New use for old mill offices

Twenty-five years after it helped usher in an era of historic building renovations in Minneapolis' Mill District, the Ceresota Mill office building is joining the apartment wave.

The Minneapolis Planning Commission last week approved owner Ross Dworsky's plans to convert the 1908-vintage former grain storage building at 155 Fifth Av. S. from offices to 117 apartment units, joining a trend that is seeing hundreds of new residential units coming online in downtown Minneapolis.

The Ceresota Mill building -- an 11-story structure featuring a huge, windowless south facade with the flour brand's historic logo painted on the side -- has always struggled as an office building since its 1987 conversion by the original owners, Dworsky said.

"It's considered a white elephant," he quipped.

Despite the best efforts of some of the city's top commercial real estate brokers to find takers for its 92,081 square feet of space, it's been an uphill struggle at a time when such "Class B" office space is plentiful and relatively cheap.

A flier issued by Colliers International indicated office space in the Ceresota Mill Building was going for $9 per square foot -- $1.89 less than the Class B average in downtown Minneapolis, according to a third-quarter 2012 market analysis by the brokerage.

The report found the market for such second-tier office space in downtown is only slowly improving. Class B office vacancies stood at 16.2 percent in the third quarter of this year -- a figure that is down since the year-earlier mark of 18.6 percent, but still stubbornly high.

On the other hand, the story for apartments is the opposite, with plenty of takers for new units seeking top-of-the-line residential rates.

Dworsky said his decision to convert the property to apartments was made because he's convinced it will be some time -- if ever -- before the market for second-tier office space turns around.

"I think the turning point came in March when one of our biggest tenants, Walden University, decided to downsize from more than 40,000 square feet to 20,000," he said. "I'm just a small owner, a hobbyist really -- I'm not a REIT (real estate investment trust). I can't wait out this market."

He said another factor in the move is the availability of federal tax credits for the preservation and updating of historic structures, and they don't come much more historic than the Ceresota Mill Building.

Part of the St. Anthony Falls Historic District, the flat-roofed, rectangular brick building is officially known as the Northwestern Consolidated Milling Co. Elevator A, which includes a four-story, tower-like former workhouse section.

But, as Dworksy noted, the Ceresota Mill Building has been the laggard of the bunch. While the Crown Roller Mill landed the city's Community Planning & Economic Development Department as an anchor tenant in 1991, his building has never been able to achieve the same stability.

"I think it's going to be quite some time before we can soak up the excess capacity in the office market," he said. "People are trying to save money on office space by having employees work at home. And overall, the economy remains bad.

"We have to move ahead and make use of what we've got."

Don Jacobson is a freelance writer in St. Paul.