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Land Use

Minnesota’s First Recreational Cannabis Dispensaries are Navigating Nuances in Licensure, Real Estate and Land Use

The state of Minnesota has completed its cannabis licensing lottery and issued preliminary licenses to a pool of selected entrepreneurs. Those licensees now have 18 months to get their businesses up and running, or they face the prospect of losing their licenses. That means it’s “go time” for cities, counties and cannabis entrepreneurs to work together to make these businesses come to life. In recent talks with attendees of the Midwest CannaCon conference, I found entrepreneurs who were focused and ready to execute their plans. Those conversations, combined with issues we’ve been navigating on behalf of clients, have revealed a few common themes. Here are factors that entrepreneurs should keep in mind to help their next steps run smoothly: Understanding Nuances of Zoning Avoid the mistake of homing in on a location for a retail store and starting down the road of lease negotiations before confirming with the city or county that your location is zoned correctly and outside of any mandated buffer zones. For example, some entrepreneurs have made the mistake of assuming that an otherwise properly zoned space is clear to proceed with, without realizing that a planned unit development, proximity to schools or other “sensitive” uses, or some other zoning restriction would disqualify that space. This situation can sometimes be navigated by requesting a special zoning amendment from the city, but costs for these amendments can be in the thousands. Don’t be afraid to contact city or county officials to ask questions, and be specific with your plans. For example, “I have a microbusiness license and I want to open a retail store. Is this address zoned correctly?” Additionally, know that many city maps that illustrate buffer zones around schools, churches, etc. are showing estimations, and you will need to confirm distances precisely to determine if a space is fully outside of a buffer zone. We have worked with clients who had a prospective space disqualified over a matter of a few feet.  Don’t Wait to Engage with Inspectors It’s also a good idea for entrepreneurs to engage early with the fire inspector or building inspector to understand their requirements. Ultimately you may need to hire an architect or engineer to create the final drawings for the inspector, but in the early stages even a rough drawing can help you start the conversations and avoid wasted time. If you do hire an architect or engineer, it’s a good idea to find one who has worked in that city previously and understands how their inspections operate. As any tradesperson will tell you, standards can vary widely, even between neighboring towns. Find Out Your Place in Line Another thing to ascertain from the city or county early on is whether the area has a limit on licenses, and if so, how many applications have already been submitted. If your application would be far down in the queue for a limited number of licenses, your time will be better spent looking elsewhere. Be Transparent with Landlords Cannabis businesses are not just new for cities; they’re new for landlords too. Tactics landlords have used in the past with other tenants may not work in this new situation. Some landlords may try to insist on an “open by” date for your business, but the number of variables in the state’s current cannabis landscape makes it very difficult to be specific about opening dates. Be wary of promising a timeline. If you’re seeking a growing space, the power supply is another major issue to determine with the landlord. You may find a large space with cheap rent, but if the power needs to be upgraded, determine who will be taking on that cost before signing a lease. The Clock is Ticking As mentioned, those who have received their license approval have 18 months to complete the rest of the steps in the state’s process and open their doors. With the clock ticking, it’s important for entrepreneurs to work efficiently and prevent lost time. Our team at Larkin Hoffman is ready to help businesses navigate this new landscape, and can help advise on licensure, site selection and more.

September 16, 2025

Real Estate

Three Biggest Tips for Realtors Facing Tricky Transactions

Real estate professionals oftentimes find themselves fielding a variety of difficult questions and facing some tricky transactions. Having partnered with realtors for decades, our team compiled our top three tips for realtors to reduce their potential liability and better serve their clients. 1. Put It in Writing Documentation is key for any transaction, but it does not only apply to agreements and contracts. Document all communications throughout the buying and selling process – including emails and texts. By putting everything in writing, realtors can increase clarity and help protect themselves and their clients should an issue arise. Advice for Implementation: Save your emails. Keep a dedicated folder for each client. Develop the habit of summarizing verbal discussions in a follow-up email or text message. This not only provides a record but gives all parties an opportunity to confirm they are on the same page. 2. Stay in Your Lane Real estate professionals are oftentimes asked to do a variety of tasks that do not fall under their job description. This can potentially open them up to liability down the line. Avoid providing services and advice outside your scope. For example, never perform electrical work, provide legal advice or give opinions regarding a property survey. Instead, act as a referral source to professionals who can provide these services. Advice for Implementation: It is important to build a network of trusted professionals, such as attorneys, licensed contractors, professional surveyors and lenders. This not only helps protect you from liability but enhances your credibility and your client’s overall experience. 3. Acknowledge, Don’t Admit Handling complaints is an inevitable part of the real estate business. While it is important to acknowledge concerns, agents should be cautious not to admit wrongdoing. This approach allows you to address perceived issues while protecting yourself from potential legal repercussions. Advice for Implementation: If representing a buyer who later complains about a possible property defect, acknowledge receipt of the correspondence but try to avoid apologizing or saying anything that could be construed as an admission of fault or liability. Serious complaints should be sent to your broker to decide if an attorney or the broker’s insurance carrier should be notified. Implementing these tips can help you reduce your risk of legal issues as a real estate professional. They can also elevate the standard of service you offer your clients.

April 15, 2025

Real Estate

Bill Griffith and Adam Pabarcus Moderate at Bisnow's Twin Cities State of the Market Event

Larkin Hoffman's attorneys Bill Griffith and Adam Pabarcus recently moderated panel discussions during Bisnow’s Twin Cities State of the Market outlook event. Held earlier this month, the event featured insightful conversations with leaders in the Twin Cities real estate and development markets. The first panel, moderated by Bill Griffith, included Pat Barrett, COO of Oppidan Investment Company; Tim Elam, Managing Director at Scannell Properties; and Barry Stoffel, Partner and Integrator at Gardner Builders.  The four covered a range of topics including strategies for navigating the current market and some of the challenges to various asset classes including industrial space, data centers, and senior housing.  Pat Barrett remarked optimistically, "Winds are shifting, and we're headed in the right direction," when discussing emerging trends in the Twin Cities. Adam Pabarcus moderated the event's final panel which included Josh Brandsted, President of Greco Properties; Jay Bhakta, Managing Partner at JR Hospitality; and Angela Ledding, Head of Underwriting at PACE Sloan Group. The panel focused on the future prospects for the Twin Cities real estate market. "We're witnessing significant economic volatility, impacting every facet of property development and management," noted Adam. Discussions centered on the resurgence of office space demand as the city adapts post-COVID-19 lockdown, as well as identified avenues for future growth. Bill Griffith and Adam Pabarcus are both part of Larkin Hoffman's real estate team.  Recently, Bill sat down with Adam and another attorney on the team, Tim Rye to discuss property taxes.  If you would like to learn more about property taxes in how today's market may be affecting your value, please visit the Larkin Hoffman Real Estate Podcast and listen to our latest episode.  Bill Griffith advises local and national clients on legal and policy issues affecting land use, zoning, real estate, environmental review, municipal law, regulatory matters and government relations. He has been legal counsel to Mall of America in all its phases, and serves as city attorney for the city of Columbus. He is a trusted advisor on real estate development and public funding for both private clients and municipalities. Adam Pabarcus is a litigator and trial attorney who focuses his practice on complex real estate litigation and property tax appeals. Adam represents clients in state and federal courts across the country to resolve disputes and advance their business goals on a broad range of issues. Tim Rye is a litigator who advises clients on real estate valuation and property tax appeals. He advises on all aspects of the property tax appeal process, including: reviewing properties for potential success on appeal, filing appeals and all statutory disclosures, researching market data, preparing analyses for negotiations, negotiating resolutions, and litigating appeals if necessary. Tim represents a broad range of clients, including real estate investors, owners, developers, property and asset managers, corporations, and individuals with real estate holdings.

May 13, 2024

Real Estate

Bisnow’s Twin Cities Multifamily Market Overview with Bill Griffith

On February 1st, the Federal Reserve raised interest rates by another quarter-point. This first rate hike of 2023 follows seven interest rate hikes in 2022.  With the rising interest rates in mind, Bill Griffith sat down with a panel of real estate and construction industry leaders last fall at Bisnow’s Twin Cities Multifamily Market Overview to discuss the effect of rising interest rates on their business. In this episode of The Larkin Hoffman Real Estate Podcast, Bill takes the opportunity to review the discussion he moderated and highlight some of the trends, opportunities and forecasts for the Twin Cities construction and real estate markets. Bill discussed the market with Traci Thomas, COO of Doran Companies; Sargent Johnson, Managing Director at Hines; Brady Pollard, Vice President – Preconstruction Services Director at JE Dunn Construction; and Johnny Opara, President and CEO of JO Companies.  Bill Griffith advises local and national clients on legal and policy issues affecting land use, zoning, real estate, environmental review, municipal law, regulatory matters and government relations. He has been legal counsel to Mall of America in all its phases and serves as city attorney for the city of Columbus. He is a trusted advisor on real estate development and public funding for both private clients and municipalities. Contact Bill Griffith at wgriffith@larkinhoffman.com

February 14, 2023

Real Estate

Listen to Bisnow’s Twin Cities State of the Market Recap With Jake Steen on The Larkin Hoffman Real Estate Podcast

In the second episode of the Larkin Hoffman Real Estate Podcast series, I had an opportunity to wrap up a recent Bisnow panel I moderated at Bisnow’s Twin Cities State of the Market event held in Minneapolis in late August. The panel covered the trends, opportunities and forecasted growth of the Twin Cities construction and real estate markets including predictions about where capital investments are going; the effect of rising interest rates on new development projects; the impact of rent control policies; how developers are pushing new projects forward; what a return to the office is looking like; and the future of redevelopment in downtown Minneapolis and St. Paul. I was joined on the panel by Jackie Knight, COO, Ackerberg; Ericka Miller, Senior Development Manager, Alatus; Phil Cattanach, VP & General Manager, The Opus Group; Josh Budish, Principal, Endeavor Development; Brent Webb, Development Executive, Mortenson; and Alex Cole, Senior Manager, Nuveen Green Capital. _________ Jake Steen advises and represents businesses, developers, and property owners seeking favorable government approvals including licensing, zoning, environmental review, and other ‎regulatory matters. Contact Jake Steen at jsteen@larkinhoffman.com

October 10, 2022

Real Estate

Building the RBC Gateway: Interview with Bill Katter, President of United Properties Development

I recently had the opportunity to sit down with Bill Katter, President of United Properties Development, in the firm’s new offices located in the RBC Gateway, a building he developed.  The 37-story tower sits on a key block linking the downtown Minneapolis core with the bustling North Loop neighborhood and providing tenants with commanding views of the Mississippi River, just a few blocks away. Bill Katter  didn’t plan to be a developer when he was recruited to join United Properties almost 20 years ago.  He was working for Lutheran Brotherhood underwriting equity investment when Boyd Stofer offered him a job underwriting acquisitions for United Properties.  Soon after, Stofer asked him to take on development of the C.H. Robinson Headquarters in Eden Prairie. “It started with Boyd saying ‘you have the qualities of a developer. Why don’t we just make you a developer and see where it goes’,” said Katter.  Asked what those qualities were, he responded, “I would think drive is the most important thing, wanting to wake up and get something done, and the desire to compete and win business.” Katter talked about what it took to develop RBC Gateway, the largest mixed-use project to open in downtown Minneapolis in many years.  “First of all, organizationally we never built something taller than 10 stories in our a hundred plus years history. For us, it was the fortitude and the organizational depth and breadth to pull something like this off. The second thing we learned is how important Minneapolis was to the Pohlad family. The project was a chance to reunite, under one roof, with our owner and contribute meaningfully to Minneapolis.” RBC Gateway Landing the Four Seasons Hotel was the special sauce of the project, according to Katter, but it wasn’t clear it would pencil out.  “We felt great about the condos, we felt great about the office, but the hotel, we were not sure it would underwrite fully.  We all kind of locked arms and said, let’s take a shot at this.” Katter said the office component is doing extremely well.  “We’re about to sign a lease that puts us at 99% leased.”  Still, he credits the other components of the projects with driving the success of office leasing.  “The Four Seasons Hotel offers a level of amenities with meeting space and dining, and valet parking was important to RBC’s wealth management business. It could also be there is a shift towards the North Loop and out of the core.” We talked about what it will take to make development viable in downtown Minneapolis for the long-term and it didn’t take Katter long to come up with his answer.  “The most important thing is getting people back to the office and most of the major employers downtown have not fully commanded a return to office policy.”  He said, “until office fully returns, the core of downtown will continue to just feel like it’s missing something.” Katter contrasts the downtown core with the success of the North Loop.  “The North Loop is primarily a residential submarket with office in it. It has many more people living there and so it’s felt much more vibrant throughout the pandemic and even today.” Shifting gears, we discussed some of the challenges in the marketplace with supply chain problems, interest rate hikes and fear of recession. Katter wouldn’t say the real estate market is in recession, preferring to call it a “cooling off period.” “Our business is completely driven by access to capital and lenders have definitely pulled back on the amount of financing available for projects.”  Katter said that’s a natural function of the economy slowing down. “Then the double whammy for us is there’s also less buyers available.” With volatility in financing markets and supply chain, buyers, underwriters and lenders are having trouble pricing assets right now, according to Katter.  “Our business is driven by long term debt rates but volatility has led investors to conclude it’s hard to price an asset right now. Our pencils are down until things stabilize a bit and they probably won’t stabilize, in my judgment, until the Fed decides it’s done with a very aggressive raising of near-term interest rates and the campaign against inflation.” Katter predicts the market will find a new place and get to a new norm.  “Then buyers will start pricing assets in that arena, lenders will see the new pricing and developers will see what their exit pricing looks like.” Supply chain also affects pricing, according to Katter.  “We do measure that and the volatility of the supply chain.”  Compared to the ordinary level of supply and time of deliveries, the current market is four times off the standard deviation, said Katter. “That’s unprecedented, and that can be good and bad. It can be bad if you need materials that are coming from a place that’s not close to your construction site.  It can be good in the sense that it’s driven a repatriation of supply chains.” Katter sees industrial development as the one bright spot in the market as businesses see more local demand and the need to control inventory.  “We developed 11 industrial buildings a year ago and we’ve since filled and sold most of them. We’re about to break ground on our next 14 here and in Denver and Austin.” He believes the demand for industrial development will taper a bit as companies assess inventory and consumer demand in light of rising interest rates. As we wrapped up the interview, we circled back to the RBC Gateway project.  It is clear that the Pohlad family and United Properties intended to create a lasting impact on downtown by building Class A office at time when others have pulled back, anchored by the Four Seasons Hotel and topped with high end condos.  As a result, downtown Minneapolis now has a landmark building connecting the central core to the successful North Loop neighborhood and the Mississippi River. Bill Griffith practices real estate and municipal law at Larkin Hoffman and is a regular contributor to the firm’s Real Estate and Construction Blog.  Listen here for his interview with Bill Katter.

