Author Archives: Dan Peterson

Fort Snelling Drill Hall now adaptive reuse Star

Troops at the Fort 1917 - courtesy MNHS.org

While attending the awards ceremony for the new Boy Scouts Base Camp at Fort Snelling a couple weeks ago, I was struck by another truism of adaptive reuse. The use of a facility, such as this historic cavalry drill hall, can take its cues more from the use and not just the architecture. I was quite familiar with the historic uses of this building having spent four years on a project to renovate and reuse the hall as an action sports entertainment complex. But to see it now used by the Scouts as a base of operations for gathering and fostering young explorers to gain confidence hits closer yet to the original charge. Young military personnel used the hall to train their equestrian regiments in the era of WWI. Later the building was used for assembly and barracks during the heavy trafficking of troops bound for action in WWII. The most un-like use came when the Bureau of Mines used the building for mineral experiments and storage until the 90’s.

Adaptive reuse can honor the past by presenting a contemporary interpretation in its place. The Boy Scouts, specifically the Northern Star Council, has hit the mark. With a bit of help from previous projects, the interior spaces are now the assembly hall and conduit for individuals to embark on greater challenges in life. With the renovation and reuse, the Drill Hall and hopefully, the rest of the Upper Bluff, will find new life as well.

I encourage everyone to check it out. It’s truly a place where vision can become value, once again. The Fort Snelling Boy Scouts Base Camp is another great example for Minneapolis commercial real estate to find inspiration.

Your job, my job, this Job

The man had it right. Connecting the dots does not come from looking forward but only backward. Until then you have to trust it will work out in the end. He did that and it served him well.

Everyone is commenting on and eulogizing Steve Jobs today. From the profound impact to the inspiring example to the run on black turtlenecks, everyone is feeling, analyzing, and grabbing for their connection today. That connection is a testament to his ability to deliver, not just great products, but a message that resonates. A clear but interpretive, elite but accessible, elegant but basic message. You can think different but subscribe to a movement, its okay. You can be different, but belong something bigger than yourself, its okay. You can prioritize design in your life but still have function and mastery of complexity, its okay. You can be a grown-up and still have a child like wonder, its okay. Matter a fact, all these things are not just okay, they are secrets to true success and inner peace …. at least according to Jobs. Judging by the impact seen by his passing and his summarized achievements, I’d say he was on to something. It was more than bringing personal computing, legal music, or really slick gadgets and lower case branding to the masses. It was connecting with people about why he did it.

Imagine if his passion would have been real estate. Can you imagine someone of his vision and skill able to drastically change how we think about how we use our built and natural environments? Maybe that was a chapter forthcoming that will not be due to our still lacking ability to conquer cancer. Maybe that is the charge of another Jobs type persona waiting to come and is now taking to heart the wisdom of Job’s actions and words.

For that person I will say take it back to the best message I connected with from him. ‘You have to trust in something – your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.’ That’s apple we can all can take a bite out of and get a sweet taste.

flickr photo cred:http://www.flickr.com/photos/mhaithaca/

Does the recent stock market activity and Fed action help commercial real estate?

It depends who you ask. Certainly the idea of investing in income producing hard assets sounds like a good hedge regardless if the Fed is trying to hold off inflation. To me the idea that the value in dirt, the commodities it produces and rental income are timeless and ever increasing. If anything, the recent uncertainty so prevalent has made me more certain about commercial real estate.

From the National Real Estate Investor:

The Fed’s message that interest rates will remain stable for some time bodes well for property investors, contends Hughes. Economic realities of job creation, manufacturing output and consumer confidence will drive real estate fundamentals, he acknowledges, but other forces may drive capital to the sector.

“The recent volatility in the stock market will ultimately drive dollars into more secure investments, such as commercial real estate,” he says. “With property fundamentals improving and stability assured, we are going to see more investors putting their money into the commercial real estate arena, which will further solidify values.”

flickr photo cred: stoneford

Generation Y Wants Flexible, Modern Offices

….These include efficient use of office space, more flexible workstations (not necessary smaller), sustainable practices and more data center development. – The conclusions of a study done recently by Colliers and reported in GlobeSt.com. We’ve been writing and reporting on it for some time. Your commercial real estate costs, employee recruitment, company’s future depends on it.

flickr photo cred: Cross Duck

Anoka or should we say A’yes’ka.

