Northstar Center redevelopment delivers multi-family, office, meetings & events center, and hotel to downtown Minneapolis

{MINNEAPOLIS, MINNESOTA, May 20, 2022}—Sherman Associates has joined the partnership of Polaris Properties Group, Taconic Capital Advisors, and Wilson Street Hotel Group in the approximately $200 million master-planned redevelopment of Northstar Center in Minneapolis’ central business district. The parties will complete a historic conversion of the former office space, hotel, and parking garage and deliver a coordinated ecosystem of uses to downtown Minneapolis including apartment homes, a repositioned office tower and parking garage, renovated hotel, public-facing meetings and events facility, and a variety of new restaurants and retail concepts.

Northstar Center opened in 1963 as a mixed-use development, an innovative concept at the time, with its developers promoting it as a “city-within-a-city.” Northstar Center was also the birthplace of the Minneapolis skyway system which has grown to comprise 9.5 miles of pathways, connecting 80 city blocks.

There are three structures that encompass the redevelopment: the east office tower, the hotel tower, and the west office tower and parking garage, which make up the 1.6-million-square-foot Northstar Center, spanning the city block where it sits in the heart of downtown Minneapolis. The east office tower was built in 1916 as the Pillsbury Building and construction of the hotel tower and west office tower were completed in the 1960s. Northstar Center has been listed on the National Register of Historic Places since 2016, recognizing its meaningful legacy as part of downtown Minneapolis.

NORTHSTAR CENTER EAST - $85 MILLION APARTMENT REDEVELOPMENT BY SHERMAN ASSOCIATES

Sherman Associates will redevelop the Northstar Center East building, a 13-story office tower, and deliver approximately 217 apartment homes, extensive amenity space, high-end lobby, and skyway connection. Construction on this approximately $85 million redevelopment is expected to start later this year, with completion planned in late 2023.

The current concept includes 20% of units being affordable to households earning 50% or less of area median income. Eighty percent of units will not have rent restrictions but are planned to target renter households in the 80% to 120% of area median income range.

The development will provide essential housing options for middle-income residents of the downtown community. Northstar Center East’s core location is ideal for serving downtown’s public employees – teachers, police officers, and firefighters – as well as young professionals, workers in the construction trades, retail salespeople, office workers, and service workers who are integral to the community, yet who often cannot afford to live in the communities they serve.

This historic conversion to workforce housing speaks to the environmental sustainability and social impact components of Sherman’s ESG Commitment. The repurposing of an existing historical structure that is in a central business district with access to mass transit, biking, and walking will revitalize the neighborhood and create a more vibrant community.

NORTHSTAR CENTER WEST - $70 MILLION+ OFFICE AND PARKING RENOVATION BY POLARIS PROPERTIES GROUP & TACONIC CAPITAL ADVISORS

Polaris Properties Group and its partner, Taconic Capital Advisors, will invest more than $70 million to redevelop, reposition, and lease the 325,000 square feet of office space, 105,000 square feet of corporate storage space, 75,000 square feet of retail and hospitality space, and 975-stall parking garage in the Northstar Center West building, a 17-story tower. The project will be unique among Minneapolis office buildings in that it will introduce a “hospitality-grade” office product to the submarket that’s intended to provide an experiential, service-infused workplace environment that will be more competitive in attracting workers back to the office post-COVID.

To help deliver that hospitality-grade standard, the investors are partnering with Convene, the leading provider of premium meetings, events, and flexible workplaces to deliver what they term a “Convene-powered building.” Convene has a proven track record of partnering with landlords across the U.S. and U.K. to enhance the leasing proposition for office buildings by introducing their hospitality-forward, premium meetings & events product, elevated flexible workspaces, and seamless hybrid meeting technology – Convene Studio. Their offering also includes culinary services and health and wellness solutions which act as building software to power physical space. That high standard of premium workplace experience has become even more important as landlords increasingly compete not only with other office buildings but also with the work-from-home option that employers are offering talent.

The initial phase of construction will include a gut renovation and re-imagining of the common areas, which will feature curated retail, quick-service food and beverage concepts, and a concierge-style property management presence that will serve as the point of customer service for office tenants.