August 15, 2022

Finding the Future Podcast Series

Finding the Future: Building Tiny Houses for the Homeless

In cities across the country, the pandemic has brought home the plight of the homeless.  Rising home prices, job losses and economic disparity have left more and more people without viable housing options.  Communities everywhere are struggling to find alternatives to the tent cities that have sprung up in public parks and along highways. One solution is gaining national attention – the construction of tiny house villages.  A housing nonprofit in Seattle has had great success pioneering the concept and now manages tiny house villages in Seattle, Tacoma, Olympia and King County.  The organization is known as LIHI, which stands for the Low Income Housing Institute. Recently, I had the chance to sit down with Josh Castle, the Community Engagement Director for LIHI.  It’s his job to run the gauntlet of community and church organizations, building support for the construction of tiny house villages and seeking volunteers.  Josh has seen volunteers’ attitudes shift from concerns about the impact of the villages on neighborhoods to “tell us what residents need.” A little over five years ago LIHI started partnering with the city of Seattle on the tiny house village project. Castle explained, “There was a huge homelessness epidemic in the Puget Sound region with encampments popping up all over the city. Seattle was trying to find a solution, so they started authorizing these encampments, allowing them to be in place as long as they had some kind of an organized structure, some management and a fiscal sponsor.”  LIHI stepped in to serve as fiscal sponsor working with other organizations to address homelessness. LIHI has been around for 30 years and owns or manages nearly 2,400 units of housing in six counties.  About 20 years ago, the organization opened its first urban rest stop in downtown Seattle providing laundry services, showers and bathrooms for people experiencing homelessness. Eventually, that experience and working with the City led to the creation of the tiny house village concept. “We realized that if you build a structure that is 120 square feet or less, it falls below the limit for the International Building Code so it’s not considered a dwelling unit, and it makes it much quicker and easier to build the structure,” said Castle.  “So, we started building tiny houses that were 120 square feet or less and very cost-effective, about $2,500 to build.”  The cost has gone up with the spike in lumber prices but it is starting to come down again. Now, LIHI manages a total of 14 villages, eight in Seattle alone, two in Olympia and three in nearby Tacoma. Recently, they added a village in Skyway which is an unincorporated area of King County near the airport.  Castle adds, “It’s the first one that the County has funded.” Castle points out that residents really like having their own place to live and almost 50 percent move on to permanent housing, which is way above the norm for people who live in shelters.  “The idea is to serve as a steppingstone from homelessness to permanent housing, and the bridge that gets it there is case management,” according to Castle. Case managers hold regular office hours in every village and work with residents to obtain permanent housing, employment, health care, education, which usually starts with getting IDs and documentation together. Castle explains, “A lot of people come into a village after having their encampment swept away or they just simply lost their ID and their documentation. You can imagine it’s complicated to try to get an ID if you don’t have any way to prove who you are.” Castle talked about a resident who was living outside with her daughter.  “She ended up connecting with a church and the pastor recommended that they go and visit a tiny house village and see what it’s all about.” He was able to refer her and her daughter into the village because his church was one of the sponsors. “When they saw the village, they said ‘this is a place we want to be,’ it was the first sense of hope that they felt in years,” said Castle. “They came into the village and she was just a natural leader and an organizer inside the village and helped with everything from working with staff to working with volunteers. She was part of the success of the village.”  Working with case management in the village, the resident and her daughter eventually transitioned into permanent housing.  Castle added, “And now they’re doing just great.” There’s no limit to how long somebody can stay in a village, but Castle said they want to get people in and out as quickly as possible. Homes in the villages are rarely empty and fill up within 24 to 48 hours of opening.  Referrals are made through the City’s outreach services to various service providers and nonprofits. It is clear the tiny house villages are in great demand. Now that LIHI manages a number of villages, they have developed programs that are targeted to specific demographic groups. “We have a village that serves all women.  We have villages that serve families with children. And then we have several villages that specifically serve African Americans, Native Americans and Alaskan native people experiencing homelessness, and they’re referred by organizations that serve those communities.” When LIHI first started the tiny house village program, there was significant resistance. Castle said, “We had these community meetings, people were very vocal and the meetings were quite dramatic, but over time people realized that the tiny house villages are transitional and it’s an interim solution to homelessness.”  They presented empirical evidence that the model is actually working and is the most successful shelter program for getting people into permanent housing.  Some of the initial critics became volunteers when they saw how tiny house villages created a real alternative to tent encampments in their neighborhoods. LIHI now has a record of success in rolling out tiny house villages and building community support. The Seattle experience shows a marked shift from managing tent cities and emergency food programs, to creating a solid path to housing stability – a model based on strong case management and a commitment to addressing the individual causes of homelessness on a person-by-person basis. Bill Griffith practices real estate and municipal law and is the host of Finding the Future, a podcast that explores innovation in land use and sustainability. Listen here for the interview with Josh Castle of LIHI.  If you have a story about innovation in land use and sustainability, please reach out to Bill.

September 27, 2021

Local Government

Fees, Fees, Fees!

In my practice representing developers and landowners, I routinely review dozens if not more, of development agreements over the course of a year.  Without question, the most complained about aspect of virtually all such agreements, by a wide margin, is the extent of fees being imposed by a given city.  Municipal fees are the runaway train of the development business; while this problem affects all businesses engaged in the development of land, it is crushing the housing industry, creating an artificial market condition that has all but eliminated new, more affordable, entry-level housing. I sat through a public hearing this week involving a city’s consideration of a new tree replacement ordinance.  One objecting landowner has calculated that the cost of complying with that city’s new ordinance, after adoption, will exceed the cost of his land.  This is not marginal land, off the beaten path in the middle of nowhere; it is prime real estate in a fast-growing region of the metro area—the land commands a premium.  While the land will sell, even with the fee imposed, the added cost of the fee will be reflected in the price of the new home. I am working on another project in another city involving the redevelopment of an outdated commercial site.  The site is located in a prosperous community with a highly-regarded school district with good freeway access.  The land commands a premium for redevelopment.  It is not a marginal site.  However, in this situation, the municipal fees likely to be incurred, most significantly park fees, will also exceed the price of the land.  Crazy. Ever since the “Great Recession” put cities across the country on a serious diet, a growing number of them have resorted to collecting all manner of fees to backfill their budgets in hopes of avoiding general property tax increases.  Guess what—it is working.  To be fair, cities are allowed to impose fees in an amount that corresponds to a service being provided or a cost incurred.  But Minnesota law very clearly bans cities from imposing fees that are disconnected from a service provided or a cost incurred by that city.   A Minnesota housing industry group has documented the tens of millions of dollars collected by cities which arguably violate state law. The response to this growing phenomenon is essentially a “yawn”.  Various industry groups have tried for years, with Republicans and Democrats in charge, to address this problem, with little progress to show for it.  In the end, state policy-makers are unwilling to limit the power of local elected officials to impose fees on anything.  No wonder landowners and developers are forced to seek relief in court; nobody else with authority appears to be listening or care.

July 16, 2021

Local Government

Hollydale Golf Course: The Complex Road to Redevelopment Approval

The redevelopment of any large land area can be very difficult to accomplish, especially when it is surrounded by homeowners who like the status quo.  This is especially true when the conversion involves a golf course: pastoral, quiet, well-landscaped (maybe a few stray golf balls).  The surrounding landowners (most often homeowners) understandably love the open space, the seasonal nature of the sport and the relative quiet they experience as a neighbor.  However, the redevelopment of golf courses has been occurring with some regularity for the past 20 years throughout the country as demographics and loyalty to the sport has changed.  Throughout Minnesota, and certainly throughout the metro area of Minneapolis-St. Paul, at least a dozen golf courses have been closed and redeveloped, sometimes multiple courses in the same city.  In most instances, the closures were strongly resisted by citizens, especially by the directly affected residents of a given course.  Often the final decision on the redevelopment has been rendered by a judge. All of these redevelopment conversions endure a lengthy public process to entitle the replacement use, most often a housing project of some sort.  They not only are costly and time-consuming to complete, but very often they are politically challenging.  No elected official wants to inject controversy into their community especially if that elected official has the final word on whether the proposed redevelopment goes forward.  Plymouth, Minnesota endured the most recent such redevelopment involving the former Hollydale Golf Course.  (this was the 4th course to close in Plymouth over the last decade or so).  The closure of Hollydale was a surprise as to timing only; its fate was known for some time as the owners had previously communicated their intentions to the city. In the Internet age, a proposal to redevelop a site like Hollydale instantly draws a crowd—both opponents (plenty) and supporters (less visible).  Web site pages are quickly created, and links distributed far and wide, enabling commenters to not only weigh in from across a given city, but also literally from around the world.  It’s quite a thing to read posts from individuals who are not from the neighborhood, or even the subject community, who have an opinion and want you to know it! In the case of Hollydale, the developer and landowners worked closely with city staff to create a very low-density land-use plan that tried to hit all the critical policy markers while avoiding (or fixing) obstacles to success.  That was not enough, unfortunately.  The neighborhood was well-organized and very active in expressing their opposition to the redevelopment and their advocacy for the city acquiring the site for some public use, even if only as open space.  After careful deliberation, the city declined to pursue acquisition, in part due to the high market value being placed on the land by the owners.  But even the clear decision was not enough; notwithstanding strong support of city staff and an extensive record supporting the redevelopment, opponents persisted and successfully prevailed on the City Planning Commission and the City Council to block the redevelopment, the latter decision by a narrow margin. As often happens in this circumstance, and given the strong record in support of the redevelopment, the developer and owners sued the city to overturn the denial.  Fortunately, after reviewing the decision with city legal advisors, the city allowed the project to be resubmitted with several changes, but no loss of building lots.  The City Council voted to approve the revised redevelopment allowing the developer and owners to proceed with it. The moral of the story: frankly not sure if there is one; persistence paid off in different ways for the developer and owners, as well as the opposed resident group.  The redevelopment process was unquestionably made more difficult and expensive for the developer.  And the pressure on City Council members was substantial and direct.  Fortunately, the City Council had the interests of the entire City of Plymouth in mind when it decided to settle the lawsuit and approve the redevelopment essentially as previously proposed. Larkin Hoffman attorneys Peter Coyle, Gary Van Cleve and Bryan Huntington represented the Hollydale Golf Course developer in connection with its land use application and the related litigation leading to the final approval. Tags

June 24, 2021

Construction

Twin Cities Industrial Market Remains Strong

Industrial markets have been in the unique business position of becoming increasingly more valuable during the pandemic.  The value of e-commerce, same-day delivery, and infill development is more important today than it was a year and a half ago. I recently moderated the Bisnow webinar panel Minneapolis Industrial Updatewhich included developers of industrial facilities from United Properties and Ryan Companies. The panelists Connor McCarthy, Development Director at United Properties, and Eric Morin, National Director of Architecture, Industrial at Ryan Companies both confirmed that the pandemic has accelerated an already growing industrial sector. Eric stated that “the reasons we are seeing the growth and explosion in the market aren’t new, they have all been here for several years, those trends have just been accelerated (by the pandemic), studies suggest maybe by five years in terms of acceleration and adoption for e-commerce especially for e-groceries and other items.” Both panelists agree that many of the challenges other sectors have faced due to the pandemic have not been as big of an issue to overcome in the industrial sector. Many of these businesses were deemed essential, workers needed to be on-site, and the naturally distanced workplace lent itself well to continued operations. Connor points out that businesses that figured out how to ramp up distribution like “Amazon, Target, and Walmart all did very well during this pandemic”.  The rapid growth in this industry is also opening up new opportunities for construction companies who are being called upon to modify existing warehousing and develop new buildings in an effort to meet increasing demand. Submarkets in the Twin Cities Emerging as Hot Industrial Hubs The Twin Cities submarkets are running hot in the industrial sector agreed the panelists. The northwest quadrant is seeing the most active development due to access to both labor and roads but that doesn’t mean the other markets aren’t also doing well.  They both noted that labor is absolutely the number one concern for businesses across the board in their sector. Cold storage is in high demand and is increasing in primary and secondary distribution markets.  As grocery stores move direct-to-home, increased demand for cold storage space creates a big opportunity for development but it also has its challenges. Trying to get the right mix on a speculative basis is difficult, particularly when it comes to cold storage and freezer space.  In addition, the city approval process is often more difficult due to the build specs needed up front which can be difficult to nail down in the early stages of development.  It costs 2-3 times more to build a cold storage facility than other spaces.  In addition to this, a very small number of companies own the majority of cold storage sites in the US creating a barrier to entry. The last-mile delivery trend is also creating an opportunity in the market, however, conducting due diligence and identifying the risk and opportunities a particular site provides is very important.  The panelists agree that in-depth traffic studies are needed to determine adequate access to highways and the surrounding community. These particular facilities also have naturally high parking needs for both employees and delivery vehicles.  The combination of traffic, parking, and labor issues require developers to become increasingly creative with their site selection.  Historically, developers would look to farmland outside of the cities, but with the trend in customers wanting everything sooner, site selection is more crucial than ever before. Pain Points for Developers are Real Developers must conduct increasingly complex due diligence and take into account issues of remediation, re-zoning, or re-entitling a site as risk issues.  In addition, close proximity to a city will increase a site’s cost.  The market rent for a first-tier suburb vs. a third-tier suburb vs. a business district, all affect the premium someone pays, which in turn factors into project budgets and the offerings developers are able to provide to the marketplace. Design changes to help mitigate these costs are being explored and implemented but a big issue that developers face today is a shortage of steel.   Connor points out that “in Oct 2020, the lead time for steel from the date of commitment to showing up on-site was around 12-16 weeks and today it’s 36-40 weeks…and costs are up 50% as well in this same time period”.  As a result, build-to-suit development is becoming increasingly challenging with the timeframe needed to order steel for a fully designed building now sitting at 12-18 months ahead of time. Trends in Industrial Supply chain weaknesses have been identified during the pandemic which could result in businesses needing more space.  There is also a trend in reshoring manufacturing to the US creating a sense of security that manufacturing at home provides.  With this in mind, good land, sites, and specs will continue to be in high demand.  Automation is increasing in manufacturing and warehousing facilities and the current labor shortage amplifies this need. Finally, another important trend in the industrial space is a greater need to have access to data.  Getting high-quality fiber to a site is just as important as electricity these days. Outlook Long-term demand in the industrial space is growing consistently year on year.  Developers are meeting current needs but new design opportunities will open up for distribution centers with more development, construction, and design which is good news for Twin Cities developers. To watch the full webinar and hear much more about industrial sector development including thoughts on repurposing shopping malls, what to do about ghost kitchens, and more, please listen to the full webinar at: https://www.bisnow.com/webinar/minneapolis/minneapolis-industrial-update-7027. About the Author Brandi Kerber focuses her practice on real estate law, nonprofit law, and corporate law. She advises clients in connection with all aspects of real estate transactions including development projects, commercial and residential sales, and leases, cellular tower leases, commercial loan transactions, construction contracts, easement agreements, title registrations, zoning matters, and lot splits. Brandi advises nonprofit organizations on a wide range of matters including organization, income tax exemption, property tax exemption, and sales tax exemption. She also represents closely-held businesses in corporate matters as well as mergers and acquisitions.

June 14, 2021

Construction

Larkin Hoffman Ranked Highly for Real Estate and Construction by Chambers USA

Larkin Hoffman was recognized as a leading real estate firm in the 2021 edition of Chambers USA: America’s Leading Lawyers for Business, an annual guide identifying the top attorneys and firms in the United States. The publication also recognized five of the firm’s attorneys as leaders in their fields. Real Estate Chambers notes that Larkin Hoffman’s real estate practice is known for its “litigation expertise, [which] includes handling eminent domain, construction and tax disputes.” Tim Stoltman and Gary Renneke were both recognized for their practices in real estate.  Peter Coyle and Bill Griffith received top rankings for their practices in zoning and land use. Larkin Hoffman is a go-to law firm in Minnesota and throughout the region, advising on all aspects of real estate, including acquisition, approvals, assembly, construction, development, financing, leasing and litigation. The firm serves clients in residential and commercial development. Commercial development includes office complexes and major facilities in the retail and hospitality industries. Construction David Hammargren was recognized as a leading practitioner in construction by Chambers. David leads the Larkin Hoffman construction and surety practice. The firm counsels clients on every aspect of the construction process, from procurement and contracting to government regulations and high-stakes litigation. The construction team represents construction contractors, subcontractors, developers, commercial building owners and sureties. Chambers USA is one of the world’s leading publishers of guides to the legal profession, ranking leading firms and lawyers in an extensive range of practice areas throughout the United States.

