StoneBridge (2nd Street South & 11th Avenue South)

[mnmike]

I was by here again last night. I like this one a lot...there is way more glass than I expected. Nice looking building.

[John]

it would have been fine bookend to the carlyle. but no, it's another stunted lump. personally this project is a miss. developer has the opportunity to market hi-rise city views and opts to play it safe. maybe he should just stick to projects in the 'burbs.

That's similar to my opinion of when they reduced the size of Nic on Fifth from 34 stories to 26. For some reason, many local developers here don't "get it " that high-rise city views are a huge draw to attract tenants/condo owners. I suspect it is due ignorance as we just don't have much of a history or tradition of high rise living compared to Chicago or Seattle. We are indeed struggling to overcome our suburban mentality.

[MNdible]

Land prices and the rents that landlords are able to command are completely different in the places you note. That's like saying, those developers in St. Cloud just don't get it!

Developers have ego, too. They'd like to build a tall, sleek, expensive building that impresses their developer friends. But at the end of the day, you know what really impresses their developer friends? A killer return on their investment.

[John]

Yes, no doubt making a great ROI on you project is a developer's most important objective. But there are definitely cultural influences at play. All you need to do is look at Magellan's LPM project. That has a decidedly urban attitude and feel which you would expect from a major player in constructing housing in downtown Chicago. That is their point of reference.

I don't want to be too critical of Minneapolis. We are definitely creating our own unique big city culture and its very exciting to see this evolve. Its just still very new and the transition away from being a provincial outpost takes time.

[Konante]

I walked across the Hennepin bridge this morning and paid special attention to StoneBridge. From that view, it's looking to be a nice bookend to the Mill City area. It's fun to see the glass going up.

[min-chi-cbus]

Generally speaking, when developers have the ability to go higher they'll take it until going higher becomes cost-prohibitive, mainly because a lot of the cost of developing a tower is fixed and it helps to spread those fixed costs as thin as possible. But each extra floor carries additional costs that warrant offsetting revenues. For example, at 26 floors, it may have cost $150 per square foot to construct the tower, but at 34 floors it might cost $175 per square foot, and perhaps they didn't see the opportunity to charge high enough rents to justify that cost given the market, the location, or whatever. Where developers CAN charge incrementally higher prices for each added level over and above the cost of building that level, they'll keep going skyward. To somebody's point, perhaps in Minneapolis millionaires with $million penthouses aren't a dime a dozen like they are in Chicago or Seattle, and perhaps that's because there may be a prevailing suburban mindset here still.

My guess is that when they did the analysis they realized that by going 8 floors higher they'd be spending more and not necessarily getting more in return, and their efficiency frontier for ROI may have been at 26 floors (even if they could have ADDED profits at 34 floors, but the percent return wasn't quite as high: "law of diminishing returns"). And if you think about it, you may agree that those 8 extra floors may not offer much more of a view than what the others would have offered, and going beyond 34 floors may have required rents that couldn't be achievable.

[Didier]

I'm sorry but the notion that developers are so stupid that they are accidentally leaving millions of dollars on the table because they don't "get" that taller buildings are more profitable is ridiculous.

[nickmgray]

the one big factor that plays a huge roll in taller buildings is the need for additional elevators. Adding another 8 floors to a building may sound easy, but it may require an additional elevator bank. This changes the design of the building since at least one unit on every floor needs to be smaller and you have the additional cost or a high-speed elevator to build as well.

On a separate note, does anyone thing we'll see more condo developments proposed for downtown. More than half the units in the building are already sold and the number of available downtown units for sale is hovering around 150. Seems like a new condo unit would be much more feasible than rental since there are so many of those being built right now.

[min-chi-cbus]

This was discussed before at one point (maybe within this thread, but I'm too "lazy" to sift through all of the pages) but I remember hearing that condo developers are looking for higher average median prices before it becomes more feasible to build new condo projects. I can't remember the specifics, but something like $225K per unit was close to the break-even point, and we were around $200K (if not those exact #'s, you get the gist).

[Anondson]

Condo development isn't a sure thing to coincide with apartments right now. Prior to the housing bubble people were told at renting was flushing equity down the drain, owning built up net worth. Many discovered how easy it was to go underwater "owning" above your means as values crashed and suddenly 15-years of equity growing vanishes in one day with a foreclosure.

[MS3]

I would much rather pay a little extra and have a killer view from 40 stories up than pay a little less and a view from 8 floors up.

[Nathan]

I would much rather pay a little extra and have a killer view from 40 stories up than pay a little less and a view from 8 floors up.

Wouldn't we all? But the point is the developer has identified that only so many people can even afford to live on floor 8, and it's too risky to assume there will be people with that little extra to live up higher.

Not to mention the bank probably isn't interested in financing something adding a large number of condos to an iffy condo market, It might not have even been the developers choice to limit it.

[John]

I think Stonebridge was actually financed privately by the developer. I feel fairly secure in saying this is going to be profitable for Mr Stanton as he has no other competition and this a a very well done project.

I don't think will will see a 40 story condo tower with hundreds of units for sale anytime soon. However , I think a 40-50 story mulit-use tower with a 100 units on the top floors would do extremely well. The current market can absorb that. You see projects like this happen in other big cities, but for some reason , no one builds projects like that here.

[FISHMANPET]

They're not being built because the market won't support them (or at least the banks don't think the market will support them). There's no great conspiracy to keep tall buildings out of Minneapolis, it's the market.

[cass]

Does the fact that our top banks here (ie. Wells Fargo and US Bank) came out stronger during the recession because of their conservatism add anything to this discussion? (other regional banks following suit) I'd think the banks are saying that we're too small of a market to support this, that a certain number of professionals still live in the burbs, that average pay doesn't support this etc. etc. (ie. we don't have the technology money like Seattle; Amazon/Microsoft). I'd think the banks plus market just aren't quite there, plus lack of experience risking a taller bldg for local developers.

[Nick]

They're not being built because the market won't support them (or at least the banks don't think the market will support them). There's no great conspiracy to keep tall buildings out of Minneapolis, it's the market.

Nah, it's probably a conspiracy.

[John]

No, not a conspiracy. It's related to too much available vacant land in our downtown compared to other cities. The land is relatively cheap and it's easier to build single use projects. It's not unlike the mentality that drives suburban sprawl. That's all changing though, as the supply is shrinking.

[min-chi-cbus]

Honestly, there is very little reason to EVER build anything taller than 1,000 feet, as it usually impractical and expensive to do so and the only reason it's ever done is pride/arrogance/inferiority/etc. At least, that's what I've heard. If you think of some of THE most expensive cities on the planet (like Manhattan, Tokyo, Paris or London) the cost/SF would justify a very high FAR, but it would be so expensive to build it that you could just as easily locate the office somewhere on the periphery and subsidize commutes for all employees. Like, in Manhattan for example, if a building cost $1B to build in Midtown, but cost only $350M to build in Brooklyn, Queens, or an core suburb like Yonkers or even Jersey City, they may choose to build there and could build almost 3 times as much space for the cost of building in Midtown.

This is especially true in Minneapolis, since land is at much less of a premium than it is in Midtown, NY, which has only a small handful of 1,000+ ft. skyscrapers of the 6K-7K skyscrapers in that city.

[Matt]

Taken today:

[Wedgeguy]

Give the condo market some time. IF the high rise Apartments fill and stay filled then We can say there is a better chance that people will want to buy a condo in the sky. We first have to prove that we have a sustained market for living downtown, not just a flash in the pan type. I also see a few of the current apartment buildings possibly turning Condo if the market is there. Until there the condos will mostly be more low rise than high rise.