2005 MSCA RESEARCH COMMITTEE MEMBERS 2005 MSCA RESEARCH COMMITTEE MEMBERS Bob Barton, Kraus-Anderson Companies Molly Bird, United Properties Eric Bjelland, United Properties Brandon Champeau, United Properties Jerry Ciardelli, Erdahl Aerial Photos Gregg Erickson, CB Richard Ellis Betty Ewens, Kraus-Anderson Companies Jan Goossens, Kraus-Anderson Companies Jennifer Helm, United Properties Dirk Koentopf, United Properties Mike Korsh, Kraus-Anderson Companies Jim Mayland, MNCAR Robert Pounds, Welsh Companies, LLC Holly Rome, Jones Lang LaSalle Paul Sevenich, Kraus-Anderson Companies Kenneth M. Vinjes, Kraus-Anderson Companies A special thanks to: Linda Autry, Kraus-Anderson Companies; Darci Fenske, Lanmark Corporation; Lisa Kinowski, Fisher Group; Joe Kleiman, Kleiman Realty; Caroline Lilienthal and Jim Mayland, MNCAR; Tom Madson, Benson-Orth Associates, Inc. Property information was provided by members of MSCA, as well as the MnCAR “Xceligent” database. Data contained in this report is the property of the Minnesota Shopping Center Association and may not be copied without prior consent. The 2005 MSCA Research Committee performed the statistical analysis. Additional copies of this report are available by contacting the Minnesota Shopping Center Association at (952) 888-3491. ©2005 Minnesota Shopping Center Association 8120 Penn Avenue South, Suite 114 Bloomington, MN 55431 www.msca-online.com TABLE OF CONTENTS Introduction . 2 Executive Summary . 3 Glossary of Definitions . 3 OPINION SECTION Development/Redevelopment . 4 New Retailers/Bankruptcies/ Acquisitions/Mergers . 5 Investment Market. 6 Legislative . 6 Trends . 7 Mixed-Use . 7 Grocery-Anchored Centers. 8 Urban Clusters. 9 STARRSM AWARDS Interior Design. 10 Design and Aesthetics . 10 Development Process . 11 Renovation/Remodel . 11 Redevelopment . 11 Individual Awards . 11 OVERVIEW OF TWIN CITIES PROPERTIES Market Size . 12 Vacancy . 12 Expense Analysis – Rental Rates . 14 – CAM Expenses . 14 – Real Estate Taxes . 15 – Comparisons of All Expenses . 17 PROPERTY SECTION Regional Centers . 17 Property Listing of Regional Centers Community Centers . 22 Property Listing of Community Centers Neighborhood Centers. 24 Property Listing of Neighborhood Centers Minneapolis CBD . 30 Property Listing of Minneapolis CBD Saint Paul CBD . 31 OUTSTATE SECTION Introduction to Outstate Properties . 33 Duluth . 34 Property Listing of Duluth Mankato . 36 Property Listing of Mankato Rochester . 38 Property Listing of Rochester Saint Cloud . 40 Property Listing of Saint Cloud Brainerd/Baxter . 42 Bemidji . 43 Moorhead/Fargo. 44 RETAILER PROFILES . 46 APPENDIX: PROPERTY LISTINGS Alphabetical, by city. 48 2005 Corporate Sponsors. 66 1 INTRODUCTION Welcome to the Minnesota Shopping This year, the MSCA Research Committee Center Association (MSCA) 2005 Retail Real has redesigned the retail report with the Estate Report. Minnesota is fortunate to have a intention of further improving the content. The strong real estate community infused with Outstate Section of the report has once again successful industry leaders, the presence of expanded this time to include the Moorhead/ many retailer headquarters and a large array of Fargo area. Two new sections were added to the retail venues. The Minnesota marketplace offers report overall: a section highlighting the past the latest concepts in everything from super- year’s Shopping Center Tribute Awards to regional shopping centers to the everyday Retail Real Estate (STARRSM Awards) recipients essential Neighborhood Center. For the past 16 and a Minnesota Retailer section, highlighting years, MSCA’s Retail Real Estate Report has several of Minnesota’s publicly traded retailers. tracked Minnesota’s shopping center market as Lastly, we have discontinued the annual retail it has expanded and evolved, providing a survey of MSCA’s members. The committee’s market overview of the industry. decision to do so was driven by the strength of Information for the report is generated by the information in the “Xceligent” database and the “Xceligent” database and input from the cooperation and assistance of many industry real estate professionals. The statistical industry professionals. data is generated by an alliance between MSCA We would like to express a special thanks to and the Minnesota Commercial Association of the 2005 Research Committee, Caroline Realtors (MNCAR), working closely together Lilienthal and Jim Mayland at MNCAR and to update and filter the information in MSCA. We hope you will find this year’s Retail MNCAR’s “Xceligent” database. Committee Real Estate Report to be informative and useful. members spent several hours reviewing and analyzing data, and making site visits to ensure Holly Rome that the information is as accurate as possible. Robert