May 20, 2021

Planning and Development

Health Care Facility Development: Navigating Uncharted Waters

The impact of the COVID pandemic is far-reaching, upending the norms of operation for businesses and families around the world.  I recently moderated the Bisnow webinar panel Minneapolis Health Care Updatewhich included developers of health care facilities. The panel confirmed that the impact on the health care provider community has been especially significant and is ongoing with the ebb and flow of viral spikes.  The most immediate impact was the sudden surge of patients requiring high levels of care; it’s fair to say our health care operations were not prepared for a pandemic, and their staff members have certainly borne a historic burden in meeting the needs of their patients in response to it.  At the same time, health care providers were forced to alter their operations, first when they had to suspend discretionary health care services such as surgeries and other significant modes of care, and later when they had to adapt their services to safely manage patient intake or virus exposure and modify facilities in an effort to safely return to regular patient interactions.  These latter requirements came at a very high cost.  Taken together, the “business” of health care has been forced to adapt to a degree that was not anticipated a little more than a year ago. The most obvious change, from a consumer standpoint, has been the rapid deployment of telehealth platforms that enable patient-doctor interactions without the need to access the provider facility and potentially transmit or risk exposure to the virus. This capability has been available for a very long time, but its growth was essentially compelled by providers needing to find a safe way to continue their operations, interact with patients and generate revenue.  One can assume that the reliance on this approach to patient care will be more common going forward, even when it’s possible to have personal exam visits.  This use of telehealth technology will require that medical facilities be designed, or redesigned, to accommodate the virtual aspects of health care delivery. Notwithstanding the role of telehealth, the overwhelming majority of patient health care interactions will continue to occur in bricks-and-mortar health care buildings whether it be a hospital, clinic, or another specialty facility.  One of the most pronounced changes in this physical aspect of health care delivery has been the consolidation of physician groups with health care providers as a means of capturing patient volumes and revenue.   Concurrently, the trend of developing specialty facilities under the ownership and control of physician groups, or of large investment groups, proceeds unabated.   Thus, we will likely be seeing more standalone surgery centers, urgent care facilities and the like in our future.  The long-term implication of the telehealth trend for patient care, and especially for hospitals with a mandate to provide a broad range of costly services, remains unknown. The health care industry has been forever changed by the many challenges of this pandemic. It was an honor to moderate a panel of individuals working in the health care technology and real estate sectors. The panelists offered many insights into innovations, opportunities, and expansions in health care particularly relating to changes within health care facilities and future real estate needs.  If you would like to learn more, please listen to the Bisnow panel discussion Minneapolis Health Care Update here. Peter Coyle advises business and institutional clients on solving problems related to federal, state and local law and regulation. He represents clients before the Minnesota Legislature and state agencies, as well as cities, counties and townships, on a wide variety of business licensing, permitting, regulatory compliance, environmental review and related matters. The main focus of his practice is advising land owners, developers and contractors who are seeking local and state regulatory approvals associated with new commercial, industrial and residential land development projects.  If you would like assistance with local and state regulatory approvals associated with new commercial, industrial and residential land development projects, or have questions about real estate development please contact Peter atpcoyle@larkinhoffman.com.

May 7, 2021

Finding the Future Podcast Series

Finding the Future: Reviving Downtown Minneapolis – Bisnow State of the Market Panel

Every day, business and political leaders are tackling the question of how to revive downtown Minneapolis.  After a year of dealing with the pandemic, social unrest, and shuttered businesses, they are searching for ways to bring people back downtown.  Even as the state has ramped up vaccinations against COVID-19, downtown remains a ghost town with few office workers, limited events, and restaurants and bars scrambling to attract customers. The question of how to revive downtown Minneapolis was recently posed to a group of real estate leaders on a panel organized by Bisnow.  The panel acknowledged real challenges facing the city, however, at the same time they found bright spots on the horizon as people are ready to leave their homes in pursuit of a bit of normalcy, illusive as that may seem. Brent Robertson is the market lead for JLL’s office in Minneapolis.  He’s working on several large commercial real estate projects in and around downtown.  One of his clients is a large law firm tenant that was planning to move in two years and has announced they will remain downtown.  “I wouldn’t say the pandemic had an effect, but it just speaks volumes to their commitment to downtown Minneapolis.” Anne Behrendt is CEO of Doran Companies, a local developer of multifamily and commercial projects. Her company responded to pandemic protocols by getting construction managers on-site more often.  “That was in the works but probably happened much quicker than we thought as a result of the pandemic.”  She also emphasized the focus on social issues that have come with the events of the last year.  “We are having really thoughtful conversations about equity, inclusion, and anti-racism within our organization and within our community and how do we drive that in our businesses and within our spheres of influence?” Todd Simning is President of ADOR Homes, a builder of custom homes and unique multifamily projects.  He noted that the pandemic has created opportunities for new business.  “In single-family construction, there was a big push towards people wanting home offices.  There’s still quite an appetite for people to live in multifamily apartment and condo buildings, with safety precautions.” Many predicted a mass exodus to single-family and suburban locations a year ago.  The panel reported that things have slowed, but the mass exodus has not materialized either as a result of recent social unrest or the pandemic.  In fact, Simning reported losing a development property to other bidders in downtown just a month ago. “This shows that people still want to invest in Minneapolis,” said Simning.  “I took that as a real positive.  The other thing that I’ve noticed hanging around the North loop area is there still is a lot of activity around there, whether you’re at Fairgrounds Coffee, or Martin Patrick, you see that.  The Hewing Hotel is also starting to pick back up.” According to Behrendt, the multifamily market is mostly holding its own. “There are projects in lease-up right now that are doing fine, but when you look at the sub-markets within the downtown area, performance has been spotty.”  “Looking forward”, Behrendt said, “as we come out of this pandemic, you’re starting to see activity continue to increase. That’s a positive but I also think, given the term of most of these leases, we’re probably 12 to 18 months out from really understanding fully what kind of impact 2020 had on the downtown leasing market.” On the investment side of things, the pandemic has slowed investment activity downtown.  According to Robertson there were only two notable transactions in 2020, “the Thrivent Headquarters trade and the Millwright Building.” Still, Robertson believes buyers are committed to downtown Minneapolis. Simning, an investor in downtown, echoed that sentiment, “I truly believe that as the vaccine gets out a bit more, people are going to go back to the mean.  They want to socialize, they want to hang out, they’re tired of being pigeonholed at home.” One wildcard in the downtown office market is the recent announcement that Target plans to vacate City Center, giving employees the flexibility to work from home or at its campus in Brooklyn Park.  “That was an unfortunate announcement and the timing of it is tough,” said Behrendt. “We’re all trying to get some momentum, but Target was moving employees up to their Brooklyn park campus prior to the pandemic.”  On the bright side, Behrendt noted the recent announcement that the Dayton’s project leased a significant block of space, “which will continue to drive momentum downtown.” Robertson responded to the news about Target saying, “They have ten and a half years left on that lease at City Center and I continue to say, this is the first couple of pages of the first chapter, of what’s going to be a long book.  If it works, they’ll lean into it more and if it doesn’t, they’ll pivot.”  At the same time, Robertson noted that other national companies like Google and Amazon continue to add employees and space driving real estate transactions. Another challenge brought on by the pandemic is a disruption in the supply chain for building materials, fixtures and appliances.  Behrendt said she’s helping clients get out ahead of it by ordering things early or swapping out brands.  “Some are just practical decisions that people have to make, but the bigger issues for us, and for everyone building wood construction right now, are lumber prices and steel prices.  Material prices are really volatile.” Simning said he knows owners of lumber mills in northern Wisconsin and offered this insight.  “There’s plenty of logs at the mills – the issue is getting it milled into two by fours and two by sixes, whatever we need as dimensional lumber and getting it to the distributor.”  He believes the bottleneck will start to clear in the third and fourth quarter of the year as more people return to work and COVID protocols are gradually eased. All three panelists agreed that employees should be offered flexibility on whether to get vaccinated before returning to work.  Behrendt said, “Number one, having people get vaccinated and being efficient about this process is so key to where we need to go. We are actually planning a big party since we didn’t have a holiday party last year and the idea is if you are going to come to the party, you need to be vaccinated.”  Behrendt added, “As employers, we can strongly encourage people to take those necessary steps, but we are not going to mandate it as a company.” Robertson has been working downtown since his office reopened last summer.  “With proper protocols in place, we’ve had zero transmissions.  I’m not going to require anyone to come back if they don’t feel comfortable with coming back, but I’m just sensing that people want to get back.”  He added, “I’m just going to be smart about it, I’m not going to be pushy about it.” Simning said his construction crews don’t take for granted the fact that they have been able to work on job sites all year during the pandemic.  “The biggest thing that I’ve stressed through last summer and even this year is whatever we need to do to stay open, I think it’s our obligation to actually do the right things.” Shifting gears, I asked the panelists to look ahead five years.  Behrendt is hopeful, “When we look at Minneapolis and downtown in particular, I think we are going to be back to where we were.  We’ll continue to see multifamily activity, it may be smaller projects and infill type projects versus some of the larger-scale deals that we’ve seen in the last few years.”  She concluded, “I think the five-year picture is bright, but I think our challenges are going to be construction costs and interest rates, something that everybody’s watching, and just how these deals get put together may shift a bit.” Robertson hopes to see more companies choosing to relocate a division to the area. “We’ve seen a little bit of it, I’d love to see more of it. With flexible work, I think we are going to see more of it in cities like Minneapolis and St. Paul, where the cost of living is much lower than the Bay Area or Seattle. He added, “We have a diverse economy, all the things that Greater MSP is promoting, so I’m hoping in five years, we have more success on that front.” Simning says he’s an optimist at heart and talks about other downturns in which investors found real estate a good investment. “We started buying development land in 2011 on the residential side and the reason I did is just knowing people always seem to go back to the norm.”  As in the past, Simning sees optimism returning, “I think people want to get out again.” No one will dispute that the last year has been difficult for all of us, and it’s easy to get mired in all the bad news.  It was great to spend a few minutes with some hard-working, seasoned real estate professionals who see a brighter future, not only in downtown Minneapolis, but across the region and beyond. Bill Griffith practices real estate and municipal law and is the host of Finding the Future, a podcast that explores innovation in land use and sustainability. Register here to listen the panel hosted by Bisnow. If you have a story about innovation in land use and sustainability, please reach out to Bill.

April 5, 2021

Real Estate

The State of Retail

The state of retail in Minnesota and around the country is a huge question-mark.  The obvious effect of the ongoing COVID restrictions has delivered an unwelcome shock to the operations of even the very best brick and mortar retailers. Nobody can say with confidence when the cloud of uncertainty around COVID and the restrictions on store operations will be lifted (or, more importantly, when customers will feel safe walking into a crowded store).  The pandemic has had a double-down effect on what already was roiling the retail marketplace: online sales and delivery services.  Online retailing has exploded across a broad spectrum of products and services.  While the trend for online was certainly growing pre-COVID, nobody could have predicted the accelerant-effect of the COVID restrictions on retail and many more aspects of our economy (think restaurants, automotive, etc.). While online sales still make up far less than a majority of overall retail sales, the percentage gap between online and bricks-and-mortar retailing has shrunk noticeably, with e-commerce now accounting for 21.3% of total retail sales; up from 15.8% in 2019.  According to Digital Commerce, total online spending jumped 44% in 2020 over 2019 spending or $861.02 billion (this excludes B-to-B transactions).  Regardless, the sheer magnitude of our economy (total retail sales exceeding $4 trillion) means we will always need retail boxes for some types of products and services. In years past, when a retail site was closed for any reason, it was only a question of time before a new retail concept took its place.  Landlords had to make accommodations, for sure, but the re-tenanting of the space was virtually certain especially for popular retail settings like 50th and France or Southdale or countless other high-traffic locations throughout Minnesota.  It is far from certain how this transition will come about in the post-COVID/online world.  It’s not only the financial ramifications of losing a tenant in a mall or prime storefront on “main street” but also the emotionally deflating impact of vacant space on the passersby.  Even if one’s personal situation is positive, seeing empty storefronts sends a chill and a reminder that things change, often for totally uncontrollable reasons.  Certainly not as much fun window-shopping. Imagine the challenge it must pose for large retail operations, such as regional malls, who took hits from all sides over the past year.  They were shuttered entirely for months (unless they were fortunate to have an “essential service” business such as a grocery or a pharmacy retailer).  Apparel, hospitality, and entertainment, all staples of retail centers, were forced to shut down for months or were allowed to hiccup along with severe restrictions on operations.  Many were forced into the online space without planning or operating capacity to make the shift and suffered in spite of the efforts of local jurisdictions to assist.  The real body-blow for large retail centers has been the ongoing closure of large retail brands like Penney and Sears.  With few exceptions, every large retail center had one or both as tenants to attract the budget-conscious shopper while also catering more broadly to those seeking higher-end brands.  Now these brands are disappearing from retail centers, and many more like it, leaving large chunks of empty space with no obvious back-fill option.  To make it more complicated, often these anchor stores occupied a pad that was owned by an entirely different legal entity, if not the retailer itself; lease restrictions or bankruptcy proceedings make it much harder to immediately reposition the space for another user A further complication is that cities across Minnesota and nationally want to see large retail centers turned into pedestrian-friendly neighborhoods, with apartments, hotels and other high-traffic users.  Even assuming the legal restrictions on these alternate uses is not a factor, the value of these users to a large retail operation with multiple users, multiple pad owners, each with competing business objectives and expectations is a real challenge.  Cities have tried to force these discussions through their authority as local zoning regulators.  Some point to Southdale in Edina, and it’s neighbor Galleria, as a perfect example of a successful transition.  Not all owners of regional centers agree, or else they would all be rushing to complete their own conversions.  It’s much easier to try and rework the boxes within the traditional retail format, especially given the legal framework governing retail centers. One bright spot, admittedly of limited scope, is the extent to which large bricks-and-mortar retailers have been able to use slower or even vacant store locations as fulfillment centers for their online businesses.  Avoiding the capital expenditure for distribution centers that companies like Amazon are incurring is a clear advantage. So, how does this work itself out?  The way it always has; there will be winners and, sadly, losers, but the free-market economy we live under always finds a way to establish a new normal. This may not be the normal we want or can easily afford in the short term, but the version of “normal” the marketplace will support.  One certainty: online retail is here to stay, but so is bricks and mortar retail.

February 25, 2021

Construction

Do You Need a Teleworking Policy?