The 8th floor of the office project will take advantage of a hidden gem in the Minneapolis skyline – a 12,000 square foot outdoor terrace called the “SkyGarden” that will be complemented by the new two-story indoor “SkyLodge” bar and lounge that will provide a year-round indoor/outdoor environment to office tenants and capacity for up to 350-person events.

Adjacent to those amenities will be a new Convene-operated meetings and events facility that will include a 250-person conference room and additional meeting spaces that will feature built-in audiovisual and technology and that will be serviced by Convene’s in-house culinary program. The culinary program will also be extended throughout the building to provide office tenants with vertical “room service” catering and pantry-stocking service and will provide a seasonal menu of dishes that will be sold to both tenants and the public in a new food marketplace on the ground floor.

In addition to several other first-to-market amenities, Northstar Center West will also strengthen what is perhaps its most meaningful amenity in a driving market such as Minneapolis – the 975-stall parking garage that provides one of the highest parking counts among Twin Cities office assets. A major capital project will enhance drive aisles and provide for an enhanced security regime and improved customer service.

The office floors of Northstar Center West will be completely modernized, with brand new elevator lobbies, bathroom sets, mechanicals, and other enhancements to reintroduce the 32,000 square foot floorplates as the latest and greatest blocks of contiguous space in the Minneapolis central business district.

JLL has been engaged as leasing representatives for the office component and construction is expected to start later this year, with newly renovated office space available in 2023. Visit the website for more information: https://www.northstarcenterminneapolis.com/

NORTHSTAR CENTER HOTEL - $25 MILLION HOTEL RENOVATION BY WILSON STREET HOTEL GROUP

Wilson Street Hotel Group will renovate and reflag the hotel space in the south Northstar Center building as the new, boutique-style Hotel Indigo, planned to open in late 2022 with 218 keys. The $25 million renovation includes a significant expansion of the ground floor to provide a stunning lobby, rotunda bar, and two full-service restaurants to the hotel.

Wilson Street is partnering with The Bartmann Group to operate the “Star Bar & Bistro” restaurant in the hotel. The Bartmann Group creates places that cater to the interests and identities of the people who live in the neighborhoods of its restaurants — all under the guise of serving great food and drink.

The hotel space will serve office users by delivering a hospitality component in the same complex to host guests, as well as corporate meetings and events. Construction has been underway on the hotel for a few months, with an expected opening before the end of 2022. Visit the website for more information: https://www.hotelindigo.com/mndowntown

YEARS IN THE MAKING

The wholesale repositioning of Northstar Center has been years in the making, with the Polaris/Taconic group quietly enhancing the site since 2019 through a ground lease acquisition, subdivision, assemblage of historic tax credits, and other pre-development activities. Acting as a master developer of the project, the group pre-packaged the partitioned renovation projects and tax credits and carefully selected the Sherman and Wilson Street groups as buyers/developers of the residential and hotel components due to their proven expertise as developers, operators, and users of historic tax credits.

Matt Legge, principal of Polaris Properties stated: “The exercise of putting this all together has been a long one, but we believe that the impact will be enormous for downtown Minneapolis, and at a time when it needs it the most. We’ve been very deliberate about ensuring that this project isn’t just introducing more supply, but rather creating a unique place in CBD Minneapolis that people will be truly excited about coming back downtown for. It’s not very often that you have a full city block at ‘main & main’ in such a good quality market sitting idle for so many years. It’s even rarer that the property has so many unique attributes and so much potential. We hope that reawakening Northstar Center will do its part to help further reawaken downtown Minneapolis.”

Since these projects are interconnected as one building complex and therefore, one historic designation, the development team will work in tandem through the complex financing process of using equity from federal and state historic tax credits to fund the project. That pioneering approach to utilizing joint tax credits amid partitioned uses is one of several examples of the uniquely collaborative effort being made by Sherman, Polaris, Taconic, and Wilson Street to collectively reinvent a full city block together.