Pounds 2005 MSCA Research Co-Chairs 2 EXECUTIVE SUMMARY AND DEFINITIONS EXECUTIVE SUMMARY GLOSSARY OF DEFINITIONS • Fundamentals for retail property remain plan, whether conceptual or in progress to strong in 2005. Tenant and investor demand stay abreast of today’s harried but luxury- Property Classifications is heated, and supply is somewhat focused consumers. For the purpose of this constrained. The resulting imbalance, report, a shopping center’s especially as it relates to the capital markets, is Some statistical highlights from the 2005 classification is based solely an upward pressure on pricing. Local and report: on square footage. All national developers continue to supply statistical inferences are based product into the market to accommodate the • The Twin Cities retail universe increased on the following definitions: population growth patterns. Interestingly, the 1.86% from 2004. The total amount of retail population growth patterns are now urban space according to MSCA is 58,059,383. • (R) Regional Center— and suburban in nature. This new • Market rental rates have continued to increase 400,000 square feet phenomenon, growth occurring toward, in overall and especially in tight markets. and up and away from the center cities will pose • Average vacancy is down from 2004 and interesting development conditions in the presently stands at 6.0%. • (C) Community coming years. If the old adage “retail follows Center—150,000 to rooftops” is true, then we will likely see an 399,999 square feet increased amount of redevelopment in the center cities, as well as the ongoing retail • (N) Neighborhood development in outer-ring suburbs. As the Center—30,000 to kids say, “It’s all good”! 149,999 square feet • In terms of product type, Neighborhood and Community Centers seem to be the preferred • (CBD) Central Business property type of the area’s developers. District of Minneapolis Development is occurring in virtually every —regardless of square geographic sector, with grocery stores footage typically anchoring the development. A new Lifestyle Center is being developed in Woodbury. The joint venture of Opus Northwest and RED Development transforms unimproved land along I-94 in fast-growing Woodbury into approximately 400,000 square feet of new retail in a unique design, with an interesting layout and a retaining wall (rumored to be called the Great Wall of Woodbury). • The market’s Regional Malls continue to retool to meet the needs of today’s consumers. As an example, Rosedale Center purchased one of the area's nine vacant former Mervyn’s buildings with plans to demolish the building and construct new retail with a focus on entertainment and retail in a nonmall environment. Virtually every one of the Regional Malls has some 3 OPINION SECTION Mills Corp., which took DEVELOPMENT/ over ownership and REDEVELOPMENT management of Edina’s In the southwest, Eden Prairie is still a high- Maple Grove continues to grow their retail Southdale Center earlier demand market that continues to attract mecca with Opus Northwest’s Fountains of this summer, has retailers. Best Buy is under construction at Arbor Lakes at I-94 and Hemlock Boulevard. significant makeover plans I-494 and Highway 212, and is redeveloping Opus Northwest is proposing anchors Costco, the site from an office building to a state-of-the Lowe’s and other big box, service and restaurant for the nation’s oldest art retail store. In addition, Fountain Place retailers. This addition will add another 800,000 enclosed shopping center. opened in the fall with HomeGoods, square feet to the existing retail universe. In Sportmart, Michaels, Famous Footwear, Zeno addition, Ryan Companies is still moving To the northwest of and Pei Wei Asian Diner. forward on their project at I-94 and County Minneapolis, Rogers is Mills Corp., which took over ownership Road 30 at the future Highway 610 extension attracting a lot of and management of Edina’s Southdale Center featuring Home Depot, a proposed SuperTarget earlier this summer, has significant makeover and a medical facility. Finally, Wal-Mart there is discussion these days — plans for the nation’s oldest enclosed shopping undergoing expansion to SuperWal-Mart. with a 190,000-square- center. Although renovation plans have not been Wayzata’s downtown will get a major face-lift foot Cabela’s that opened finalized, early plans include adding a fourth with the redevelopment of Wayzata Bay Shoppes. this fall and Cub Foods department store and an Open-Air/Lifestyle Center. Currently, United Properties, in partnership and Lowe’s proposing East of Saint Paul, Stillwater/Oak Park with the existing owners, are in the midst of a locations in the market as Heights is coming into its own with Kowalski’s six-month study with the city to determine