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This holiday week we're learning about two older properties that are ready for creative new owners to add value. The first is a commercial property in Minneapolis that is currently used for self-storage but could be converted for something completely different. The second, a 1940s mixed-use building in downtown St. Paul's historic retail district, is currently available as the city government seeks interest in converting it from office to residential.
Self storage in Hiawatha/Lake
The 36,526-square-foot light industrial building at 3138 Snelling Ave. in Minneapolis has experienced a lot in its more than 110 years of existence. It's old enough that its railroad frontage was probably far more important to the original owner than its location near the busy intersection of Hiawatha Avenue and Lake Street.
However, according to Mark Drummond of Colliers, one of the real estate agents, access to the property today is a boon for the current owner, an independent self-storage company primarily engaged in “overflow” residential storage. The store itself was not included in the building sale, but continuing to use it as a self-storage facility would be the new owner's path of least resistance given the fragmented interior, limited on-site parking and transferred storage contracts, he said.
It's an unusual opportunity. “Self storage [sales] are often out of market and it's usually a national chain that is acquiring something, so this could be an opportunity for another local operator,” Drummond said. “Such properties are often owned for years and come on the market less often.”
On the other hand, the storage contracts are flexible and increase the possibility of a fresh start. The building has a clear height of 20 feet, making it taller than most industrial buildings of its time. And an on-site cell tower, which brings in about $26,000 per year, could improve cash flow during the renovation and leasing phase after the sale.
Self storage in Hiawatha/Lake
Address: 3138 Snelling Ave., Minneapolis
Type: Light industry (self-storage)
Square footage: 36,526 square meters
Asking price: $3.25 million
Salesperson: Dick Halvorson LLC (Minneapolis)
Listing broker: Tom Sullivan, Mark Drummond and Ben Rorvick, Colliers
Grace Building
The Downtown St. Paul's Grace Building is located on prime real estate at 7th Place Mall, near the heart of the city's historic shopping and entertainment district.
Although dwarfed by its mid-sized and tall neighbors, the Grace Building is larger than it looks. The second and third floors are dominated by offices that were originally designed for luxury retail. Most of the first floor consists of a spacious retail building occupied by Walgreens from the 1940s until 2018. Below ground is a full, finished lower level above a half-height, “amazingly dry” basement, said Eric Dueholm, a Terrace Group partner. A freight elevator serves the entire building.
“A building like this is open to creativity,” Dueholm said.
Dueholm suggested the top two floors could remain as focal points for owner-occupiers or renters looking to expand into adaptable space at competitive rates for the submarket. The former Walgreens would serve as a restaurant for concertgoers and local residents, possibly with windows along the now-muraled wall of 7th Place Mall. The lower level, previously used as storage and an employee break room, has potential as a production space or speakeasy-style event space.
On the other hand, converting offices into apartments is a hot topic in St. Paul right now. A recent study by Gensler and the Pew Charitable Trusts included the Grace Building, and the Terrace Group has fielded inquiries from several potential buyers interested in the idea, Dueholm said.
Otherwise, the Grace Building would not be protected, Dueholm said. However, a major renovation would require a well-capitalized buyer willing to take the risk of new construction in a still-struggling submarket. The clearest path, Dueholm said, is probably some kind of adaptive reuse.
“It’s very affordable for an office user,” he said.
Grace Building
Address: 421 Wabasa St. N., St. Paul
Type: Mixed use (office and retail)
Square footage: 52,347 square meters
Asking price: $2.95 million
Salesperson: Cpec Exchange 51180 LLC (St. Paul)
Listing broker: Eric Dueholm and Ben Bruno, Terrace Group