Before the COVID-19 pandemic, most employers were reluctant to allow employees to work from home on a continuous basis.  Many companies prohibited all teleworking or allowed employees only to work remotely when recovering from an illness or when required as a reasonable accommodation.  When COVID-19 hit, many employees began working remotely and it appears that working from home is now, for many employees, a permanent situation.  I, myself, have seen the advantages of working from home although I miss the collegiality and professional dialogue with other attorneys in my firm. It has been estimated that about half of employed adults are currently working from home.  Job applicants have indicated that they place a high value on the ability to work from home.  Flexible scheduling is a significant perk that younger workers prefer, even more than a higher salary. Many employers developed written policies regarding teleworking once it became clear that employees would be working from home for some period of time.  Other employers, thinking that remote working was a temporary situation, do not have written policies on teleworking but instead issue periodic directives, instructions, and procedures to employees who are working from home. Key Elements of a Teleworking Policy If an employer expects that all or a segment of its employees will continue to be working from home, even after the pandemic ends, it may be time to consider developing a teleworking policy.  Although allowing employees to work from home may retain or attract employees, the ability to work outside the office can also create nightmares for an employer.  Whether employees work full-time from home or partially work from home, it is important that employers and employees have the same expectations as to productivity, communications, and compliance with company policies.  Below I have highlighted some key elements of a telecommuting policy: Specify what positions are eligible to work from home. Identify those persons responsible for making the decisions as to whether particular employees or positions can work remotely and how often the employees can work remotely (i.e. how many days per week). Identify the expectations and requirements for employees who will be working remotely.Are employees expected to participate in any meetings in the office?  Do they have flexibility in their work hours?  How often do they need to communicate with their supervisors?  Employers may have concerns about the diligence and reliability of employees who work from home, so the expectations need to be clearly stated.  It may be appropriate to remind employees that when they are participating in video meetings, such as Zoom or Teams meetings, they need to dress appropriately.  How many of us have seen others in Zoom meetings wearing pajamas, sweatshirts or other clothing that they would never wear to an in-person meeting involving the same people as those in the Zoom meeting? Discuss expected communications protocols. Employees should be told when they are expected to be available for telephone conferences, video meetings and other group confabs.  Should employees regularly check-in? Should employees inform their supervisors when they are ready to start their day at their computer?  Will employees have to list the specific tasks they will complete or have completed during the day or during the week? Discuss the equipment which an employee will need for their work and who will provide it. The policy should describe what equipment and supplies the employer will be providing versus the employee, and if provided by the employee, whether the employer will be reimbursing the employee for these supplies and equipment.  Explain what personal use an employee can make of equipment which is provided by the employer, such as a printer and scanner.  Outline the accepted use of a personal device and if or when it is acceptable to download or access company files on a personal device. Security is a critical element of the arrangement for an employee to work from home. Firstly, if employees are accessing a company network or other confidential information, what procedures must they follow from their home office to ensure the security of company networks and communications.  Will the company be providing a shredder or is it up to the employee to discard paper generated during the workday?  What safeguards should the employees be setting up against potential hacks, breaches or theft?  The policy should describe the need to password protect all devices used for work purposes. Expectations of work hours. Many employees working remotely have children at home because their daycare or schools are closed. How much flexibility will employees have to extend their work hours to accommodate taking care of their children, or assisting their children with schoolwork?  Are there specific hours during which employees must be working?  How do employees keep track of the hours they work? Consequences of abuse of the policy. The policy should state that employees can be disciplined for violation of the teleworking policy or any other company policy while working remotely. At some point, an employer may decide to withdraw an employee’s right to work remotely because that employee has been abusing the privilege of working from home. Workers Compensation and Remote Workers Employees who are injured while working at home may be covered by the employer’s workers compensation insurance.  Over 10 years ago, the Minnesota Workers Compensation Court of Appeals considered the question of whether an employee’s injury while working at home was covered by the employer’s workers compensation insurance.  The employee was taking a short break from his computer to get a cup of coffee.  While he was walking down the stairs, he slipped and landed on his back on the steps.  He suffered a fracture of his T9 vertebra and eventually required surgery.  The employee filed a claim for workers compensation insurance alleging that his fall arose out of and in the course of his employment.  The employer and insurer disputed the employee’s claim.  The Workers Compensation Court of Appeals held that when he left his home office to go to the kitchen for a cup of coffee, the employee was no different from an employee who, while working at the office, goes to a kitchen for a cup of coffee.  The court found that the injury arose out of the employee’s employment and therefore was covered by workers compensation insurance. To possibly control workers compensation liability for remote workers, an employer should consider establishing guidelines for a home office such as requiring a designated work area and provide training related to setting up a workstation and appropriate safety measures.  When feasible, conduct periodic checks of employee home offices to identify and eliminate work area safety hazards. This suggestion may not make sense for many, if not most employers, but companies should understand that an injury because of hazardous conditions in an employee’s home may be covered by workers compensation insurance.   Consider setting fixed work hours and meal and rest periods for telecommuters.  This may help establish whether an injury was “in the course of employment.” Conclusion If an employer has a written teleworking policy, the employer should periodically discuss with supervisors and managers whether the teleworking policy is effective and whether it is addressing all issues that arise when employees are working from home.  Employers should also check with the remote employees to discuss how isolated they may feel from the rest of the company, whether they feel they are working at their most effective and efficient level and what adjustments may be appropriate for their schedule and/or in the teleworking policy.  Employers should consult with their attorneys to ensure that their teleworking policy complies with all state and federal requirements.

February 19, 2021

Construction

Land Development: Not for the Faint of Heart

Anyone experienced with developing land realizes that the regulatory process one must complete for a given development is daunting, at once complicated and cumbersome and surely expensive.  I often tell landowners who want to become “developers” in order to capture more value in the price of their land, that it is not for the faint of heart or the risk averse–I’m usually proven right. The most consistent regulatory challenge associated with developing land is regulatory inefficiency or regulatory “creep”.  It is not unusual that a given development application will require a review for possible stormwater or wetland impacts; developers accept this and realize there are costs associated with this process.  However, what frustrates them to no end is the multiple layers of government that are involved with even the most routine development application.  In the case of stormwater and wetlands, an application likely will have to be reviewed by multiple agencies with overlapping and maybe even conflicting jurisdictions, such as the U.S. Army Corps of Engineers (USACE), local watershed districts, department of natural resources and pollution control agency, as well as the local jurisdiction in which the development is proposed.  It is typical for each agency to have a permit process with their own requirements for submission and review.  In fairness, they do try to coordinate their review but some are more cooperative than others.  What is certain is that each will have its own technical professionals involved, often aided by private consultants; moreover, there is no prescribed timeline to reach a conclusion so any hold-out delays the process for everyone.  And, of course, no application is ever perfect; invariably someone will want additional details or alternative plans created and submitted—another source of delay and added cost.  Developers frequently lose the entire building season due to simple delays even if they made a timely submission for review.  The crazy thing is that most developers would gladly incur the cost of the redundant process if they had an assurance that the process itself would be completed in a predictable and reliable manner.  Instead, they get the cost and frustration of an inefficient process without assurance of anything. I’ve been working with a client for several years on a wetland permit for expansion of a mining operation.  In 2019, after extensive back and forth with the state and local agencies involved with their permit review, the company thought they were nearly finished based on statements from the state’s lead permit reviewer.  My client had been expecting its permit to be approved by the end of that year but instead, out of nowhere, they learned that the permit reviewer had retired at the end of the year; instead of receiving the promised permit, his replacement announced summarily that not only would my client not get the expected permit but that the state agency was unilaterally giving itself 6 months more to review the permit.  Essentially, they were starting over with no explanation given.  So here we are in early 2021 and still we have no permit; instead the process continues to drag on and more recently has gone backward.  More on that below.  The point is that the applicant is held hostage to a process that is time-consuming, very expensive and offers very limited due process.  It is not for the faint of heart. Closely connected to the cost of delay is the risk of a shifting regulatory environment.  Developers accept their responsibility to protect wetlands, erodible slopes and water bodies.  Any setbacks or restrictions on the use of their land is a cost that must be borne by the balance of the development.  It is not unusual to see a third or more of a development tract placed off-limits by setbacks, open space requirements, dedications or sensitive environmental conditions.  Again, experienced developers recognize this as a cost of doing business.  They build their project proformas around these assumed costs.  You can imagine that it makes a developer very unhappy when a regulator moves the goal line while an application is being reviewed. I’ve seen state and local agencies change their position on setbacks, density or land preservation requirements on the fly with no regard to the added cost to the applicant or whether they will get a demonstrably better regulatory result in the end.  This frequently happens when a project has generated controversy; for elected officials the easiest thing for them to do, short of an outright denial, is to impose additional conditions on a development to appease angry objectors.  If a 25-foot setback is good, a 50-foot setback must be a lot better.  The unfortunate truth is that the regulatory bodies have so much discretion in these areas that challenging them is often more time-consuming and expensive for the developer than actually achieving the desired outcome; the pragmatic response is to accept the added conditions and cost, if possible, and move on with an approval.  The cost implications are not the regulator’s concern; the developer, on the other hand, needs to recalculate its proforma to absorb the loss of additional usable area and hope the project remains viable.  The development business is not for the risk-averse. Back to the mining permit; after several years of review, the company recently received a written determination by the state agency confirming a new restriction on their property: no prior notice, no prior input from the company.  This sort of regulatory creep is unfair and essentially unchecked short of a permit applicant’s willingness and ability to push back.  In most cases the risk of challenging, not to mention the cost of delay, often forces the permit applicant to swallow their pride along with the newly imposed condition in order to simply be done. Experienced developers try to complete their due diligence on their development projects in advance of initiating the public review process.  They understand that once they commit to a site and have incurred the cost of tying up the property and preparing the necessary applications, there is great risk in the public process.  One would wish that the process itself would provide more confidence in the anticipated outcome.  Unfortunately, the state and local regulatory bodies control the process.  This means they control not only the clock but also the rulebook itself.  It’s not for the faint of heart or the risk averse.

February 5, 2021

Real Estate

The Legal Fundamentals Series: Takings Law

This is the first in a series of articles that will describe the fundamentals of the most consequential topics falling under the umbrella of real estate law.   As a real estate trial lawyer with personal experience handling disputes in each of the areas that will be considered, my goal is to explain in plain language key legal concepts and terms commonly used in real estate law, identify issues that regularly lead to disputes, and describe how controversies in each area are resolved.  The first subject matter to be considered in this series is the law of eminent domain, also known as the law of takings. Takings Terminology Takings law can be a confusing subject matter.  A single piece may alternatively discuss takings, eminent domain, condemnation, and inverse condemnation, all without ever defining the meaning of these terms.  “Eminent domain” refers to the government’s authority to seize land.  The land is taken for a number of purposes, such as transportation projects, public improvements, to address a blighted area, etc.  The government is generally required to first attempt to negotiate with a landowner regarding the land sought to be taken.  If that fails, the government will resort to the courts to obtain ownership of the land. The power of eminent domain is incidental to a government’s sovereignty, thus explaining why no provision in the Constitution of the United States expressly grants the federal government authority to take land.  The power of eminent domain extends beyond the federal government to state governments, state agencies, local governments, and even, in certain circumstances, private corporations acting with authority delegated by the government. “Condemnation” has been given various meanings, but frequently refers to the proceedings by which the power of eminent domain is executed. Eminent domain may only be exercised for a “public use” or a “public purpose.”  What comprises a “public use” in Minnesota is whether the land will be possessed, occupied, owned and/or enjoyed by the general public, or by public agencies.  A taking must also be “necessary,” meaning that it is reasonably necessary or convenient to further the goal sought to be achieved by the government. When the government exercises its eminent domain power to effectuate a “taking,” a property owner is entitled, under both the United States and Minnesota Constitutions, to “just compensation.”  In Minnesota, a “taking” is broadly defined to include “every interference, under the power of eminent domain, with the possession, enjoyment, or value of private property.”  When the government damages or destroys the value of a property that it has not physically appropriated, such as by regulation, it may be liable for a “regulatory taking.” “Just compensation” is the fair market value of the property at the time of the taking.  It is the price that a willing buyer would pay a willing seller, taking into consideration the highest and best use of the property.  A property’s highest and best use is not necessarily the current use of the property.  Instead, it is the use that is physically possible, legally permissible, financially feasible, and maximally productive.  Whether a particular potential use meets all of these criteria is a common point of contention in court.  In some cases, a landowner may also recover other financial losses, such as loss of going concern of a business and relocation costs. An “inverse condemnation” proceeding occurs when the property owner, and not the government, initiates a lawsuit to recover just compensation.  Property owners and businesses start these lawsuits when their property has been damaged or destroyed as a result of governmental action, but the government will not admit it.  In this case, the owner brings a lawsuit alleging that his or her private property has been taken without compensation.  A landowner only recovers damages if a court holds there has been a taking and then orders the government to start a condemnation proceeding. Thus, inverse condemnation cases might require not one but two trials: the first trial concerns whether there was, in fact, a taking; the second concerns the amount of damages if there was a taking.  Often the issue of whether there has been a taking is resolved on a pre-trial motion (request to the court) known as “summary judgment.”  This spares the parties the cost, time, and expense of two trials. The government will often take only part of a property owner’s land.  “Severance damages” are those damages that occur when only part of an owner’s land is taken and as a result the rest of the land is damaged.  Severance damages are determined using the “before and after” rule: compare the market value of the land before the taking with the market value of the land after the taking. Ordinary Condemnation Proceedings A takings case will begin by the condemnation authority filing a petition with the local county district court describing the land desired to be taken and stating the purpose for the taking.  All affected property owners must be served with the petition.  The court will hold a hearing and at that time, determine whether the taking satisfies a public use/public purpose and is necessary.  In certain circumstances, Minnesota law allows the government to take the title to a property before a hearing has taken place to determine its value.  This is appropriate when the government can demonstrate that it requires immediate ownership of the property.  Such proceedings are referred to as “quick take” condemnation proceedings.  The government’s use of the quick take procedure is the norm in Minnesota. Assuming the judge concludes that the taking satisfies the above-stated criteria, the court will appoint a panel of three commissioners to determine the damages caused by the taking.  Commissioners are real estate professionals such as attorneys, appraisers, and brokers who have agreed to serve on such panels.  The commissioners will hold a hearing at which valuation evidence is presented by both the landowner and the government.  The commissioners will then decide the just compensation (damages) owing to the landowner. The property owner has a limited period of time to appeal the commissioners’ award to the district court.  A property owner appealing to district court has the right to demand a jury trial on the amount of damages suffered by the taking.  Although jury trials have become rare in most areas of the law, they continue to occur with regularity in eminent domain cases. Of critical significance to landowners is that, under Minnesota statute, in certain circumstances they may recover their attorneys’ fees if they can prove damages sufficiently in excess of what was previously offered by the condemning authority. The next article in this series addresses the government’s use of special assessments to fund public improvement projects. Find it here.

January 11, 2021

Finding the Future Podcast Series

Finding the Future: Retail Innovation Doesn’t Wait for a COVID Cure

Walk anywhere in the five and a half million square feet that make up Mall of America and you will find signs of COVID…literally signs that help keep guests safe as they visit and shop the country’s largest retail destination.  Sanitation stations are a few feet apart in every hallway.  Masks are required and strict limits are observed in the theme park and other entertainment venues serving guests of all ages. “As soon as we closed our doors in mid-March, we immediately began looking at how we could reopen and what to factor in to make sure guests feel safe when they reenter our property,” said Jill Renslow, Senior Vice President of Business Development for Mall of America.  “It is really important to collaborate with other businesses in our industry, not only retail but also entertainment.  We think every day about how to assure tenants, shoppers and employees that the country’s largest retail and entertainment venue is safe.” To quickly clean rides and other attractions, Mall of America partnered with Graco, a local industrial company, to adapt their paint sprayers for use with sanitizers.  “It is important that we have a level of consistency throughout our building,” said Renslow.  “Early on we learned a lot about safety parameters from essential retail and we have the benefit of our size, but it was also important to take the time to make sure that people felt like it was a different environment when they walked in.” Today, the entire building is reopened but some venues are under strict attendance limits. “Nickelodeon Universe is open, at limited capacity,” according to Renslow.  “In Minnesota, entertainment venues are limited to 250 people.  We have a seven-acre theme park with only 250 people, it’s like they have the whole place to themselves.  We’re hopeful we can work with the state in the coming weeks and months to increase capacity a bit.” A recent innovation, virtual shopping, started before COVID hit.  Renslow and her team tested virtual shopping during the last holiday season giving guests the opportunity to shop from home. After the mall reopened in June, they partnered with Popshop Live to enable mall staff to host live shopping episodes which shoppers can watch from an app on their phones. “There’s a variety of different brands and channels,” said Renslow.  “You just look for Mall of America and you can find a listing of upcoming shows.  You can tune in and engage with the host.  They will also do some personal shopping while you’re active with the show at that time.”  Renslow said, “It allows us to bring the fun shopping experience of Mall of America into your home or wherever you are to conveniently shop from your mobile device.” If the pandemic has accelerated innovation at the mall, community engagement has caused managers to reach beyond their doors.  Community Commons opened in retail space at Mall of America to showcase retailers displaced by the civil unrest on Lake Street in Minneapolis following the tragic death of George Floyd in May. “We immediately reached out to community leaders to see what we could do to help,” said Renslow.  “You can imagine they were inundated with support and a bit overwhelmed.  It took us a few months, but our conversations resulted in a collaborative retail environment for a number of the businesses affected.” Out of 50 applications, Renslow’s team selected 16 retailers that offered a complementary mix of products.  “Listening to their stories, we wanted to make sure that we were helping those with the greatest need.  It’s been received so well.”  Retailers receive free rent for six months and the opportunity to access shoppers during the critical holiday shopping season.  Afterward, they can choose to stay, expand, or return to their old locations. If short term success at Mall of America means making guests feel safe and engaging shoppers in new ways, in the longer term, Mall of America looks to stay relevant by increasing the number of entertainment options for visitors. Attractions are the driver at American Dream which recently opened in New Jersey with a 50/50 mix of retail and entertainment.  The project was developed by Triple Five, the owner of Mall of America and West Edmonton Mall. Kurt Hagen, Senior Vice President of Development for Triple Five, talked about reopening the American Dream. “They’ve received a great response from the New Jersey market – people are really excited to see Nickelodeon Universe open. The waterpark is open, they have miniature golf, and the ice rink.”  Hagen added, “Again, it’s a large environment, that’s safe, where families can get out of the house and have some fun again.” Hagen hopes to restart plans for the Bloomington waterpark project soon. “As you know, we were a couple of months from getting the waterpark financed when the pandemic hit.  It would be under construction now,” said Hagen.  “It’s part of the secret sauce for these large projects, our resilience is driven by the entertainment component.  Guests come here and experience something they can’t in a typical shopping mall or buy online at Amazon.” At five and half million square feet, Mall of America is only halfway there, as Hagen likes to point out.  “We have entitlements for 10 million square feet of development, and we have some great ideas. Covid was very much a setback, but it has really amplified the importance of diversification and entertainment for Mall of America.” Clearly, a global pandemic has not shaken confidence in the business models created by Triple Five over 40 years ago in Edmonton, Canada.  Neither Renslow nor Hagen would trade their careers at Mall of America for something more recession-proof. “I would just say the family ownership has always been extremely supportive of trying new things,” said Renslow.  “They had this vision from the very beginning of Mall of America, and they support the management team on change and trying new things.”  Renslow added, “We do a lot of pilot projects with technology companies, but we’re very careful not to lead with technology.  We want to drive change, whether it’s utility or convenience for the consumer, and then find technology to support that.” Kurt Hagen echoes Renslow in talking about his experience with Triple Five.  “It’s a company that really allows us to be innovative and they provide the resources to do cutting edge stuff.  Where else can you build the largest waterpark in North America.  What you see at American Dream – the sky’s the limit, they really push innovative ideas, innovative development.”  Hagen concludes, “I love my job. COVID is a little setback we’re going through right now.  We’ll get past this.” As we wrapped up the interview, it was clear that Mall of America plans to lead retail innovation in the future for the same reason they have in the past – they are driven to push the boundaries of their business model – mixing shopping, entertainment, and now virtual shopping and online retailing with new attractions.  Perhaps, the most compelling indicators of future success are their care for the guest experience, and their desire to create bridges to those working to improve the community for the benefit of all. Bill Griffith practices real estate and municipal law and is the host of Finding the Future, a podcast that explores innovation in land use and sustainability. Listen here for the interview with Jill Renslow and Kurt Hagen. If you have a story about innovation in land use and sustainability, please reach out to Bill.

