When it opened in the 1960s, the Northstar Center in downtown Minneapolis was a hub of activity. Its main tower featured air-conditioned offices. His posh hotel had a restaurant that overlooked an indoor pool. The block-sized complex has been advertised as a ‘city within a city’.
But as new builds sprung up in the decades that followed, Northstar’s luster faded. Now developers plan to spend more than $200 million to revitalize the complex with new offices, a hotel and rental apartments.
“In its heyday, it was an interesting and vibrant place,” said Matt Legge, director of New York-based Polaris Properties Group. “Our ambition is to do something as ambitious and different.”
At 1 million square feet, the Northstar project is the largest downtown Minneapolis renovation since the Dayton project, which officially opened last fall after four years and $350 million in spending. And the news comes just a week after Houston-based Hines proposed building an office tower two blocks from the Northstar complex.
Minneapolis-based Sherman & Associates will tackle the conversion of the nearly empty 13-story Northstar Center East office building into approximately 217 apartments.
The residential component will include expansive amenity spaces, an upscale lobby and air link to other downtown buildings. It is expected to account for around $85 million of total spending, with work beginning this year and finishing late next year.
Polaris Properties and its financial partner, Taconic Capital Advisors, will spend an additional $70 million to renovate the 17-story Northstar Center West building, which includes offices and a 975-space parking lot.
Madison-based Wilson Street Hotel Group is spending $25 million to transform the former hotel, most recently a Crowne Plaza location, into Hotel Indigo by the end of this year. The Minneapolis-based Bartmann Group will operate a bar and restaurant in the renovated hotel.
With the downtown office vacancy rate hovering around 30%, Legge said he hopes to differentiate the renovated Northstar Tower by positioning it as a “hotel-grade” office building that “will be more competitive for to attract workers to the office post-COVID”. .”
The Northstar Center project offers an opportunity to provide something that does not exist downtown as it features a kitchen on the seventh floor, which can be used to provide catering and catering services to office tenants and their guests, Legge said.
“It’s rare to have a centralized commissary-level kitchen that can power everything,” he said. “Office buildings don’t normally have that convenience.”
The building also has a 12,000 square foot “SkyGarden” that will be reopened to tenants and their guests. Part of this area will become a two-story “SkyLodge” bar and lounge.
The developers have hired a company called Convene to coordinate events, adjust and plan workspaces, meetings, culinary services, and health and wellness amenities at the renovated resort.
“This high level of high-end work 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 offer talent,” Legge said.
Legge said when Polaris Properties was evaluating its purchase of the building, it was partly drawn to the center’s 975-space parking lot, an unusually high number of parking spaces for a project of this size. The ramp will receive several improvements.
When the Northstar Center opened in the early 1960s, it was sometimes called the birthplace of Minneapolis’ airway system, which now includes 9.5 miles of track connecting 80 city blocks.
This resulted in the entire complex being listed on the National Register of Historic Places in 2016. The eastern office tower that will originally become housing was built in 1916 as the Pillsbury Building. The hotel tower and the west office tower were built in the 1960s.
The building’s historic status will help it qualify for state and federal historic tax credits, which can help fund costly conversion and renovations. The future of the state’s tax credit program, which was set to expire, was in jeopardy, but an extension was included in a tax bill by state lawmakers over the weekend. Legge said his company was able to submit its applications before the scheduled expiration.
Sherman will also seek tax increment funding to help keep rents low. This means that 20% of the units will be affordable for households earning 50% or less of the region’s 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. For example, a one-bedroom apartment of about 750 square feet would rent for about $1,700 per month at market rates, but the income-restricted rent at Northstar would be about $1,300.
Although the downtown retail, office and hospitality segments are still weak, demand for downtown apartments is rebounding.
In 2020, as construction peaked and public safety concerns grew, the downtown Sherman apartment building’s vacancy rate fell to around 85%. Today, apartment occupancy among Sherman-managed buildings is around 97%, and rent concessions are running out fast.
Chris Sherman, president of Sherman Associates, said the company recently launched the $30 million renovation of its historic JI Case building. In the past two weeks, it has also closed two new construction deals, including a 240-unit, 22-story tower at the corner of Washington and Portland avenues.
Not counting its Northstar project, the company has 642 apartments under construction in Minneapolis.
“We have a lot of work to do,” Sherman said. “But I and we are very optimistic about the reimagining that is happening in the central business district.”