Anoka – Build Your Future Here

When it comes to Anoka commercial real estate, Adam has the best office location now available for sale. Go check it out at 2040ferryst.com.  Then give us a call to go really check it out. Its worth the look, the building AND Anoka. If your interested in Anoka, MN commercial real estate, get in touch here.

To be a consultant with a deep bench and big thirst.

To solve problems, you need to first understand, then find soutions. I believe this is more true the more times I read it. Thanks John.

Lease Accounting Changes: Update

The way we account for leases on the balance sheet is about to change, but not as quickly as previously thought and not as harsh. While not finalized, the Financial Accounting Standards Board’s new regulations are expected to shift real estate and other leases from the balance sheet’s “operating lease” categorization to capital-lease status, where they are recognized as a liability. The FASB update party has had plenty of push-back. The options-to-renew previously captured on the “Exposure Draft on Leases” are now gone. The date in which these will take affect is now proposed to be 2015 but companies will need to prepare before this date. The standards are projected to be published in July, 2011. Once they are, it will be good time for you to meet with your accountant to see how these changes will affect your situation going forward. The bottom line is that owning and leasing your commercial real estate may look very similar so shorter leases or purchasing maybe the better alternative to longer terms. Talk with your commercial real estate advisor to examine what options might be out there for you.

The Towle Report

Thanks to Steve Johannes at Towle Financial Services (612.335.7730) for the following update on commercial financing. Steve and Towle are a great contact for commercial mortgage loans.

75% LTV – Conduit loans
There is no longer any doubt whether the Conduit Lenders will once again be a viable source of debt for commercial real estate. They are back, and not only are they back for the larger $20M+ loans, they are becoming more and more available for loans under $10M. And there are even programs for small loans on stabilized properties $1M-$5M. The niche for these conduit programs seem to be maximizing debt leverage as the underwriting seems to be able to generate higher proceeds than the Life Insurance programs, or even Fannie Mae/Freddie Mac when there is “cash out”. The main drawbacks for these programs are slightly higher pricing and more costs involved in loan closing due predominately to legal fees associated with this type of debt. Typical terms are 10-year fixed rate term and 30-year amortization. These programs seem to be changing week by week due to the competition from other conduit lenders and Life Insurance companies.

Current Rates:

Rates listed below are estimates for 10-year fixed rate loans greater than $3 million. Specific rates will adjust according to LTV, DSCR, 10-year Treasury Yield (3.50% on 4/12/11), and other property specific data. Please call to discuss specific properties and rates.

Multifamily: 5.20-6.25%

Industrial: 5.25-6.00%

Office: 5.25-6.00%

Hotel: 6.5%-7.00%

Anchored Retail: 5.25-6.00%

Un-Anchored Retail: 5.50%-6.50%

Multifamily Small Loan ($1 million – $5 million)

Multifamily rates below are based on a 10-year term, 30 year amortization and up to 80% maximum Loan To Value.

Loan Size                                                             Rate Range

$1,000,000-$3,000,000                           5.75%-6.25%

$3,000,000-$5,000,000                           5.50%-6.00%

$5,000,000 +                                                   5.20%-5.75%

10-year Treasury

The 10-year Treasury Yield is the benchmark most frequently used by Life Insurance Lenders to determine their interest rates for Commercial Real Estate debt. Below is a graph which charts the 2011 movement of this 10-year Treasury Yield:


Source: US Department of the Treasury

Average 10-Year Treasury

Average – 2010

3.22%

Average – Last 10 years

4.15%

High – Last 12 months

3.85 (April, 2010)

Low – Last 12 months

2.54% (October, 2010)

Source: US Department of the Treasury

Source: US Department of the Treasury

Towle Financial provides debt and equity capital to finance the construction, sale, or leveraging of commercial real estate and multi-family properties. The Towle name has been a mainstay in Midwest Commercial real estate and specifically commercial mortgage loans in Minneapolis/St. Paul for over 100 years. Towle Financial was formerly part of Wells Fargo until March, 2010 when Towle was purchased back from Wells Fargo by the current and former owners: Mark Vannelli, Dan Mott, and Mike Pazlar.

Towle primarily works with Institutional Clients: Life Insurance Companies/Pension Funds; Wall Street: Conduits/REITS; GSE various multi-housing programs including Freddie Mac, Fannie Mae and FHA providing long-term non-recourse permanent debt. Typical loan terms are from 10-20 years locked rate and amortizations ranging from 10-30 years. Towle currently represents over 10 Life Insurance Companies on an exclusive/semi-exclusive basis. We also have over 50 other lending relationships we work with in placing debt for our clients. Towle currently has offices in Minneapolis and Detroit, with a servicing portfolio of approximately $1.6 billion, administrated out of our Minneapolis office.