October 30, 2020

Real Estate

The Twin Cities Commercial Real Estate Market: What Does the Future Hold?

The United States is now more than 10 months into responding to the COVID-19 health care crisis.  Minnesota has been grappling with it in earnest since at least March 2020 when Gov. Tim Walz initiated a series of executive orders designed to stem the spread of the disease until testing and/or a vaccine can be implemented.  Meanwhile, the effects of the crisis, including the mandates imposed by the governor’s executive orders, have severely affected a broad cross-section of the economy.  Some companies, especially service companies, have been able to adapt to the crisis by having their employees work from home.  Others, such as health care and construction companies, have been deemed “essential” and thus have been able to keep their employees in place.  However, others have either been required to cease operations entirely or severely limit their hours of operation.  The net effect of these pressures has been a loss of productivity, jobs and income for companies large and small, and especially those employees suffering through extended layoffs or furloughs.  Some of these impacts were mitigated by the combined spending of the federal and state governments, either through direct grants to individual workers and companies, or targeted aid to select industries such as health care or transportation.  Now, unfortunately, financial props are ended or soon will be.  At the federal level, we have learned that any new COVID relief measure will likely have to wait until after the November elections. We are a long way from overcoming the health risk created by the COVID-19 virus.  Companies and their employees are working hard to regain their footing amidst the ongoing risk and uncertainty but have a long way to go to convince their employees and customers to resume business as usual.  As we enter the months leading to winter, outdoor seating options will disappear for bars and restaurants, which will force hard decisions about their operating viability.  Companies leasing officing space throughout the state continue to exercise caution which means the vast majority of their employees will continue to work from home for the foreseeable future.  Even with enormous federal subsidies (now expired) airlines are facing substantial losses and have announced major staff reductions.  The point of this recap is that we are now entering a very tricky and uncertain time, perhaps more consequential than earlier this year.  Real estate professionals will be challenged to advise their clients about a way forward. Anyone who believes they have a crystal ball to divine the future is making it up.  The best we can do is confront the situation honestly with our clients, accept that the problem is larger than one company or certainly one individual and focus on what is within our ability to manage.  Every economic downturn causes companies to fail and triggers large-scale layoffs; this situation is not due to economic weakness generally so even exercising superb business judgment will not, by itself, see us through.  On the other hand, downturns always create new opportunities.  It has always been a hallmark of our economy.  The marketplace works in mysterious ways but when there is supply and favorable pricing, good things usually happen.  In this singularly unique time, let’s hope the good things are not too far off. Please join moderator Peter Coyle and panelists Tim Elam (Scannell Properties), James Freytag (CBRE), and Gretchen Camp (ESG) this Wednesday, October 28th at 2:20 pm (CDT) for the Bisnow webinar Twin Cities Deep Dive: State of the Market. In Wednesday’s webinar, the panel will discuss the Twin Cities commercial real estate market and offer their predictions about what the future holds and will  specifically look into the following questions: Could the Twin Cities see a spike in interest as people and companies look to de-densify? Industrial is the only asset class to see values go up during this pandemic. What does the future of the sector look like and will it continue to see high demand? Much has been made of the office market as most professionals continue to work from home. What does the future of the office market look like? Multifamily used to be considered the safest investment in CRE as people will always need a place to live. With so many growing through difficult economic times how can the multifamily start to make a recovery? The coronavirus has sped up trends we were already seeing. Which of these trends is going to change the CRE landscape for years to come? To register for the Bisnow webinar click on the link: Twin Cities Deep Dive: State of the Market

October 23, 2020

Construction

Multifamily Housing Shifts Focus to the Suburbs

Like most things in 2020, the multifamily housing market is in a state of flux. Recently, I had the opportunity to moderate the Bisnow webinar, Twin Cities Deep Dive: Multifamily Update. The panelists included Brent Webb, Development Manager, Mortenson, Christian Osmundson, Director of Development, Alatus, and Josh Brandsted, President of Greco Properties. These leaders of the multifamily housing market discussed the current state of the industry and made predictions for the future of the Twin Cities real estate market. The webinar began with a look at how the pandemic has changed the multifamily housing market. Most notably, the panelists discussed how developers are beginning to take a closer look at first and second-tier suburban markets. Many projects located in Minneapolis are not receiving the same attention from developers that they once received. The panelists discussed how vacancy rates in high-demand areas like the North Loop, North East, and South Minneapolis have remained steady while downtown vacancy rates have declined in recent months. Many rental properties in the suburbs that were hovering near 80% are now at full occupancy. Although migrating to the suburbs could be a short-term trend, the two leading factors for renters leaving downtown are home purchase and crime. These factors coupled with the closure of restaurants, land values, taxes, and a lack of parking have given investors pause when considering investing in the downtown market. A “new” inclusionary zoning policy went into effect the first of the year in Minneapolis and the country went into a state of lockdown shortly thereafter. It is hard to separate its impact from the pandemic, but the added challenge of supporting affordable housing seems to be a factor in development. Places like Edina and Saint Louis Park have more tools than Minneapolis to make the math work for new projects. Panelists agree the influx of remote workers has impacted the multifamily housing market. Buildings currently under construction are being modified to accommodate work from home offices and increase connection to outdoor recreation. Larger units and two-room apartments have also seen an increase in popularity since working from home has become commonplace. It may be too soon to see new projects being designed with pandemic restrictions in mind, but the panelists felt that there will be a significant change coming to future builds. A prioritization of wellbeing and amenities seems unavoidable with most of the population spending more time at home. The amount of leasable space vs. amenities in new buildings will become critical when creating an environment attractive to future renters. Finally, the panel discussed the eviction moratoria during the pandemic. There was a general consensus among the panelists that the moratorium is not impacting the market as the majority of renters dealing with financial hardships seem to be willing to create a plan with their landlords. There seem to be conflicting views on the best way to proceed, but all the panelists agreed that open communication is essential to creating a way forward. Click here to listen to the Twin Cities Deep Dive: Multifamily Update webinar. Jacob Steen part of the Larkin Hoffman real estate team. He is available to answer your real estate and land use questions. Jacob Steen, jsteen@larkinhoffman.com.

October 12, 2020

Construction

Pandemic Disrupts the Multifamily Housing Market

The global pandemic has affected every aspect of life in America and across the world, the multifamily housing market is no exception.  The impact of the pandemic is affecting every aspect of multifamily development from product design and selection, to getting deals done, to building management and operation. Over the last decade, there has been a strong trend in young professionals flocking to the Twin Cities, especially to amenity-rich areas of Minneapolis like the North Loop and Northeast. With the onset of the pandemic, many of these professionals are now working from home and have limited high-contact extracurricular activities. This new way of life is resulting in an increased demand for additional flex space within apartment units. Whether it be in the form of additional bedrooms, in-unit offices, or flexible workspace amenities, these new space demands have a strong potential to change product offerings as developers evaluate projects. Project evaluations and deal-making, like all traditional interactions, have also been forced to adapt to our changing circumstances.  Social distancing and work-from-home orders have encouraged, if not forced, changes while putting together projects.  Developers are using remote video and drone surveys to evaluate everything from site conditions to building envelope inspections.  Like many traditional in-person interactions, the days of the in-person marketing of projects to partners and other key players are over as meetings have moved to a video conferencing format. Unrelated to the pandemic, high taxes and costly land prices in Minneapolis has been a slow-moving trend in recent years as developers have sought more affordable land and lower taxes.  While the Minneapolis market has remained strong, these factors combined with incentives such as suburban TIF and opportunity zones are making the first and second ring suburbs more enticing. Managing tenancies has also changed over the past several months.  Existing tenants are protected by a residential eviction moratorium leaving some multifamily property owners stuck with tenants unable to pay rent and unwilling to leave without recourse.  Other landlords are struggling to get multifamily occupancies leased pushing concessions to renters in an effort to incentivize the signing of new leases.  Many properties outside of high-demand neighborhoods are offering two or three months of free rent, discounted parking, and other incentives. While changes in the multifamily housing market are the result of several factors and were in motion before the pandemic, the prospect of a lingering public health crisis well into 2021 and beyond will influence the direction of future trends.  Join moderator Jake Steen (Larkin Hoffman) with panelists Brent Webb (Mortenson), Chris Osmundson (Alatus), and Josh Brandsted (Greco) on Wednesday, September 30th, at 2:30 PM for a Bisnow panel to learn how pandemic lifestyle changes are affecting the multifamily market. To register for the Bisnow Webinar click on the link below: TWIN CITIES DEEP DIVE: MULTIFAMILY UPDATE: HOW THE LANDSCAPE WILL CHANGE POST-PANDEMIC

September 25, 2020

Commercial Lease Negotiations

Commercial Lease Negotiations in Uncertain Times: Market Trends Surrounding Property Improvements Part 2

In our last post we welcomed the following guests to introduce themselves, to share advice they are currently offering to clients as they navigate the COVID-19 pandemic, and to share their initial observations surrounding property improvements as some businesses are beginning to re-open their doors to employees, customers, and clients: Ericka Miller, Senior Vice President at KimbleCo Heather Weerheim, Director of Business Development at Greiner Construction Shari Bjork, Principal at DLR Group Abigail Heimel Peterson, Healthcare Team Lead, Gardner Builders In this post, we continue the conversation surrounding property improvements with Ericka, Heather, Shari, and Abigail. More specifically, we will hear about the wide range of changes currently being introduced to existing spaces, as well as the long-term changes anticipated in the coming years as a reaction to the COVID-19 pandemic. What changes are property owners considering or implementing with respect to office design and open workspaces? Ericka: What we have heard from business leaders, heads of real estate, national property managers and landlords is that they will follow local, state and national health guidelines and expect occupants to follow along. Because there isn’t a one size fits all approach, many are working hard to get plans back in place that are specific to their property and the health situation in their particular geography. Most notably we have seen: Notices as to distancing expectations within the building common areas New pathways with one way in and one way out Capacity requirements in elevators and other small spaces No gatherings in common areas Increased cleaning in general but especially in high touch areas Review and potential changes to their HVAC systems airflow and filtering practices. Limiting space capacity at first and then allowing more people in overtime Have changes to scheduling of employees, such as staggered work shifts and increased use of home offices, resulted in any unique challenges or improvements to commercial space? Ericka: It has certainly accommodated the need to provide physical distancing to those that are coming into the office.  Having fewer people allows for more space per person and supports physical distancing.  Because of the unknown future it is challenging for businesses in the short term to make decisions about space needs and, in particular, how much space they will need in the future. Heather: We have been able to navigate this challenge of working from home rather quickly. The only noticeable change would be a lag in communication time early on. Internet issues, distance learning and other distractions while at home caused some delays in communication which can affect construction schedules. Post-pandemic, what pandemic spurred changes do you anticipate will continue to be integrated into the design of commercial spaces? Ericka: We have been doing a lot of listening to business owners and leaders – it seems the concept of high-efficiency space (meaning more people in less space) will take a back seat to the concept of proper spacing. This may get done through either expansion or simply having people/workgroups work in a more flexible way on different days or weeks which can be accommodated by the space tenants have today. While we, like everyone else, are hearing great things about work from home scenarios, there are many who simply can’t make this work at all times and strong collaboration still needs to take place in person. It seems that the focus on wellness we were seeing in the years preceding the pandemic has taken off – really focusing on the health of the inhabitants of the building, not just the sustainability of the systems within a building. WELL building standards that focus on 7 key areas (Mind, Comfort, Fitness, Light, Nourishment, Water & Air) are key to human health and we may see a renewed interest in this type of programming even if just in concept without actual certification. Finally, we are seeing a lot of innovation happening that would seem to be beneficial post-COVID. Shari: In the future, we believe people will continue to work from home some of the time, but final percentages will vary by industry and job function. As the percentage of remote workers approach 50% or more, companies may consider shared desking, which may require a reconfiguration of space and allow a possible reduction in square footage. Emphasis on space designed for workstyle or work modes will be important as we encourage ‘quality time’ in the office, attracting individuals and teams into the office for planned interaction and team-based work. People’s personal health and safety will continue to be a driver post-pandemic, which will push innovation in how space is designed and the products we specify for the built environment. Current social distancing guidelines will influence how much space we allocate to various functions, as well as how space is configured and furnished. We are already seeing changes being made to building mechanical systems and more importance put on the monitoring of indoor air quality. In addition, there are new products being researched and launched weekly, everything from anti-microbial materials, to rethinking elevator design, voice automated controls, and even American Standard is rethinking how bathroom fixtures can be designed to be safer. Heather: Some of the things we’re expecting to see are as follows: Conference rooms equipped for better communication via web-based meetings Redesign of open office environments Stricter guidelines for use of amenity spaces and/or a complete redesign Enhanced HVAC design and air filtration Abigail: Could you imagine a year ago having conversations about how we could most effectively utilize the flow of a parking garage to deliver care to patients at a clinic? Or who could have imagined how quickly the shift to telehealth in so many disciplines would become possible? I think we will continue to see a transition from the use of spaces and technology once seen as temporary to a new normal full of hybrid care delivery and creative design solutions. What is one of the most innovative or surprising changes you have seen to commercial space arising out of the pandemic? Ericka: Innovation around wellness kiosks is an interesting change we have seen; the ability to assess temperature and wellness as employees enter the workplace.  Another innovation, indoor air quality systems and products that purify the air to remove airborne particulates and pathogens has been a study that will hopefully go well beyond the pandemic to benefit all building users for years to come. Shari: I don’t think we’ve seen anything too innovative that has been implemented at this point. Both within DLR Group and the broader industry, COVID-19 has catalyzed really positive discussion about the future of workplace design. We are gathering data through our own surveys, and primary and secondary research, as well as through collaborations with our academic partners about the future of buildings, systems, public space and interior environments. Most organizations are currently thinking about the short-term safety and health of their employees and the public. Coming out of the pandemic, this is a real opportunity to think about the overall well-being of a space’s occupants and how we measure the success of our real estate based on its value and impact on both the individual and the organization, versus measuring real estate on the basis of square footage per person. Heather: One of the most innovative methods for bringing staff back into the office is the use of QR codes. Our larger corporate clients are using QR codes in the open office environment to share data and scan to reserve a workstation. I’m surprised by the companies that have announced that their offices are not reopening until 2021. Who knows, they could be working on a complete redesign and preparedness plan in the background, however, if they believe that employees will be able to work in the same pre-pandemic environment come 2021, they will be mistaken. Abigail: I wouldn’t call this entirely surprising, but over and over again we have seen the need for physical space to come together as teams inspired by our basic need for connection. Remote working and staying home when we needed to has proven to be entirely possible, but the need for space to come back together in whatever amount is most comfortable will likely always be there. I saw this in my own team and consistently talk about it with clients. We may never go back to the way things were, but the new normal still require a place to be together and collaborate. Thank you again to our blog contributors for sharing their insights and experience with our readers! As we’ve learned from the last two posts, commercial spaces are already changing and will likely continue to look very different than they did prior to the year 2020. Additionally, while work-related values may stay constant, companies will need to be nimble and creative in their approach to property and the incorporation of possible improvements. Coming Up Next In our final post, we will wrap up this blog series with a discussion surrounding a variety of lease provisions that both landlords and tenants may want to take a close look at in light of the pandemic and civil unrest.