The projects also utilize several common project team vendors, most notable RSP Architects for architectural services, New History for historic consulting services, and JLL for project management services. Several other parties have been instrumental in helping the project succeed, including Gardner Builders who acts as general contractor for the office project, LEVEL General Contractors who acts as general contractor for the hotel project, and Lee & Associates (Lamar Newburn and Kai Thomsen) who represent the seller on the sale of the East tower to Sherman.


Backgrounders:

Sherman Associates
Sherman Associates (www.Sherman-Associates.com) is a growing commercial real estate development and management firm based in Minneapolis with properties throughout the Midwest and Colorado. Sherman develops, owns, and operates its assets with a long-term vision to build neighborhoods, enrich communities, and empower people.

Sherman Associates has developed over 11,700 multifamily units and currently owns and manages over 6,600 multifamily rental units (affordable and market-rate). Sherman also owns and manages over 640,000 square feet of commercial space, four franchise hotels, and two solar gardens; and has three Starbucks locations. Stay connected with Sherman on LinkedIn, Twitter, Facebook, and Instagram.

Polaris Properties Group
Polaris Properties is an entrepreneurial commercial real estate firm that specializes in high complexity, heavy-lift value-add and opportunistic investments that require entrepreneurial solutions to transform distressed assets into thriving, submarket-leading places. The firm focuses on introducing genuine, anticipatory hospitality to assets through integrated space & services, to create immersive tenant experiences and optimized investment outcomes. Informed by leading over $3B of asset repositionings and developments across North America in several different asset types and situations, the Polaris team is uniquely equipped to make the most challenging projects succeed.

Taconic Capital Advisors
Taconic Capital Advisors is a global institutional investment firm that pursues an event driven, multi-strategy investment approach dedicated to generate strong risk-adjusted returns over multiple market cycles. Taconic was founded in 1999 by former Goldman Sachs partners, Frank Brosens and Ken Brody. The company has roughly $8 billion in total assets under management with offices in New York, London and Hong Kong with over 100 employees worldwide.

Taconic’s full-service commercial real estate platform invests in all asset classes and across the capital structure in both public and private markets. The strategy’s broad mandate offers flexibility to capitalize on shifting market opportunities, creating uncorrelated risk-adjusted return profiles for investors. Rooted in distressed and opportunistic investing, the team applies high-touch asset management capabilities to drive strong asset-level performance and capital market executions. Well-established relationships drive Taconic’s unique and diverse transaction sourcing channels, which includes local operating partners, investor partners and broad network of lenders, CMBS special servicers, trading desks and brokerage houses.

Taconic’s series of closed-ended real estate funds are fully discretionary and have received over $1 billion in capital commitments. Investments to date across all Taconic funds total over $3 billion of gross asset value across roughly 165 distinct transactions.

Convene
Convene is the leading provider of premium meeting and workday experiences with a global network of venues and flexible office locations. Combining design, technology, and hospitality to elevate today’s modern work experience, Convene creates the spaces and experiences that help teams succeed. With Studio, an all-in-one solution for digitally-enabled events, and 23 locations across the U.S. & London including meeting spaces and flexible workplaces, Convene creates your best day at work, wherever it happens. The company has been named one of America’s 100 Most Promising Companies by Forbes and a Best Workplace by both Inc. and Fortune Magazine.

Wilson Street Hotel Group
Wilson Street Hotel Group of Madison, Wisconsin, includes principals of Kothe Real Estate Partners, KP Property Development, and Great Lakes Management Group. The principals include John Kothe, Kevin Page, and Neil Densmore. The team brings deep experience and expertise in hotel development, hotel operations, multi-family development, structured finance, and tax credit financing to carefully selected developments throughout the Midwest and Florida, with a particular focus in recent years on hotels and historic redevelopments.

IHG Hotels & Resorts
IHG Hotels & Resorts [LON:IHG, NYSE:IHG (ADRs)] is a global hospitality company, with a purpose to provide True Hospitality for Good. With a family of 17 hotel brands and IHG ONE Rewards, one of the world’s largest hotel loyalty programs, IHG has nearly 6,000 open hotels in more than 100 countries, and a further 1,800 in the development pipeline.

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