A sunny drive down France Ave.

Ahh, sunny spring in Minnesota. Time to take the long way. As I did from my weekly pilgrimage from the bluffs of the Minnesota River northward, I took notice of the continued progression (and in some cases regression?) of the development landscape.

France Avenue offers a sampling of it all.

Starting with Normandale Community College in Bloomington, the old “high school with ashtrays” has really grown in curriculum and square footage along with the interest for more higher learning. There is no doubt education was/is good commercial development business.

Crossing 494, I come upon the wrecking ball at Centennial Lakes Plaza tearing down a structure built as recently as 1989 to make way for the new Whole Foods. I mean, come-on, could we not use our heads a bit more to come up with an adaptive reuse strategy before we scraped the site? There are buildings three times as old and as ugly across the street. For the time being, the development party has mostly turned its back on the that side of the street. I guess to me this seemed short sighted and I expected more from Whole Foods and Edina. For what its worth, if they had considered all the adaptive strategies and they were deemed not feasible,  my apologies. It will be a sad day when they tear down the Macy’s (Dayton’s) Home Store down the street  for a short term endeavor or whatever development wave is breaking on the beach.

All is well and good with Leisure Lane, Tavern on France, Galleria and all the other main drag sites that have found development or redevelopment love. Or is it? Looking closer at the Container Store development, the strip center looks a little forced. The future may prove it to be smart infill but maybe there is a reason there wasn’t retail beyond an uncompetitive movie theater there before. The development track of bringing the residents closer to the shops like the Galleria condos, Westin and apartments on York seems to make more sense. Whatever phase of development thinking, this part of France is definitely the main thoroughfare of the new retail /mixed development that has grown around and now beyond the old lady with too many face lifts, Southdale.

Point of France corner marks what I call France’s symbolic version of Edina’s demographic turn. POF was the first big condo tower and now is showing its age. So are the residents of Edina. Fittingly, the Southdale medical area around Crosstown has developed to suit the surroundings. Like all medical facilities, Fairview has no shortage of customers and funds. Somehow the density of buildings fit in an area not easily ready to accommodate. Both old and new structures jam into a spot like a swollen foot in an orthopedic shoe yet function with design efficiency and functional ingress/egress with each addition.

Crossing Crosstown, I enter into the lot and block version of Edina. Guided by grids and Minneapolis echoes, France is tamed into being more sensible, at least until 50th. However, as you approach the holy grail of urban shopping you are confronted with modified residential living now more adapted toward affluent clustering. Density is less but the Edina side of France wins out over Minneapolis for the new developments. Hitting the commercial district of 50th, new mixed-use developments once the fears of some are now firmly supplanted. The residual is greater mixed-use density and more economic action. Restaurants such as Barrio, Salut and Mozza Mia and new additions for the hip looking to grow up and the grown up to try to stay hip. Fare thee well Pearsons.

Jumping down to 44th, a sense of more grounding comes over me as I see the Linden-Hills Co-Op where the neighborhood successfully avoided the CVS wave and the Sunnyside Gardens have endured long enough for a new generation to discover gardening. Buildings last over here. Maybe because its less prized than their 50th & France big sister or its Southdale area uncle.  Local success stories, old classics and independent operators survive with minimal pretense. Whatever the case, the development gods have not penciled out too much in the way of tear-down/build-up for this end of France, and that is a good thing.

So is rolling down the windows and taking the long way in Minnesota spring.

Fickr photo creds:  Marcus MetropolisJohn McNab

WHY ARE WE IN THE CRE BUSINESS?

To know WHAT we do, take a look at www.adamcommercial.com.
To know a bit about WHY we are in the business, see below:
We do it because we want commercial spaces to inspire people.

We do it because real estate should be adaptive, be renewed and be smarter.

We do it because real estate is a vehicle to artistic expression, financial prosperity, and fostering community.

We do it because real estate should be efficient and elegant with all its systems.

We do it because transactions should be respectful to all its participants.

We do it because integrity is what makes the structures and relationships last.

We do it because new ways of doing it are how the old ones got started.

We do it because creative vision can be made into commercial value.

Okay. What’s your WHY?

fickr photo cred: Ame Otoko