September 3, 2020

Planning and Development

Larkin Hoffman’s Real Estate and Construction Attorneys Recognized in The Best Lawyers in America® for 2021

Every year attorneys from Larkin Hoffman receive recognition for their efforts to assist in a variety of complex issues relating to land use and zoning, real estate, environmental regulation, construction, eminent domain and condemnation, and tax law. This year a number of the firm’s real estate and construction practice attorneys have been selected by their peers in The Best Lawyers in America® for 2021. Peter J. Coyle – Land Use & Zoning Law; Litigation – Land Use and Zoning William C. Griffith – Land Use & Zoning Law; Municipal Law David D. Hammargren – Construction Law Peder A. Larson – Environmental Law Paul J. Linstroth – Tax Law; Litigation and Controversy – Tax Tamara O’Neill Moreland – Land Use and Zoning Law James M. Susag – Land Use and Zoning Law, Litigation – Real Estate Gary A. Van Cleve– Eminent Domain and Condemnation Law Additionally, attorneys Peter Coyle and William Griffith are each recognized by Best Lawyers as a 2021 “Lawyer of the Year” in their respective fields. Peter was selected for Land Use and Zoning Law; Litigation and Bill was recognized for Land Use & Zoning Law; Municipal Law. Only a single lawyer in each practice area and designated metropolitan area is honored as the “Lawyer of the Year,” making this accolade particularly significant. The lawyers are selected based on peer-review assessments. From Best Lawyers: Best Lawyers® is the world’s most selective and highly regarded directory of attorneys. Inclusion is based on an exhaustive and rigorous peer-review process comprised of evaluations by top attorneys. For more than three decades, Best Lawyers® has been regarded – by both the profession and the public – as the most credible and definitive guide to legal excellence in the United States.

August 23, 2020

Planning and Development

Pandemic is Driving the Pace of Change in Office Environments

Rather than immediately downsizing, employers are considering revamping their workplaces in response to the work from home experiment.  According to Erin Fitzgerlad and Gordon Wright, panelists on Bisnow’swebinarTwin Cities Deep Dive: Future of Office, clients are rethinking how they use their space and how to make employees feel comfortable returning to work in light of COVID-19. Wright, a leader in global workspace for HOK, says the pandemic has created “a pivot point for employers to focus on the wellbeing of employees rather than metrics like space per employee”.  These trends were underway before the pandemic hit but have really accelerated as employers struggle with how to attract employees back to the office. Fitzgerald, the principal in the Minneapolis office of Transwestern focuses her practice on renovating and repositioning large office buildings.  “Employers are asking, ‘if my employees are productive at home, do I really need all this space?’  They are quickly learning that collaboration, innovation, training and mentoring are difficult outside an office environment”.  Since only ten percent of the office market is considering lease renewals at any one time, it may take several years to see the true impact of the pandemic on office use and design. The most immediate trend to take hold is the protection of employees.  Landlords and tenants are working together to create one-way traffic patterns, restrictions on elevator use, testing and sanitizing stations, and plastic screens to protect employees.  “Landlords have worked around the clock to improve airflow, add air filters, and enhance cleaning protocols in response to the pandemic,” according to Fitzgerald. Both Wright and Fitzgerald agree that the focus on healthy buildings and employee wellness is a trend that will accelerate in the coming months.  “Smart companies will create an individualized approach to employees returning to work, with an emphasis on agility and flexibility”, said Fitzgerald. Recent innovations in remote work, co-working space and bench seating will evolve to create greater distance and comfort for users.  “It doesn’t mean these trends are dead,” according to Wright, “but there will be less of a binary choice of whether we do these things or not.  Everyone has gotten comfortable working from home on some routine tasks, like returning email.”  Still, collaboration and mentoring take face to face contact and employers will adapt to ensure that these important functions can continue in the new office environment. “Nobody liked commuting to work five days a week, 9 to 5, working in a gray cube under fluorescent lights,” stated Fitzgerald.  “Let’s not go back to that. Instead, let’s talk about what we can do to make great gathering spaces where people want to come together and share the creativity of the human mind.” In the competition between urban and suburban locations for tenants, both panelists agreed that there is a place for each office environment in the future. “You won’t see a departure from the urban core because there is energy there and amenities that attract creative talent,” said Wright.  “But suburban markets in Chicago, San Francisco and greater New York have become hot commodities recently as an alternative to bring people together in a place that is often easier to get to.” Large companies are considering some of both types of space – gathering spaces for collaboration and creativity in the urban core and remote or co-working space in suburban or outlying areas for more routine, day to day tasks. “Flexibility is working its way into deal terms,” said Fitzgerald. “Spec space, co-working space and renovated space allow tenants to address immediate needs without a lot of capital expenditure on improvements.” Landlords might agree to more flexibility on the amount of space and the term of the lease in exchange for higher rent. “It allows tenants to get up and running without a lot of out of pocket cost.” Much of the decision about returning to work both here and abroad is tied to whether the pandemic is growing or contracting and whether kids will be allowed to return to school.  In places like Asia and Europe where the rate of infection has slowed, work-life is starting to return to normal and families are planning to send their kids back to school. In parts of the U.S., where infections are increasing, the future is much less certain. Regardless of the outlook for the immediate future, both panelists agreed that the pandemic has accelerated the rate of change in office environments for good. “Employers will need more space because they realize they need a place for their employees to collaborate,” said Fitzgerald.  Wright concluded, “After years of focusing on densification, employers have realized that’s a terrible way to plan a workspace.” Bill Griffith moderated the Bisnow panel and practices land use and real estate law at Larkin Hoffman.  He has an interest in topics focusing on the future of land use and sustainability and hosts a podcast entitled “Finding the Future” which you can listen to here.

August 11, 2020

Commercial Lease Negotiations

Commercial Lease Negotiations in Uncertain Times: Introducing New Blog Series

As the COVID-19 pandemic and civil unrest have swept through the United States, we have been presented with novel challenges and uncertainty in nearly all aspects of life, including commercial real estate. The world of commercial real estate, dominated as it is by highly-individualized leasing arrangements, has always presented real estate attorneys with unique leasing questions, but now we are seeing landlords and tenants seek legal advice and assistance with even more new and unanticipated leasing challenges and questions. While the real estate market continues to operate with many of its usual and somewhat predictable economic forces intact, it has become clear in recent months that the current global pandemic, and the possibility of such a threat to public health and economic activity in the future, along with the current civil unrest will persist among those forces that will have an impact on the real estate market and both new and existing leases. Rather than a brief detour from life as usual, the first half of 2020 is beginning to define a new normal, and we aim to shed light on this emerging paradigm shift in the commercial real estate industry through a series of blog posts focused on lease negotiations in these uncertain times. This paradigm shift is, broadly, a reaction to the economic, social, and public health implications of the COVID-19 pandemic and civil unrest arising out of racial and other inequalities in our society. We have helped landlords and tenants in the United States adapt on an individual level by addressing various leasing concerns including loss of income and rents arising out of government-mandated closings and needed modifications to space and common areas to comply with government-mandated restrictions and to create a safe environment for employees and customers. Even as various states, locales, and individual businesses resume a semblance of normal operations, it is evident that these novel circumstances raised by the initial disruption are impacting the vast majority of existing landlords and tenants and are impacting current leases and will come to dictate future leasing arrangements. In light of the current uncertainties and unprecedented changes in the industry, tenants and landlords are looking for ways to modify existing leases and prepare new leases that not only address impacts that the pandemic and civil unrest have had on their businesses to date, but that also address the uncertain future we are facing.  In this series, we will look at lease negotiations to address a variety of questions and concerns that have been raised by both landlords and tenants.  What options does a landlord have when a tenant fails to pay rent during periods of mandatory closing?  How can leases be revised to address the loss of income during the global pandemic and periods of civil unrest?  What should landlords and tenants be negotiating with respect to improvements to the premises and common areas in light of recommendations for social distancing?  Does the force majeure clause in a lease provide any protection and, if not, should it be revised?  We will explore these questions and more throughout this series.  Our first post will address negotiations of lease revisions to address rent payments (including abatement or deferral of rent).

July 2, 2020

Real Estate

Commercial Real Estate Appraisal and Valuation in the Time of Covid-19: What Is the New Normal?

Updated 9/8/2020 This post is co-written by Gary Van Cleve, Mitchell Simonson and Josh Folland This unprecedented time of pandemic has brought social interaction to an abrupt halt with cautious open-up just beginning.  Americans have had to learn to live, work, educate their children, recreate, shop and otherwise transact business—all while social-distancing, self-isolating and not being physically present.  Despite these radical changes, the business of America carries on, somehow, someway, including commercial real estate appraisal work.  How has COVID-19 affected the appraisal process and the values of the various markets and submarkets of commercial real estate?  What changes will there be, if any, to the appraisal and valuation process because all aspects of our society are being forced to carry on their daily activities differently while trying to protect ourselves from a sometimes debilitating, sometimes deadly, always mercurial virus with no known cure? Early indications present some sobering numbers with respect to commercial real estate transactions.  For instance, 11-county Twin Cities commercial real estate sales for the first quarter of 2020 had a volume of 504 units with a total value of $1.718 billion.  Second-quarter 2020 sales nose-dived to 229 units with a total value of $943 million. Retail properties fell off a cliff in Minnesota between the first and second quarters of 2020.  In the 11-county Twin Cities area, 174 retail properties closed in the first quarter and only 45 retail property sales closed in the second quarter. While we certainly do not pretend to have all the answers, we see some patterns and trends amid all the uncertainty.  COVID does not seem to be affecting all property types and all property locations equally.  In fact, it appears at this point that the impact of the virus seems to be both property-type dependent and location dependent.  Places where the virus has not hit quite as hard do not appear to have suffered as much in terms of real estate transactional volume and pricing impacts. With respect to property types, quite clearly restaurant, retail and hotel properties have been hard hit. The Trepp CMBS Delinquency Rate declined in August to 9.02% after peaking at 10.32% in June. For reference, the all-time high was 10.34% in July 2012.  Notably, the lodging (22.96%) and retail (14.88%) sectors are being hit the hardest, while industrial, multifamily and office delinquency rates have hovered around historical levels. Office properties present interesting issues and raise interesting questions.  Will office workers return to work full-force at some point?  Will some employers decide that their organizations work just as efficiently (or more efficiently) and more cheaply by keeping some, many, or all their employees working from home post-pandemic?  Will some employers decide they need moreoffice space for their organizations in order to implement social distancing and to keep their workers safe?  A Cushman Wakefield national survey of law firms recently revealed that 72 percent of those firms surveyed believe that they will need somewhat less or substantially less space in the future and that 15 to 30 percent of their jobs may be eliminated.   Moreover, many major national employers such as Facebook, Amazon, Capital One, Amazon and Zillow, are extending work-from-home for their employees either into the fall or for the rest of 2020. Pandemic or no pandemic, we all must live somewhere.  Indeed, because of the pandemic, our homes have become more important than ever—having become the exclusive place for us to be safe while we try to live, work, “go to school” and entertain ourselves.  To date, professionally-managed multi-family apartments are enjoying high levels of renter payment.  According to the National Multifamily Housing Council’s Rent Payment Tracker, 92.1 percent of apartment renters paid their rent as of August 27th. This is a 1.9-percentage point decrease from the share who paid rent through August 27, 2019 and compares to 93.3 percent that had paid by July 27, 2020. This statistic is based on data covering 11.4 million professionally-managed apartment units.  The Minnesota Multi-Housing Association surveyed owners of about 34,000 apartments in June with favorable reports that more than 9 of 10 renters have been meeting their rent payment obligations to date. This could well be, however,  the silver lining of the cloud.  Over half of renters have at-risk wages because of the pandemic and live in single family or small multi-family rentals with two to four units. It is likely that federal relief has been propping up the rental payment numbers.  The $600 weekly federal enhancement to unemployment benefits will end on July 31, unless Congress acts to extend it or provides some other form of rent relief payments. One indication of buyer expectations becoming increasingly cautious in the multi-family market is that one commercial real estate broker has reported eight multifamily deals that have been sidelined recently. As buyer expectations decrease, seller prices will also have to decrease if “normalized” real estate sales volumes are ever to be reached.  Property owners that have good standing with their banks and good cash flow will not see the need to meet buyers’ lower expectations.  The massive unemployment we have seen has put the country in a recession; accordingly, it seems likely that price expectations of property owners will start to fall and align more closely with the lowered buyer expectations that are already being seen. About the Authors Gary Van Cleve, Shareholder, Larkin Hoffman Gary A. Van Cleve is a seasoned trial attorney and an appellate advocate handling a full range of real estate-related litigation. Gary focuses on representing property owners in: (1) condemnation actions where either the government or a utility company takes private property for a public use through its power of eminent domain, (2) land use disputes with local governments typically involving zoning or permitting issues, and (3) property tax appeals. Gary is the chair of Larkin Hoffman’s real estate litigation practice group. Mitchell Simonson, Founder, Simonson Appraisals With a wide range of commercial appraisal experience and real estate consulting, Mitchell Simonson’s 16 years of experience, knowledge, and ‘boots on the ground’ attitude are invaluable assets that have helped countless clients make smart business decisions. As owner and founder of Simonson Appraisals, he leads the firm in delivering credible valuation services for financial institutions and attorneys specializing in the areas of condemnation, property tax appeal and estate planning. Josh Folland, Senior Managing Director, Valbridge Property Advisors Valbridge provides independent valuation and powerful insights to help clients make the best business and investment decisions. We specialize in appraisals, market studies and litigation support on all types of real property. Valbridge provides independent valuation services – we are not owned by a brokerage firm or investment company. With more than 675 employees in over 70 locations, clients across the U.S. benefit from our collective strength.

June 19, 2020

Construction

Guidance on Managing PPP Proceeds to Maximize Loan Forgiveness

My colleagues, Todd Freeman and Dan Kadlec from our Corporate Group, have put together a podcast providing guidance on managing proceeds from the Paycheck Protection Program to maximize loan forgiveness.  Here’s a brief description of the program followed by the link to the podcast. The information here will be valuable to many in the real estate and construction industries. Your business has successfully applied for a loan under the Paycheck Protection Program. You either have received the loan proceeds or are awaiting receipt of the proceeds. This podcast addresses the management of the proceeds to ensure proper use of them and maximize the amount of proceeds that may be forgiven. Given the complex interplay among the various sets of rules for use, forgiveness, reduction in forgiveness and relief from reduction in forgiveness, compiling pertinent information to develop a game plan for these proceeds will not only allow you to maximize use and forgiveness, but also provide guidance on the support that you may provide to your workforce funded by this government program. About the Larkin Hoffman Podcast Briefings The Larkin Hoffman Podcast Briefings series was developed to discuss issues affected by the COVID-19 crisis. Our attorneys will address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation, and other matters in this series. Over the next few weeks, there will be several podcasts on developing matters. Larkin Hoffman is available to help.Please reach out for additional guidance.

