50-story tower to replace TCF building

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Massachusetts-based Franklin Street Properties plans to build a 50-story mixed-use tower on the current site of the four-story TCF Bank building in downtown Minneapolis.

The tower would include a full-service hotel along with apartments and 260,000 square feet of rentable office space, according to the real estate investment trust’s third-quarter earnings press release.

The project could break ground in the second half of 2016, depending on progress of the “costing and pre-development work ahead,” Franklin Street said late Tuesday.

“Significant thought and design are being incorporated into the redevelopment of 801 Marquette Avenue in order to integrate it with and enhance the appeal of its next-door neighbor office building, FSP’s tower at 121 South Eighth Street,” the REIT said.

A tower of that size and scope has not been built for several years in downtown Minneapolis, but would be an economic asset to the area, said Herb Tousley, director of real estate programs at the University of St. Thomas’ Shenehon Center for Real Estate.

“If you’re going to do a project of that magnitude (in downtown Minneapolis), that’s the place to do it,” Tousley said.

News of those details followed the REIT’s work in recent months to secure a housing developer for the project.

Franklin Street said that it is working with a residential development group and a hotelier to evaluate details of the project, but Chief Investment Officer Jeffrey Carter declined to discuss further details when reached by phone Wednesday, citing Franklin Street’s status as a publicly traded REIT.

Under its current plan, Franklin Street Properties would contribute the land at 801 Marquette Ave. S. and between $80 million and $90 million to the project in return for 100 percent ownership of the office portion of the building.

The REIT emphasized it has not yet finalized development agreements or financing for the project.

In order for the developers to break ground by the second half of 2016, a project of that size would likely have to have financing as well as major tenants in place soon, Tousley said.

“It sounds like an ambitious project and something that certainly could be done,” Tousley said. “They may have people in place and just not be talking about it (publicly).”

The current four-story office building is adjacent to the TCF Bank tower, at 121 S. Eighth St.

Previously, Franklin Street Properties said it would raze or renovate the Marquette Avenue building for either a six- to eight-story office building or a 45-story mixed-use tower.

The TCF Bank building is on a roughly 0.84-acre site immediately north of the historic Foshay Tower and west of the TCF tower. Hennepin County values the 84-year-old bank building at $6.02 million, according to property tax records.

Plans for the hotel come at a time when the occupancy rate for downtown hospitality is running more than 70 percent, said Jon Ruzicka, an associate in the Minneapolis office of Marcus & Millichap.

“When you look at something like that, putting a hotel into a 50-story tower, the developer is intending for it to be one of the marquee properties when it comes to hospitality in the area,” Ruzicka said.

While a 2016 groundbreaking could mean the hotel is ready in time for the 2018 Super Bowl or 2019 NCAA Final Four, those timelines usually aren’t “make or break” for projects of that size, he said. Both events are to be held at U.S. Bank Stadium.

“It’s going to take longer to get that opened up than it would the standard opening of a hotel, which is usually about eight to nine months,” he said.

Although details on the residential portion of the project have yet to be firmed up, Franklin Street indicated previously that the tower could include between 220 and 250 units.

The average vacancy rate for market rate apartments in downtown Minneapolis was 8.3 percent in the second quarter, according to a market analysis by Golden Valley-based NAI Everest. The average monthly rent was $1,413 per unit.