By William Morris - Finance & Commerce
November 27, 2018
A Chicago real estate investor has purchased a 2-year-old apartment building – complete with a street-level pinball bar — in Minneapolis’ Whittier neighborhood.
Randolph Street Realty Capital paid $15.075 million for the Chroma apartments at 113 E. 26th St., Colliers Senior Vice President Ted Bickel said in an interview. The sale closed Nov. 19. No certificate of real estate value for the sale was available as of Tuesday afternoon.
Bickel represented the sellers, North Bay Cos. and Reuter Walton Cos. Both Minneapolis-based companies are connected to CPM Cos., which developed Chroma. The 70-unit mixed-use complex, which includes Minneapolis’ first pinball bar, Tilt, opened in December 2016.
The purchase price works out to an average of $215,357 per unit, well above the average of $133,545 recorded by Finance & Commerce’s Twin Cities Apartment Sales Tracker. Finance & Commerce has tracked the sales of nearly 46,200 units since 2011.
Hennepin County values Chroma at $9.79 million for tax purposes. The project cost was $12.6 million, according to Finance & Commerce records.
Chroma, a 2016 Finance & Commerce Top Project, is two blocks south of the Minneapolis Institute of Art and two blocks east of the Eat Street corridor on Nicollet Avenue. The property, built on a formerly contaminated lot used by a dry cleaner, was “quietly marketed” but never formally listed, Bickel said.
“It’s a well-built, relatively new product,” Bickel said. “… There was more than one party looking at it.”
A North Bay employee declined to comment, citing company policy. Reuter Walton developer Kyle Brasser said the company was proud of Chroma, which features an innovative thermal envelope design to reduce heating and energy costs.
“Reuter Walton is very happy to have successfully built and sold another Class A, urban infill, Minneapolis apartment building and we look forward to doing more work in the Whittier neighborhood in the future,” Brasser said in an email.
Randolph Street, the new owner, is a growing player in the Twin Cities market, with holdings such as the 51-unit Silver Pines Apartments in Eagan and the 48-unit Silvan Townhomes in Maple Grove. Closer to Whittier, the company also is developing the 111-unit mixed-use TGMA project in the Lowry Hill neighborhood, at the southwest corner of Lyndale and Franklin avenues. That apartment project is under construction and due for completion late next year.
The company likes the growth outlook in Whittier, said Jonathan Saliterman, a Minneapolis-based partner in Randolph Street.
“There’s not that many newer projects in the area at the moment,” he said in an interview Tuesday. “I think that’ll change over the next decade. I think Nicollet has a lot of potential.”
Chroma was a strong asset for sale, with 95 percent occupancy and a thriving, growing neighborhood, Bickel said.
“I think the demographics [in Whittier] are improving, and a lot of investors are projecting that Nicollet will open up past Lake Street,” Bickel said, referring to the longtime Kmart store bisecting Nicollet Avenue. The city of Minneapolis purchased the Kmart site in November 2017, with eventual plans to raze it and reconnect Nicollet.
“I think a lot of people value the fact they can live very near downtown Minneapolis, and they have an easy corridor to travel to downtown,” he said.
If that trend continues, Chroma’s value to investors will only continue to grow, he said.
“You’re obviously seeing a wave of new development happening in and around Nicollet, and Chroma was one of the first in the ground, if not the first, in this cycle,” Bickel said.
Residential development has been slower east of Blaisdell Avenue than in other areas southwest of downtown, said Mary Bujold, president of Golden Valley-based Maxfield Research and Consulting. She sees increasing demand constrained only by the limited supply of available sites.
“I think that whole area has started to take hold because of Eat Street,” Bujold said Tuesday. “There’s a lot of older restaurants that have stood the test of time and are very well-respected, but there’s also a lot of new restaurants that have moved in. … In the past five years, I think the area has really started to come into its own.”