Developer Kelly Doran has renewed faith in downtown high-end housing market

Nearly three years ago, Kelly Doran, arguably the busiest apartment-complex developer in the downtown Minneapolis-to-University of Minnesota corridor since the Great Recession of 2008-2009, started moving to what seemed greener fields in Brooklyn Park, Maple Grove and Hopkins.

Residential construction was undergoing an unprecedented boom downtown and near the U.

And market watchers were wondering when it would subside.

Last week, Doran Cos. and partner CSM Corp., which redeveloped the Milwaukee Railroad event center and hotel properties, broke ground on the Expo, a $100 million-plus luxury apartment community in the St. Anthony Falls Historic District, just east of downtown on Mississippi River.

It's one of the biggest residential projects ever in the downtown district, a couple blocks east of Doran's two-stage, upscale, 338-unit Mill & Main apartments on the Mississippi River.

Why now, so deep into a mature economic recovery amid thousands of newer downtown units on the market?

"Gary Holmes came to me and asked me to be a 50-50 partner," said Doran, 60, of Holmes, another graybearded developer who is the founder of CSM. "I wasn't even aware the property was available.

And confidence, particularly in the continuing stream of affluent empty-nesters and professionals flooding the downtown high-end housing market.

Including Doran, who sold his Edina house and moved to Mill & Main a few years ago.

The deal is rooted in the decision of General Mills to sell the old Pillsbury Co. research facility along University Avenue between Second and Third avenues SE.

In 2017, Doran and CSM paid $15.8 million for the 2.6-acre, several-block General Mills facility.

The developers leased back the building to General Mills for several years.

Doran and CSM were the third and lightest bidders. The two earlier buyers couldn't perform.

Holmes, primarily a hotel and commercial-industrial property developer for 40-plus years, is a Minneapolis native who started out as a salesman. Doran, also a native and fellow U business-school graduate, began his career as a real estate banker.

The Expo project is named for the former Industrial Exhibition Hall.

It will be constructed on one city block that is currently a surface parking lot along University Avenue. With full views of the Mississippi River and the downtown skyline, the Expo will boast 368 units that will range in price from $1,000 per month for a small one bedroom to $10,000 per month for a 25th-floor penthouse, as well as 12 street-level townhouses.

"CSM Corp. and Doran Cos. have worked very hard and we are proud to bring these beautiful, amenity-rich buildings to the market," said Holmes in a statement.

Doran said there is no public subsidy and the developers voluntarily will discount the rents of 10 "affordable" units.

The amenity-rich Expo will include a heated garage and bike storage, clubrooms and entertainment suites with dining areas and chef-grade kitchens, a central terrace overlooking the river with a heated pool, a fitness center and spa, and a contoured putting green.

Doran said there's no indication that the good times won't continue for upscale downtown-area development.

"Part of it is it's just the continued absorption … downtown, not just what we own but in properties [built] by others in our industry," Doran said. "There's an influx of people who want the urban environment, including [affluent] residents.

"There's a multitude of different reasons people would choose to rent over owning. Job transfers, divorces, young professional people, former homeowners and 'lifestyle renters' who choose rental as way of life."

Doran spent two years raising the financing for the $36 million acquisition-renovation of the landmark Dinkydome office-retail building, and construction of the adjacent Sydney Hall apartment units in Dinkytown, the first significant private project in 2008-2009.

He has since been involved in about $1.1 billion of residential projects from Edina to Minneapolis to Maple Grove.

And this run is not over yet.

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.