This week, as rain-soaked, hard-hatted crews pumped concrete to the top floor of a 25-story riverfront apartment tower with arresting views of the downtown Minneapolis skyline, developer Kelly Doran is looking ahead. Next up: Two adjacent blocks where an excavator is demolishing a four-story office building where he and his partners will build another 574 rentals.
Over the next couple years, this three-block redevelopment project behind St. Anthony Main will have nearly 1,000 upscale rentals in a tower and several low-rise buildings, making it the tallest, biggest and most expensive project to date for Doran.
“This is a new adventure for us,” he said during a recent tour of the tower, which is perched above St. Anthony Falls.
For Doran, who is codeveloping the site with Minneapolis-based CSM Corp., the $350 million project also represents what he said will be his last residential project in the city if a planned inclusionary zoning ordinance that requires developers to include income-restricted units in all new buildings moves forward.
Doran and CSM acquired the 8.7-acre site at 330 University Av. nearly three years ago from General Mills, which for decades operated its Riverside Technical Center on the site. The project will be developed one block at a time; the new apartment tower and buildings that surround it are being called the Expo in honor of the sprawling Industrial Exposition Hall building that stood nearby until the 1940s.
When residents start moving in early next year, construction will be well underway on the adjacent two blocks, filling one of the largest gaps in the Marcy-Holmes neighborhood.
“We’re happy about the way it looks, but we’re also happy there’s not another tower,” said Chris Lautenschlager, executive director of the Marcy-Holmes Neighborhood Association.
Doran and CSM originally proposed building a second 30-story tower and some income-restricted houses on one of the other two blocks, which are within the St. Anthony Falls Historic District. When that plan faced pressure from the Heritage Preservation Commission and some neighbors, they redesigned it as a set of low-rise buildings that will have nearly 600 units and some ground-floor retail space.
Lautenschlager credits Doran for opening a stretch of 4th Avenue that had been closed when the site was occupied by General Mills. Though it will remain a private street, it will be reopened to pedestrians and others.
“One of the neighborhood’s goals is opening up more pedestrian spaces,” Lautenschlager said.
Though Doran Cos. is headquartered in Bloomington, the project is literally in Doran’s backyard. He lives just a block away at Mill & Main, a 338-unit apartment project he built and developed several years ago.
Given his deep connection to the area, he is confident the nearly 1,000-unit project will be a home run even though the rental market is becoming increasingly competitive.
Within just a few blocks Mortenson just completed a 26-story tower called Rafter. Lennar is building the second phase of its Nordhaus project, called the Odin. It will have 335 apartments in two buildings, including one that is 12 stories and another that’s five floors. And within less than a mile developers are finalizing plans to build nearly a half-dozen more apartment towers.
So far there is plenty of demand. The apartment-vacancy rate in downtown Minneapolis remains slightly below equilibrium at 4.4%, according to a second-quarter report from Marquette Advisors. But with nearly 13,000 units in the pipeline over the next two years, landlords are working hard to make their buildings stand out.
Doran Cos. is outfitting the Expo with a putting green, more than $300,000 in exercise equipment and a rooftop dog park, among other amenities. Several of the units will be two-story walk-up townhouses that will wrap the parking level at the base of the tower, giving them indoor parking stalls that can be accessed directly from the units.
Rents haven’t been set yet, but those 1,600- to 1,700-foot townhouses will lease for about $3,500 monthly, Doran said. Generally, rents will be about $2.50 to $3 per square foot and will top out at upward of $12,000 per month for one of the four top-floor penthouses.
In addition to codeveloping the project, Doran Cos. is also the general contractor and architect. The company has several suburban projects in the pipeline, including Silver Lake Village in St. Anthony and the Triple Crown Residences at Canterbury in Shakopee.
The company recently announced that former Chief Operating Officer Anne Behrendt and Chief Financial Officer Ryan Johnson acquired majority ownership of the company from Kelly Doran, and that Doran will retain his real estate holdings and will continue to develop exclusively with the company.
As the city of Minneapolis negotiates the final details of a new policy that would require developers to make a percentage of the units in new buildings available to income-restricted renters, Doran said he is not shopping for new sites in the city.
While he agrees the city needs more affordable housing, he contends inclusionary zoning policies will only force developers to increase rents in other units to compensate for reductions on the others. He is also concerned that the requirement would only exacerbate the problem by reducing production, which ultimately helps brings down prices by increasing supply.
Behrendt, the new CEO, said that because Doran Cos. also includes both architecture and construction businesses, the firm will continue offering those third-party services to other companies that want to do projects in the city.
She said the company is also looking at development deals in markets across the Midwest, including Cincinnati and Indianapolis.
“Development is too difficult to do, we’ll just go somewhere else” said Doran. “It won’t be in Minneapolis.”