Sherman Associates is taking on its tallest apartment project in hopes of cashing in on a rush to develop surface parking lots in downtown Minneapolis.
Minneapolis-based Sherman plans to build a 22-story, 250-unit market-rate apartment building on parking lots behind the Crooked Pint Ale House and the Eagle Bolt Bar at the southwest corner of Washington and Portland Avenues. The developer is also planning to construct a six-story parking ramp and a 90-unit, six-story affordable apartment building on the 1.75-acre site. About 6,000 square feet of retail space is planned in the tower.
Sherman on Tuesday is presenting initial plans and renderings for the development to the Downtown Minneapolis Neighborhood Association. The company declined to release those documents before that meeting.
The proposal comes after numerous other projects have been completed or are in development for other downtown parking lots – including Sherman’s own hotel and apartment project on a nearby block. That block is bounded by Fifth Avenue South, South Sixth Street, Portland Avenue and South Seventh Street.
Sherman is taking on the $125 million tower project now because downtown redevelopment properties are becoming rare, said Shane LaFave, a Sherman project manager. Few opportunities are left in or near the Downtown East area, where Sherman has focused much of its recent work.
“There’s only so many spots left in this part of town,” LaFave said in an interview.
Sherman has signed a purchase agreement with the property owner, Allied Parking. Allied will purchase the parking structure when it is complete, LaFave said.
If all goes according to plan, Sherman expects to start construction on the Allied property next May. The apartments would open two years later, LaFave said. That schedule would put the apartments on the market after a number of current downtown apartment projects have opened and leased their units, he said.
“We actually like that there is a three-year gap before this one is done,” LaFave said.
But there is some risk in the plan, said Chris Collins, an associate specializing in apartment sales with the Twin Cities office of Marcus & Millichap. Interest rates are rising for financing construction projects, he said, and there is no way of knowing whether the city’s tight vacancy rate and rent growth will still be favorable in 2021.
The downtown vacancy rate is 2.5 percent, according to the most recent Apartment Trends report from Marquette Advisors. The average downtown rent has grown 6.1 percent during the past year to $1,727 per month.
Sherman is currently planning to charge $1,500 to $3,300 in rent for its market-rate apartments, LaFave said. The affordable apartments will rent at rates affordable to tenants earning no more than 60 percent of the area median income of $94,300.
As of April, 2,070 apartment units were under construction in downtown Minneapolis, according to the city.
The Allied block is one spot the city has wanted to see developed for some time, said Chuck Lutz, deputy director of the city’s Community Planning & Economic Development department. The block is in a “prominent” location, but is used mostly for just parking.
“The goal of the city is not to have blocks and blocks of surface parking,” he said in an interview.
The city has a vested interest in the Allied block redevelopment. The city’s Fire Station 1 would be razed as part of the project and rebuilt elsewhere on the block. The station has become too small for some modern firefighting equipment, LaFave said.
Other apartment towers under construction or under development in or near downtown include:
- Chicago-based City Club Apartments is building a 307-unit, 17-story building at the southwest corner of 10th Street South and Marquette Avenue.
- Alatus LLC is planning a 31-story, 360-unit 12th Street Apartments at 228 12th St. S.
- Hempel and Reuter Walton have broken ground on a 122-unit apartment project on a surface parking lot in the western quadrant of South Sixth Street and Fifth Avenue South, across from Thrivent’s current headquarters.
- The 368-unit Expo project is planned along University Avenue between Second and Third avenues southeast, across the Mississippi River from downtown. Developers Doran Cos. and CSM Corp. plan a 25-story tower in the $100 million project.
- Kraus-Anderson Cos. is seeking to build another mixed-use project on a block in downtown. The project would be similar to the company’s redeveloped headquarters block in downtown, said Michael Hille, Kraus-Anderson’s executive vice president of realty and development. That block includes a 17-story apartment tower. Hille declined to identify the second block the company hopes to develop.
Sherman’s other current projects in Downtown East include building 122 apartments at 205 Park Ave. S., remodeling the Thresher Square building at 724 Washington Ave. S. into a 183-room hotel, and constructing the 180-unit East End apartments at 721 Washington Ave. S. The company also recently submitted a project proposal to build apartments on a city property at 800 Washington Ave. S.
Sherman’s completed Downtown East projects include the Encore apartments at 935 Second St. S., the Aloft hotel at 900 Washington Ave. S., and the Zenith condominiums at 901 Second St. S.