A nearly $190 million financing package will pave the way for construction to begin early next month on the tallest — and most expensive — condominium building in the state, but it will scuttle plans for a competing condo tower just a few blocks away.
Bob Lux of Twin Cities-based Alatus said Tuesday that after three years of planning, including 18 months of legal challenges over the height of the project, he is now considering other options for a site where he planned to develop Alia. The proposed 40-story tower would have had 214 units, including nearly 50 that would have been priced at more than $1 million.
“We’ve been waiting to make sure that the Eleven was going to close, but now that it has we will transition our project,” Lux said. “It would not be a smart decision for ourselves or our buyers or the marketplace to flood the market.”
Though site work has been underway for several months at the Eleven on the River site — to be built on what is now a tiny parking lot along the downtown side of the Mississippi River — a ceremonial groundbreaking is scheduled for Oct. 7.
So far the developer is mum on specific pricing in the 41-story tower, but said buyers will pay $900,000 and up. Way up.
That means nearly every one of the 118 condominiums — including 17 penthouse units that will be more than triple the size of the average home in the Twin Cities — will come with a seven-digit price tag. The company said that just more than half the units have been reserved.
The nearly $190 million financing package for the Eleven was arranged by Murray Kornberg, executive vice president at Twin Cities-based Dougherty Funding, who called it the largest loan to date for a “ground-up,” multifamily project in the state.
“The participation of these lenders in this project is a significant endorsement of Eleven and is consistent with the response we are currently seeing from buyers and the community at large,” Kornberg said in a statement.
Eleven, in the Mill District, is the first project in the city for Related Fund Management, the private-equity arm of Related Cos., one of the largest privately owned real estate firms in the country. The firm, which will serve as the mezzanine lender, has more than $60 billion in its real estate portfolio and pipeline and more than 4,000 employees nationwide.
Related Fund Management’s credit platform has originated more than $2.25 billion in loans since 2015. The senior lender is Bank OZK’s Real Estate Specialties Group, which focuses primarily on senior secured commercial real estate financing.
The project is being codeveloped by two Twin Cities companies: Luigi Bernardi of Arcadia LLC is the project sponsor, and Ryan Cos. will also serve as the builder, partnering as architect with New York City-based Robert A.M. Stern Architects.
Alia was not the only competition for the Eleven.
Construction started this summer at the RBC Gateway tower, which will include 31 upscale condos called the Four Seasons Private Residences. Those units are expected to be priced at more than $1 million, and will be on the uppermost floors of the 34-story building, which will also include lower-level offices and a 222-room Four Seasons Hotel, restaurant and bar.
That project is being developed by Twin Cities-based United Properties and Four Seasons Hotels and Resorts and is expected to be completed in early 2022.
In the nearby North Loop neighborhood, developers also are working on plans for Timbr, a midrise condo building that is being called the tallest wood building in the city.
The decision to pull the plug on the Alia comes amid what is an otherwise balanced condo market.
Over the past decade, developers in downtown Minneapolis have been focused on building thousands of luxury rentals, but only a few for-sale condominium buildings. Most of those condos have been built in the Mill District near the Guthrie Theater and Gold Medal Park near the Mississippi River. Plans for the Eleven were announced just as construction was wrapping up on the Legacy, which has more than 375 units also in the Mill District.
Despite those new units at the Legacy, the supply of for-sale condos has declined in recent months. Throughout the Twin Cities there were 727 new and existing condos for sale through the Regional Multiple Listing Service at the end of August, 13% fewer than last year at the same time.
Barry Berg, a Coldwell Banker Burnet agent who specializes in the upper-bracket market but is not marketing any of the proposed projects, said the Eleven will set a new bar for condo prices in the Twin Cities. Already in the Mill District there have been several units that have sold for more than $1,000 per square foot.
During an interview in the project’s $1.5 million sales center in Ryan’s headquarters in downtown Minneapolis, Bernardi said he was wowed by the site’s potential when he first visited it a few years ago. It will be his first condo tower, and by far his most ambitious development project.
Construction will take at least two years, with move-ins expected to begin in late 2021.
Lux said that while early interest in the Alia was strong, an unprecedented number of über high-end units could test the depth of the market. Next week, the company will start refunding deposits made by about 50 would-be buyers. He is still considering options for the site, including an apartment building or selling it to another developer.
“We have plenty of other projects to work on,” he said. “You just can’t get married to [a project] and you can’t emotionally change a market — you have to be smart.”