Stuart Ackerberg may have hit a few hiccups, but he was always certain the second phase of his MoZaic office development in the Uptown area of Minneapolis would get built.
He constructed MoZaic West during the tail end of the recession and its sibling building was nearly derailed when its major tenant backed out of the project four years ago. But now the MoZaic East office complex is ready for its big reveal. Minneapolis Mayor Jacob Frey is scheduled to be on hand Thursday for the ribbon-cutting for anchor tenant WeWork.
“We are a developer, so we take risks. That’s what we do,” said Ackerberg, chief executive of the Ackerberg Group commercial real estate company.
Not only has Ackerberg led his firm to take risks in Uptown, which is known more for its trendy late-night bars and restaurants than its office space, but in the last year the company has also taken on several prominent projects in downtown St. Paul, another area not known for its thriving office market.
In a recent interview, Ackerberg laughed as he discussed his investment strategies, which have taken patience and discipline to implement.
“In the good old days, you could prelease office buildings to a certain level … to effectively de-risk the opportunity and then you go ahead and get a loan and you build it,” Ackerberg said.
Now, office tenants are different. With disruptive technology changing entire industries, it’s hard to predict the future needs of fast-growing companies, Ackerberg said.
Uptown is home for Ackerberg, who was born and raised in the area. The Ackerberg Group is the largest owner of commercial space in the south Minneapolis district.
Founded by his father, Norman, as Norman Construction Co. nearly 55 years ago, the Ackerberg Group has evolved over the years. At its peak, Ackerberg employed more than 200 people in all areas of real estate and had properties in 10 states.
But Stuart Ackerberg has refocused the company. At the beginning of 2017, the Ackerberg Group passed most of its property management to third-party providers, including much to Colliers International, to spend more time on investments and developments.
The nearly 200,000-square-foot MoZaic East is one among them. MoZaic East was built at the site of a parking lot at Fremont Avenue S. and 29th Street along the Midtown Greenway across a plaza from its MoZaic West offices.
In 2014, software company Code42 backed away from a deal to be the sole tenant of MoZaic East, which left the project in limbo. Last spring, Ackerberg announced it would go ahead with the building without an anchor tenant already signed.
Speculative office buildings are becoming less common in the Twin Cities as they are seen as fairly risky with tenants consolidating their spaces or wanting to be in their own buildings.
MoZaic East is Ackerberg’s latest push to create a new office market in Uptown, where the company owns several properties but none with that much office space.
While nightlife in Uptown is alive and well, more daytime activity is something that would help with the livability of the neighborhood and the retail stores that fill each block, Ackerberg said.
“The one missing piece that Uptown has had is a daytime population,” he said. “We think this is really going to help the vitality of Uptown.”
The eight-story building offers tenants a modern space with a lobby dominated by color-changing LED panels, bike storage, which will be accessible to the public through a partnership with Metro Transit, balconies and windows that showcase views of downtown and beyond and an art plaza.
“We’re making it so that it’s a place where people just want to hang out,” said Marc Basara, the Ackerberg development associate who has been leading the MoZaic East project.
The building is a little more than 50 percent leased. WeWork was originally going to take 46,000 square feet in the building, but the co-working company announced in the summer it would double that to more than 102,000 square feet of space. Syngenta Seeds Inc. will have more than 200 of its employees in the WeWork coworking offices.
Ackerberg’s leasing team now competes with WeWork, which offers a short-term sublease of space for tenants. Syngenta was also looking at another floor in MoZaic before deciding to lease from WeWork.
“At the end of the day, I think it will all fill up, but it was a different dynamic than we thought,” Ackerberg said.
While Ackerberg has been impressed with WeWork offices he has seen in large cities like New York and Philadelphia, there is still a bit of uncertainty about whether a business depending on short-term tenants will be able to weather an economic downturn.
“Can they continue to grow and be profitable and successful as they expand their footprint? … We are confident that they will be able to make it,” Ackerberg said.
WeWork has said the Uptown location has been attractive to “enterprise” corporate companies.
St. Paul projects
Across the river in St. Paul, the Ackerberg Group has been unusually busy in the past year.
In September, Ackerberg also gained membership interest in the John Rupp-led limited liability company that owns the St. Paul Building at the corner of 5th and Wabasha streets. The brownstone office building is home to Subtext Books and other businesses. Ackerberg plans to keep the nearly fully leased building as office space, with some minor updates to the interior.
In October, the St. Paul City Council and the Housing and Redevelopment Authority (HRA) voted to approve the Ackerberg Group as a developer of the former public safety annex building at E. 10th and Robert streets.
Ackerberg said he liked the location of the building, which is close to restaurants and the downtown Lunds & Byerlys grocery store. There has been controversy surrounding the project with some residents wanting the building to be demolished to make way for an expanded park.
“I have empathy for the neighbors and I have empathy for the city. … It’s a complicated deal,” Ackerberg said.
Ackerberg is paying $1.4 million for the annex and another $40,000 a year for 20 years to maintain the park. The company hopes to start renovations on the building in the spring.
In August, the Ackerberg Group also bought the building known as the location of Seestedt’s Carpet and Linoleum on the corner of 6th and Wall streets in Lowertown for $1.7 million.
The three-story, 29,000-square-foot building close to CHS Field will be renovated to include apartments, a pet supply store and a veterinarian office. Ackerberg is developing the project with Northland Real Estate Group, which is led by principal Brian Farrell.
First in 2014 and then later in 2017, the Ackerberg Group established an investment fund to allow others to invest in the company’s acquisitions and developments. The fund has made it possible for Ackerberg to invest in other projects in St. Paul like the Finn, a mixed-use retail and apartment complex in Highland Park.
Ackerberg said the company is going to continue its investment strategy of making sure to buy property at the right prices and not overpay for an asset.
“When there’s an economic softening, which we will have, we want to make sure we are best positioned to weather that storm,” he said.