April 16, 2020

Planning and Development

New Podcast Series: Land Use and Real Estate Issues Affected by the COVID-19 Crisis

Welcome to Larkin Hoffman’s new series of podcasts discussing issues affected by the COVID-19 crisis. Our senior attorneys will address corporate, employment, real estate, construction, franchise, bankruptcy, insurance, litigation, and other matters in this series. The podcasts are 15 minutes long and can be heard at your convenience. Over the next few weeks, there will be several podcasts on developing matters. In this first podcast, Bill Griffith and Tim Rye discuss land use and real estate issues affected by the pandemic. In particular, they address: The pandemic’s impact on value for property taxes The timing of property tax payments, appeals and extensions The timing for potential tax relief due to value changes or appeals Economic stimulus – Minnesota Essential Investment Bill Low interest loans, government guarantees, bonds, debt restructuring Other forms of relief, such as utility payments, payroll reimbursement Everyone is managing issues arising from COVID-19. Larkin Hoffman attorneys are engaged daily with clients to remove barriers critical to their ongoing operations, and perhaps even their survival.

April 10, 2020

Finding the Future Podcast Series

Finding the Future: World Leaders Fighting Coronavirus Turn to University of Washington’s Institute for Health Metrics and Evaluation (IHME)

Bill Gates sounds like a prophetic voice today when talking about the day to day impact of a global pandemic and the need for diagnostic preparedness and self-quarantine.  Still, his depth of understanding of the current crisis comes as no surprise to those who have watched where the Bill and Melinda Gates Foundation has awarded big grants over many years for research designed to improve global health. Last fall, I sat down with Kristen Dotson, an architect in the center of the design of the Hans Rosling Center for Population Health at the University of Washington which was largely funded by a grant from the Bill and Melinda Gates Foundation and reflects the foundation’s desire to help all people lead healthy and productive lives by combating extreme hunger and poverty around the globe. A key part of that global mission is reflected in the work of the Institute for Health Metrics and Evaluation (IHME) at the University of Washington, which is also supported by Gates and others.  Today, governors and world leaders are in constant communication with IHME to track the rate of infections, mortality and supplies of protective equipment for health care workers. The work of the IHME in building predictive models over many years is now providing real time data for front line decisions in every state and in many countries around the world. That same type of innovation is driving the design and construction of the Population Health building, according to Dotson.  “Putting them all under one roof is designed to see how researchers can collaborate to find population health solutions further and faster, using data visualization and data tracking metrics,” said Dotson.  This approach aligns with the work of the Gates Foundation, which supports IHME’s work in developing tools like the Global Burden of Diseasedatabase which in turn enables policy makers to make better decisions and investments in helping people live longer, healthier lives. Kristen Dotson, Miller Hull Partnership, Seattle A unique global mission demands a unique building.  Dotson brings two decades of experience in sustainable projects to the team of stakeholders.  Dotson is an architect and director of sustainability with the Miller Hull Partnership in downtown Seattle.  Even the firm’s offices speak to their specialty design practice. “Miller Hull has an incredible company culture and we wanted to hold ourselves to the same standard that we try to push our clients toward.  So we decided to pursue the Living Building Challenge as part of our office renovation,” said Dotson. “We really wanted to leverage the knowledge we have of red list compliant building materials to make the healthiest environment we could and also take advantage of all the daylight since we overlook the Puget Sound.  No one has a private office and all of our partners are scattered among the projects that they’re working on.” Like the Miller Hull offices, the Population Health building reflects the values of its funders, designers and tenants; all stakeholders have worked collaboratively on the design.  It brings together faculty, researchers and students from the School of Public Health, the Department of Global Health and the IHME. “Putting them all under one roof is designed to see how researchers can collaborate to find population health solutions further and faster, using data visualization and data tracking metrics,” said Dotson.  This approach aligns with the work of the Gates Foundation, which supports IHME’s work in developing tools like the Global Burden of Disease database which in turn enables policy makers to make better decisions and investments in helping people live longer, healthier lives. A lot of time went into design on the front end to save time and money on the back end.  “We pulled together as a team to really understand their goals, understanding what they were trying to achieve, not just what the program said, but infusing that mission in every aspect of the building,” said Dotson. “For this particular project, the word “Health” is on the building.  So, if we’re not addressing health at every scale in this project, if we’re not at least thinking about it, then we’ve failed.” When you look at the building’s plans, something is clearly missing from most of the floors of the project, that is corridors and hallways.  That missing element is intentional, it’s not like they forgot to include them or ran out of money and needed to cut costs.  According to Dotson, corridors eat up space and kill collaboration, particularly if corridors lead to private offices. “We want collaboration between these three tenants.  We want them to talk to each other.  We want them to run into somebody they haven’t seen for a while and say, ‘What are you working on?’ Every square foot is trying to build a space where people can linger and socialize in a way that builds their community, but also builds the intellectual capital of the work there.” This fall, the Population Health building will open to faculty, researchers and students.  Well before the global pandemic, the building’s stakeholders promised to use this resource to reach people around the globe, hoping to reduce disease, promote good health, and environmental resilience. Today, the urgency appears even greater as scientists and world leaders collaborate to fight disease and promote global health. Updated post from November 13, 2019 Bill Griffith practices land use, real estate and municipal law at Larkin Hoffman.  He represents Mall of America and the City of Columbus, Minnesota, as well as other owners, managers and developers of real estate.  He has a special interest in sustainable solutions to land use and development challenges.

April 8, 2020

Real Estate

Minnesota Property Tax Update

Businesses and real estate of all types are being disrupted and upended by the COVID-19 pandemic. As this pandemic changes the landscape on a daily basis, we will keep you informed of important property tax issues along the way. Currently, there are three upcoming property tax issues in focus: First Half Property Tax Payment: Due May 15, 2020 Property Tax Appeal Deadline: April 30, 2020 Local Boards of Equalization and Open Book Meetings: April 1 – May 31, 2020 First Half Property Tax Payment House leadership has indicated they are working on a series of COVID-19 measures, including abatement of penalties for late income and property tax filings or payments, and preventing evictions and foreclosures during the pandemic. Senate leadership has indicated they are on board with waiving tax deadlines and penalties. This issue is very important to many of our clients and we will provide an update when the form of relief becomes more clear. Property Tax Appeal Deadline Larkin Hoffman’s Government Relations and Property Tax teams, with support from other Twin Cities tax attorneys, have been communicating with Governor Walz, Majority Leader Gazelka, Speaker Hortman, the tax committee chairs in both the Senate and the House, and the Department of Revenue to advocate for extending the April 30th property tax appeal deadline. The governor, Senate and the House have all indicated they are working to address this issue. Local Boards of Equalization and Open Book Meetings The Department of Revenue (DOR) issued a memo on March 18, in response to COVID-19, to all local boards of appeal and equalization, city and township clerks, county and local assessors providing guidance on preparing for and convening local board meetings. DOR directs each assessor’s office to work closely with local boards to create meeting procedures and policies that comply with statutory requirements. The memo also provides Current Guidance on Virtual Meetings. Minnesota requires meetings to occur sometime between April 1st and May 31st, a timeline which is very likely to be affected by the pandemic. The Larkin Hoffman Government Relations team is engaged daily with key state government decision-makers to gain assistance and remove barriers critical to our clients’ ongoing operations, and perhaps even their survival. We are available to assist you on issues ranging from influencing the governor’s executive orders to requesting waivers from state government requirements to revising legislation that will become law. For more detailed information and other resources contact attorney Tim Rye.

March 24, 2020

Construction

We May Soon Find Out What “Force Majeure” Means

I had been pondering a new post to my law firm’s blog, focused on a traditional real estate topic. Now, of course, we are way beyond “traditional” as governments, companies and the public at large struggle to respond in a coherent way to a relentless viral invasion. Members of our firm have been pursuing various regulatory, legislative and political strategies to protect our clients’ businesses, while being mindful of the public health implications of doing so. We anticipate a “shelter in place” order from Gov. Tim Walz could issue any day based on the actions being taken in recent days. This will place a severe restraint on the economy and our lives as we used to know it. At least for now. However, even when the virus risk begins to disappear (and it will, we are told), the ripple-effect of the rapid curtailment of the economy will continue for some time. As lawyers, we routinely review agreements with an eye toward establishing clear terms and conditions governing the conduct of the parties. We pay special attention to the terms governing the circumstance in which the one party is not performing. One of these terms is referred to as “force majeure.” While fancy-sounding, the gist is that there are some things that are beyond the control or even the expectations of the parties such that reasonable performance of the contract can be suspended or even terminated. Typically, the contractual definition of the provision includes war, natural disaster or similar “acts of God” manifestations. In my professional experience, I’ve never seen this provision invoked or enforced; that’s about to change. While there will undoubtedly be many valid circumstances under which force majeure will be used to terminate or suspend a contract, the worry is that this provision, backed up by a worldwide health and financial crisis, will be used to avoid contracts that can and should remain in effect. I believe the vast majority of businesspeople will, under the circumstances, do all they can to help a business customer or consumer manage their way through the current situation. Those conversations undoubtedly already have begun. The most critical factor in this conversation will be the duration and severity of the global downturn; notwithstanding the U.S. economy seemed to be thriving, it is not possible for many companies to simply throw a switch and magically return to the days before the virus erupted. The bad actors, including those seeking unfair advantage, will make this more challenging. So, the implications of the present crisis will be far-reaching and possibly long-standing; I’m betting on the positive forces of human nature, including instincts for survival, to see us through to the other side. Stay safe.

March 24, 2020

Eminent Domain

How Will COVID-19 Affect Real Estate Values?

Those of us in the real estate practice—and particularly in areas concerning real estate valuation such as eminent domain and property tax appeals—are obviously quite concerned about the impact of the COVID-19 pandemic on our clients’ property values as we all proceed through these very uncertain times. I think about two upcoming quick-take hearings that I have for clients in late March and early April. The quick take hearing is the critical time during an eminent domain proceeding when the court grants the government title to and possession of the real property needed for whatever public project necessitated the taking. The date of this transfer of title and possession—the so-called “take date”—is the date on which the property will be valued for purposes of determining the damages that the property owner is owed as “just compensation” for the taking. Will the unfortunate timing of my clients’ quick take dates in the midst of this pandemic affect their ability to recover just compensation? It’s anybody’s guess at this point. Josh Folland and his group of appraisers at Valbridge Property Advisors have interviewed Twin Cities real estate professionals to try to assess the potential impacts of the pandemic at this early stage. I’m pleased to pass on Valbridge’s newsletter and report for your information. If you have thoughts (or experiences) of your own, we’d love to hear from you. Stay safe and stay well. Valbridge notes that market sentiment is likely to change as the impacts of the virus become more clear. They will continue to survey the market and will publish updates to this report.

March 20, 2020

Construction

Insurance and COVID-19: Are We Covered?

For a period of time now businesses have seen the effects of COVID-19 on supply lines and suppliers. But now that the virus has been officially labeled a pandemic, and businesses are being asked to shut their doors to effectuate social distancing, will insurance be the last bulwark against financial harm? The answer, as always, depends. There are generally two types of claims that businesses will deal with. One is third-party claims brought by others seeking recovery due to some perceived shortcoming on the part of the business. The other is first-party losses suffered directly by the company. How can COVID-19 play into these two concerns and what are the implications for insurance? Most businesses will carry Commercial General Liability (CGL) insurance to deal with third-party claims. But what are the issues relating to disease? If a business simply fails to fulfill contracts, an argument for coverage may be difficult. Most policies contain “business risk” exclusions that expressly exclude coverage for breach of contract damages. However, if a business is sued because it allegedly failed to protect against transmission of disease, or caused another company to have to shut down its offices, there is a strong argument that coverage would be provided under the Standard CGL policy. The normal language of the policy provides coverage for “sums the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’”. “Bodily injury” is usually defined to include “sickness or disease”, and “property damage” usually includes ‘loss of use of tangible property that is not physically injured.” There are exclusions that insurers could point to, like the pollution exclusion, and some policies have specific exclusions for infectious disease. A close review of your policy is important. The bigger risk is likely the first-party loss caused by businesses being shut down entirely, or significantly curtailed. This is just the type of loss that business interruption policies were created to address. The problem is that unlike CGL policies that are pretty uniform, there is a significant amount of variance in the language of business interruption policies. Generally, these policies are meant to cover the loss of business income along with extra expenses that are occasioned by a covered cause of loss. What causes trigger coverage can vary from insurance form to insurance form. However, nearly all policy forms require some form of damage, which is often undefined. The Oxford English Dictionary defines ‘damage’ as ‘Harm or injury impairing the value and usefulness of something or the health or normal function of a person’. Additionally, the Insurance Services Office “Business Income” form (CP 00 30 04 02) provides additional coverage for losses “caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than the described premises, caused by or resulting from any Covered Cause of Loss.” The coverage requires damage to property and a covered cause of loss, which will depend on the language of your policy, but clearly there are strong arguments for coverage. The process of policy interpretation has already started. The Oceana Grill restaurant in the French Quarter of New Orleans commenced, what is believed to be, the first case seeking a declaration of coverage for COVID-19 caused losses under a business interruption policy. Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd’s London, et al.,Civil District Court for the Parish of Orleans, Louisiana. The restaurant’s policy covered “direct physical loss unless the loss is specifically excluded or limited.” It also included an extension of coverage “in the event of the businesses (sic) closure by order of Civil Authority.” The Oceana Grill’s Complaint argues that the virus causes direct physical loss to the affected premises in that the virus infects and stays on the surface of objects for an extended period of time and that contamination of the premises constitutes direct physical loss requiring remediation. Taking the argument one step further, they asserted that if the restaurant is shut down because of the presence of the COVID-19 virus in other restaurants, then they are entitled to coverage for losses under the Civil Authority coverage extension. It is important to note that the Oceana Grill’s policy did not contain a “virus” exclusion. The most important point is that the policies and circumstances differ. Making an informed decision regarding the availability of coverage requires an analysis of both. Given the breadth of the current pandemic, the best time for a review and assessment of possible insurance is now so you can make a timely claim if and when losses arise.

