University of Minnesota Foundation pays sky high prices to bank land near campus

By Nick Halter - MSP Business Journal

June 27, 2018

Stadium Village Plaza sold for $15 million, making it perhaps the highest price per square foot paid for land in the Twin Cities.

The University of Minnesota Foundation wants to control the type of development that happens just south of TCF Bank Stadium, but gaining such power isn't coming on the cheap.


The foundation’s real estate arm paid unheard of prices when it acquired Stadium Village Plaza and the Stub & Herb’s building for a combined $22 million this month.


At just under 1.2 acres, the sale works out to $431 per square foot for the Stadium Village real estate, which is quadruple what developers have paid recently for land in the heart of downtown Minneapolis and two or three times what they paid for land in the North Loop and Uptown.


“It might be a new high-water mark [in the Twin Cities]. I can’t think of anything higher,” said Gina Dingman, president of Everest Real Estate Advisors, which represents land buyers. “But it’s in high demand over there. There’s a scarcity of sites near the U and there’s demand from developers for student and market-rate housing.”


Kelly Doran, who’s developed student housing near the U, said, “That’s a big number.” He declined to opine further without any other details of the deal.


The acquisitions are being done by University of Minnesota Foundation Real Estate Advisors, which views the area as a future gateway that links the university with the community. The UMFREA’s managing director, Sarah Harris, said the foundation had to match private developers' offers in both acquisitions.


“We matched offers from third parties,” Harris said. “We didn’t set the price. The price was set by the market. We were offered the opportunity by the sellers to match the third-party offers, which we were privy to.”


Harris signed a nondisclosure agreement and couldn’t discuss the other offers. However, two sources familiar with the Stadium Village Plaza sale said a developer had been planning a large apartment tower on the site. One developer said it would take close to 400 units of housing to make the deal work out, which is not unheard of in the area; Harbor Bay is building a 431-unit tower a block away.


“The presumption in our business is that land value is determined by what its highest and best use is,” said Bob Pounds, a commercial real estate broker with Colliers International in Minneapolis. “If [a buyer] thinks the highest and best use is something like vertical multifamily, then the value is enhanced.”


Josh Zavadil, owner of Stub & Herb’s, said he received monthly calls from developers wanting to buy his 0.38-acre parcel. He decided instead to sell to the foundation for $7 million, which is just less than what developer Howard Bergerud paid for 1 acre of land in the red-hot North Loop neighborhood where he’s building a 156-unit apartment building. Zavadil got a seven-year leaseback and a buyer that he said wants Stub & Herb's to stick around in any redevelopment.


Owners of the 13,400-square-foot Stadium Village Plaza shopping center, which includes John Trautz and Vincent Driessen, sold their 0.78-acre property to the foundation for $15 million. That’s slightly less than what Ryan Cos. US Inc. and Weidner Apartment Homes paid for the Sons of Norway building on 2.5 acres in Uptown, where they’re building 317 apartments and office space.


Harris said the foundation had an appraisal done on the Stadium Village properties and the appraiser found one pending purchase agreement in downtown Minneapolis that was north of $431 per square foot.


“I feel confident we are paying market prices," Harris said. "And what we are bringing to the table is a longer-term vision and the desire is to work with the community in the coming months to determine what is going to happen.”


Master planning for the properties

The amount of land a university — or in this case its foundation — owns is often hotly debated. In Minneapolis, the foundation wants more control over what happens to a few blocks of land bounded roughly by Delaware Street, University Avenue, Huron Boulevard and Oak Street.


The foundation announced a partnership with a new Pohlad family-owned entity called UMarq Investments this week that would create a master plan for about 15 acres in the area. They are calling blocks involved Motley because they sit in between a wide mix of uses, from athletics to campus buildings to the Mississippi River to a residential neighborhood.


The partnership is called Visus Group and will begin a planning process with stakeholders in the area to determine what the area should look like. Brandon Champeau, a developer with Pohlad-owned United Properties, has been named executive director of the group.


“Some people are unsure if this is supposed to be campus or is this supposed to be neighborhood,” Champeau said. "There are a lot of case studies around the country of places like this — some that have flourished and some that have gone the complete opposite. But the places that figure this out have made these areas into vibrant neighborhoods that attract students, faculty, researchers and businesses. They can be really great neighborhoods.”


The group expects to have a master plan by the end of the year. The city, in its draft comprehensive plan that is up for debate, views the area as suitable for a large-scale, mixed-use development. It’s now zoned for buildings of two-and-a-half or four stories.