Magellan Launches First Apartment Development in Twin Cities
- Nov 09, 2012
Minneapolis—There has not been an apartment tower built in the downtown Minneapolis market for more than three decades. But that is about to change, with the start of construction on a new high-rise apartment community in the city’s Loring Park area from Chicago-based Magellan Development Group LLC.
The 36-story mixed use structure at 1369 Spruce Place will offer 354 apartment homes, comprised of a mix of studios and one- to three-bedroom units with condominium quality finishes, as well as retail space and on-site parking. The apartments will boast commanding views of Loring Park and downtown skyline.
Magellan Development Group had originally purchased the property in 2005 with an eye toward building condominiums on the site. “The condo market tanked in Minneapolis, so we put it on hold,” Brian Gordon, Magellan’s Chicago-based vice president of development, tells MHN. “The Minneapolis rental market is always tight, and it grew extremely tight in the last couple years. So 14 or 15 months ago, we started the zoning process to convert it from condominiums to an apartment building.”
Magellan was attracted to Minneapolis for several reasons. First, the Twin Cities metro offers considerable employment growth. For another, the rental market in Minneapolis tends to be marked by low vacancies. Then there was that lack of high-rise apartment building since the early 1980s.
“We saw similarities to how Chicago was 10 years ago,” Gordon says. “We liked the idea of bringing the Magellan product to Minneapolis. Once we committed to the apartments, the alderman, Lisa Goodman, was very enthusiastic. She wanted a tower. She wanted something special.”
Two hurdles were confronted by Magellan on this development, Gordon recalls.
“It costs the same to build an apartment building in Minneapolis as it does in Chicago, but the rents are a lot lower,” he says. “We were dealing with thinner margins due to the lower rents, a thinner spread between income and cost.
“The other challenge was financing. Luckily, [Chicago’s] Harris Bank had acquired M & I Bank in Minneapolis. We had a relationship from Chicago with Harris, and they had a big presence up in Minneapolis. They were very enthusiastic, and we were off to the races.”
If there’s a demographic Magellan has chosen to target, it’s fittingly up-and-coming employees of Target, or other large Minneapolis-based employers.
“We would look for that kind of resident,” Gordon says, noting the walk-to-work location is also close to the city’s Theater District, Orchestra Hall, Walker Art Museum, Minneapolis Sculpture Garden, Guthrie Theater and Minneapolis Convention Center, as well as a wide range of dining and shopping attractions.
Very close by are bike trails that help make Minneapolis “the number one biking community in the country,” according to Gordon.
“The good news is that having the downtown zoning allows us to get the height,” he adds. “This will be a 36-story tower, and in Minneapolis, they were selling views from the sixth story. Wait till they get a look from the 36th floor.”