It costs a huge amount of money to redevelop a historic office building. Local, state, and federal officials may be willing to help.
Sherman Associates, a developer based in Minneapolis, plans to spend $91 million to transform a 330,000-square-foot office tower into a new apartment community.
Northstar East first opened in 1916 as the Pillsbury Building. In 1963, it was renovated as part of the Northstar Center, which also includes a second office tower, a hotel, and a parking garage with more than 900 spaces. The center was one of the first mixed-use properties in Minneapolis.
“It’s more expensive to do these historic rehabs than building new,” says Trevor Martinez, senior developer for Sherman Associates.
In addition to the cost of repairing the brick and limestone exterior, Sherman Associates will spend more than a million dollars to remove asbestos and lead paint from the old building. The windows can stay—installed in the 1960s, they are double-pane and can be opened.
Four developers partnered to redevelop the whole block, including Polaris Development Group, Taconic Capital, and Kothe Real Estate Partners. Sherman Associates started construction on Northstar East in May.
When it opens in November 2024, it will add 216 new apartments to downtown. That works out to a cost of $421,000 per unit to develop the new apartments.
Sherman Associates will pay about 30% of that cost with equity from the sale of state and federal historic rehab tax credits. The developer raised another $5.6 million from tax increment financing provided by the city, in exchange for limiting the rents at 20% of the apartments.
The apartments will have to stretch to fill the large, old office building. The largest floor plates are roughly 150 feet wide and 200 feet deep. That means the longest apartments will measure 65 feet from the front door to the nearest window—more than twice as long as a conventional apartment layout, says Martinez.
Amenity spaces like a coffee lounge, a library, a maker studio, and a coworking space will also help fill spaces that are far from windows on the largest floor plates. “This project has about three times the amount of internal amenity space and resident storage,” says Martinez. There will also be a roof deck on the 13th floor.
Northstar East also includes a section of the Minneapolis Skyway, a network of elevated passageways and retail spaces that stretch throughout downtown.
