.