March 18, 2020

Construction

Coronavirus Guidance For Employers

Updated 3/16/2020 An employer’s response to the coronavirus pandemic can change from day-to-day, depending on guidance and recommendations issued by the CDC, state departments of health, OSHA and the World Health Organization. The questions employers are asking are changing depending on the day, as are the answers! Can employers question their employees about their recent travel for personal reasons? Questioning employees about their travel could, to some employees, imply invasion of privacy and the fear of potential discrimination. Many employers are asking employees to voluntarily inform their employer of their personal travel plans so the employer can decide whether the employees should be quarantined at home upon their return. An employer can inform employees that they are monitoring the coronavirus and making work-related travel decisions based on the coronavirus. They can provide employees with information about the countries that have experienced cases of coronavirus. If feasible, one person should be designated as a contact person for employees who have questions about coronavirus, have concerns about other employees and their symptoms, or fear that they may have been exposed to coronavirus. Employees should be given reassurance that these contacts will be kept confidential and will be shared with others only on a need to know basis or if required by any government agency. Can employers ask employees about their health? The Americans with Disabilities Act (ADA) prohibits an employer from making a medical inquiry or requiring medical examinations of employees, except in very specific circumstances. In general, the ADA prohibits employers from requiring medical examinations unless they are job-related and consistent with business necessity, such as if the employee poses a direct threat to others. However, because coronavirus has been declared as a pandemic, employers can ask ill employees about their symptoms, and assess whether they will allow the employee to remain in the workplace. They can take the temperature of an employee, because fever is a known symptom of coronavirus. Can employers require employees to take unpaid time off if they are ill or they have been exposed to coronavirus? If an employee has exhausted their paid time off, or they do not want to use their paid time off while home, employers face a difficult problem. It can be expensive to offer employees paid time off because the employer has requested that they not come to the workplace. If paid time off is not offered, or the employee is required to use their paid time off, they may not voluntarily report symptoms or self-quarantine themselves at home. There is no legal requirement that an employer provide paid time off to employees asked or required to remain at home and they cannot work remotely, unless otherwise required by an applicable collective bargaining agreement. Nonexempt employees do not have to be paid for hours not worked. Employers should be cautious with exempt employees. The Fair Labor Standards Act does not allow an employer to make deductions from salary for partial days not worked in a week. A deduction is permitted for absences which are covered by paid sick time or other paid time off. If an exempt employee is absent all week they do not have to be paid for that week. Can employers require employees to take unpaid time off if they are ill or they have been exposed to coronavirus? If an employee has exhausted their paid time off, or they do not want to use their paid time off while home, employers face a difficult problem. It can be expensive to offer employees paid time off because the employer has requested that they not come to the workplace. If paid time off is not offered, or the employee is required to use their paid time off, they may not voluntarily report symptoms or self-quarantine themselves at home. There is no legal requirement that an employer provide paid time off to employees asked or required to remain at home and they cannot work remotely, unless otherwise required by an applicable collective bargaining agreement. Nonexempt employees do not have to be paid for hours not worked. Employers should be cautious with exempt employees. The Fair Labor Standards Act does not allow an employer make deductions from salary for days not worked in a week during which the employee provided more than de minimis work. A deduction is permitted for absences which are covered by paid sick time or other paid time off. If an exempt employee is absent all week they do not have to be paid for that week. What issues should an employer consider when employees are working from home? Because the CDC is recommending social distancing to reduce the spread of coronavirus, many, if not most, employers are allowing employees to work from home when they can. Employers should assess each position and determine if some or all functions can be performed at home. Employers should survey employees to determine their technology capabilities at home, and what resources or equipment the employer is willing to provide to enable the employees to work at home. Employees should be told that they may be asked to perform duties not normally in their job descriptions so that work is carried out as efficiently as possible. The employer should also be clear that working remotely is a temporary measure and employees will be expected to return to the workplace when it is determined safe to do so. Nonexempt employees should record and report their hours worked so that they can be properly paid.

March 12, 2020

Planning and Development

Mediation Can Resolve More Than Monetary Matters

I recently wrote about the merits of using mediation as a tool to resolve business disputes relating to land and business acquisition, land development, public permitting and related conflicts.  Mediation is especially helpful, in my opinion, when money is less the object in dispute and it is more so about a difference of opinion.  Of course, some disputes center on bona fide legal issues in which resorting to the courts may be an essential first step; but even then, mediation is frequently used to bring resolution to the disputed issues, including those involving public agencies. Developers often feel that cities just aren’t listening to them. That was the case in a recent mediation in which the dispute was premised on a land development project and a difference of opinion with the local jurisdiction about the correct manner to move the project ahead.  Out of frustration that his objections were not being heard, our client resorted to litigation to get the attention of the local jurisdiction.  While money was involved, it was not an enormous sum.  Of greater concern was our client’s objection to how he was being treated by city representatives.  It was affecting his business and his future relationship with the city.  In this case, mediation provided a forum, moderated by the mediator, who not only provided an objective sounding board for the client, but also was a reputable messenger to the city participants in the mediation.  In the end, the matter settled on terms that, while not ideal, were nonetheless acceptable.  More importantly, the parties brought the dispute to a conclusion that will enable the underlying project to advance to final approval. The lesson here is that it’s not always (or even only) about the money; business people are usually pretty adept at figuring out how to compromise a purely financial dispute.  Disputes that are more personal and involve someone’s view of “principle” usually require an official venue to voice the objection.  When the party or parties feel they have had their opportunity to speak their mind(s), it becomes easier for them to accept the need to move ahead and to accept compromise.

February 26, 2020

Construction

Mediation Can Pull Matters Out of the Litigation Rabbit Hole

One of the most challenging aspects of an attorney’s job is to advise a client regarding possible litigation.  I think of myself as a pragmatic business lawyer whose primary job is to help my clients achieve their business objectives.  I much prefer to accomplish this through time spent on advocacy, negotiation and problem solving.  Litigation typically is not part of the strategy to achieve client objectives unless that is the reason the client has come to me from the outset.  When litigation becomes a question or even a tactic to be considered (if the client has been sued already, that’s a different topic entirely), I try hard to give objective advice about the merits or lack thereof vs other options, as I see them.  The fact is that even when litigation goes exceedingly well, there often is substantial staff and executive time spent in pursuit of a court claim (along with mental and emotional distraction), not just dollars; and, of course, there will be dollars spent, often substantial sums, for lawyers, consultants and related costs, with no assurance of success, let alone an opportunity to recoup the spending (with some narrow exceptions).  This is time and money that could be spent either in resolving the source of the impasse or pursuing other business opportunities with a greater prospect of successful completion. Minnesota’s court system has, to its credit, aggressively pushed parties to use various forms of alternative dispute resolution (ADR)(which includes mediation) to short-circuit litigation.  Mediation can be a very effective tool for negotiating a resolution to an issue that led to actual or potential litigation; it is very flexible, usually cost-effective and based on a schedule set by the parties.  However, it is not a sure-thing.  Based on my experience with numerous mediation sessions over the years, one of the most important factors leading to a successful mediation process is timing:  how much discovery has been completed so that the parties feel they are well informed about the facts in question; how much money has been expended or is anticipated to be spent if the litigation runs its course; and how much pressure exists for one or both parties to the litigation to reach a resolution on a timely basis.  Another important factor is the willingness of the parties to sincerely engage in the mediation process; if one or both parties are not motivated to resolve the dispute, a successful mediation outcome is more challenging.  In that case, the first factor (timing) becomes more important. For those not familiar, mediation is a controlled form of negotiation involving a neutral third-party, often a lawyer but not necessarily so.  The mediators job is foremost to facilitate direct conversation between the parties for the purpose helping them see the merits of a resolution of their litigation, if possible.  In the first instance, the parties may not feel they are ready to mediate (egos, principle, anger, lack of pressure, etc.); the mediator has to find a way to give parties a voice so that they can focus more honestly on the source of the dispute.  If parties are represented by lawyers, then the mediator can encourage consultation privately to make sure each party knows what lies ahead for them if a lawsuit either is commenced or continues.  If the parties are not represented for some reason (maybe no lawsuit yet), the mediator needs to educate them about what a court process entails, both in time and money, as well as the uncertainty of a satisfactory outcome. In my experience, mediation sessions often run several hours if not a full day (including well into the evening if progress is being made and the parties see an end to the dispute).  Sometimes a mediation will extend over a couple of days to allow parties to regroup and investigate settlement options or underlying facts.  Sometimes, in spite of best efforts, mediation does not result in a conclusive settlement; but even then, mediation can positively contribute if it does nothing more than allow the parties to clarify positions, exchange pertinent information and voice objections.  Perhaps a negotiated settlement can still be achieved outside of mediation at some future point in the process (see my discussion of Factor 1 above). While I am not a fan of litigation, I realize that it is a reality for my clients in some instances, sometimes not of their choosing, but sometimes part of a business strategy.  In such case, mediation can be a useful tool to bring closure to the dispute without the extensive investment of time and money that would otherwise be required to bring a matter to conclusion through trial.  But for mediation to work, parties have to want it to work and be motivated to try.  Everything else is just details.

January 9, 2020

Construction

Bisnow Holds Inaugural “Twin Cities Power Women” Event

Bisnow’s inaugural Twin Cities Power Women event was held on December 11, 2019. The core purpose of this event was to highlight the success of women in the commercial real estate industry and showcase initiatives which have been pivotal in driving change.  I had the pleasure to serve as the moderator for the event’s panel titled “Opportunity and Inspiration: The Key to Increasing Participation of Women in the Industry.” The event celebrated pioneers of change and those pushing for equal access in the industry for Twin Cities top female executives. Keynote speaker Kari Broyles, Deputy General Counsel & Chief Real Estate Counsel, Lifetime Fitness, opened the program with the story of how she rose through the ranks in the legal profession and as a real estate attorney, both at Buffalo Wild Wings and Life Time, Inc. My panel consisted of five honorees, Anne Behrendt, President and CEO of Doran Companies; Carrie Eggleston, Development Manager, United Properties; Jaci Bell, Development Executive, Mortenson; Jennifer Koehler, Vice President, Opus AE Group; Laurie Mahowald, Vice President of Real Estate, Target; and Ericka Miller, Senior Vice President, KimbleCo. They discussed initiatives that have been transforming the landscape of commercial real estate, an industry that has traditionally been male dominated. Other honorees at the breakfast included Pat Wolf, President, Commercial Real Estate Services; Erin Fitzgerald, Principal, Transwestern; Maureen Michalski, Vice President, Development, Schafer Richardson; Barb Schuba, Principal & CFO,  Suntide Commercial Realty; Lisa Kro, CFO & CAO, Ryan Companies; Heather Weerheim, Director of Business Development, Greiner Construction; Shauen Pearce, Director of Economic Development & Inclusion Policy, City of Minneapolis; and Lori Larson, Executive Vice President, Dougherty Real Estate Equity Advisors.

January 6, 2020

Local Government

A Sobering Reminder of Who is in Charge of Your Land

Imagine you are a landowner whose property is dedicated to a use that has run its course—say a golf course for example.  The land represents a sizable family investment and naturally your thoughts turn to what other uses are possible to assure the land is put to a productive and, hopefully, profitable use for the benefit of your family.  While the property is surrounded by a mix of low density housing, it nonetheless sits adjacent to city streets with ample capacity for added traffic, available transit service and easy access to the interstate highway.  The market seems to favor higher density market-rate housing right now, either work-force or senior housing.  You have been reading that cities are seeking out more dense projects including housing to attract young families and to retain seniors.  And, your property is one of a few private land areas of any size left for development within an otherwise fully developed community.  It would seem a good time to convert the land to a new use that is supported by the market, but only if you can secure the necessary land use and zoning changes that are needed to bring this about.  Unfortunately, once you begin the public approvals process to convert your land use, you are abruptly reminded that you have virtually no control over (or say in) what happens next. I frequently receive calls from landowners or business owners who are trying to convert property to a new use and need to understand what this entails.  Invariably, we confirm for these owners what a specific city process will require to complete a land use or zoning amendment.  While the process of changing a land use designation seems simple and fair on its face, in practice it may be far from simple or fair.  Here’s a real-life example.  Our owner above, submits an application to change the land use designation of his property to allow the possibility of higher density housing to be constructed.  Obtaining the land use change is important as any potential buyer wants to understand what is going to be allowed before pursuing a purchase agreement and a formal development application.  The use allowed will determine the value, ie. price, of the land.  Once the owner submits the necessary land use application to change the allowed use, she is rendered a spectator to what happens next, with virtually no power to affect the ensuing course of events. State law gives cities in Minnesota very broad authority to decide the land use designation for all property within a given jurisdiction.  This means that the owner’s well-reasoned plan to change the land use designation for her property is essentially irrelevant from the city’s point of view.  A city could accept the application and approve it, it could deny the change or go a different direction entirely, whether the owner is supportive or not.  Moreover, a land use application, by law, must be reviewed in a public hearing conducted by a planning commission or city council.  This requires public notice and opportunity to comment from surrounding residents.  What the owner quickly learns is that the surrounding residents earnestly believe they have a right to dictate the future land use designation (or that it not change at all).  If enough residents rise up to oppose the landowner’s application, it becomes politically treacherous for city leaders to ignore the residents’ objections. It is hard enough on the landowner to hear residents who she may not even know speak critically of the proposal to change the land use, attributing it to the owner’s greed or complete disregard for the impact of any change on the surrounding residents.  More than a few will avow that it should be converted to a city park.  It is even harder on the owner when the city’s leaders make it clear that they are listening to the residents, first and foremost, and effectively ignore the interests of the landowner.  But the real “topper” is when the city not only rejects the landowner’s request but then decides to initiate a land use change of its own for the property, without regard to the owner’s interest or financial consequences, including whether the new, alternate land use designation will be viable in the marketplace.  The sad truth is that the landowner in this situation has little choice but to let the process play out, hoping that some good will come of it.  Meanwhile, if a new land use designation is approved, the county assessor will likely revalue the property based on whatever new designation is approved by the city, putting a new property tax burden on the owner without any certainty that the land can be sold for its newly designated use. It’s a sobering reminder that as the landowner, the only certainty you have is your obligation to pay your property taxes; the rest is out of your control.

November 13, 2019

Eminent Domain

Relocation Reimbursement: Actual Moving Expense or Business Re-establishment?

Property owners forced to move their business locations through condemnation for the Metropolitan Council’s Southwest Light Rail Transit project are generally entitled to compensation on two fronts—first, they are entitled to just compensation for the taking of their real property; second, they are entitled to relocation benefits for the costs and expenses of moving their business operations to new business premises. Navigating the weird amalgam of federal statutes, federal regulations and state statutes governing “relocation reimbursement” can be confusing and frustrating for these business owners. Consider a business client of ours requiring both warehouse and office space that relocates after condemnation to a building once occupied by a manufacturing business. The city insists that the new and different use required by the business—warehousing as opposed to manufacturing—requires installation of a new water line to accommodate sprinkler system modifications for the former manufacturing space that will now become warehouse space.  The cost?  $90,000. Can the business owner receive relocation reimbursement from Metropolitan Council for this necessary modification to carry on the business in the new location? It may depend on whether that cost is considered an “actual moving expense” or a “business reestablishment expense.”  Why does it make a difference?  Because the law caps “business reestablishment expenses” at $50,000—not a difficult lift to reach for an established, successful small business possessing a large inventory that is forced to relocate.  But there is no monetary limit on “actual moving expenses,” other than that the expense must be “reasonable.” In the example of the sprinkler modifications, the regulations are less than clear. On the one hand, the relocation regulations state that, “modifications necessary to adapt utilities at the replacement site, to the personal property …” can be reimbursable as an actual reasonable moving and related expense.  Application of this rule would exclude the water utility expense from the $50,000 cap.  On the other hand, the relocation regulations also state that, “[r]epairs or improvements to the replacement real property as required by Federal, State, or local law, code or ordinance …” may qualify as a reestablishment expense.  Application of this rule would subject the expense to Minnesota’s $50,000 cap on reestablishment expenses.  The Metropolitan Council rejected the business owner’s $90,000 expense for reimbursement, concluding that it was a reestablishment expense subject to the $50,000 cap, which the owner had already exhausted through reimbursement of other expenses. Where does that leave the business owner? The allowable recourse to the Metropolitan Council’s final determination is appeal to an Administrative Law Judge.  The process ultimately could wind up in the Minnesota Court of Appeals if the administrative hearing process leads to an unsatisfactory outcome.

October 30, 2019

Construction

Protecting Church Real Estate Assets—Case Studies from the Twin Cities

When a developer proposed a 29-story tower above the oldest church in Minneapolis, threatening the stability of historic buildings, what did church leaders do? They went on the offensive and brushed up on their rights under land use and zoning regulations.  That was one of several case studies presented by land use and real estate attorneys Jake Steen, Brandi Kerber, Victoria Dutcher, Bryan Huntington and Bill Griffith at a recent conference for church business leaders hosted by Larkin Hoffman. The case involved the redevelopment of Nye’s piano bar in Minneapolis into shops and housing immediately adjacent to the historic church of Our Lady of Lourdes.  “We helped the church use the heritage preservation guidelines to go on the offensive since the church was identified as historically significant,” according to Jake Steen.  Steen, who spent five years in planning at the City of Minneapolis, added, “It’s also located in the St. Anthony Falls Historic District so there are district and individual protections for the church and we were able to identify historical damage that was done by similar projects.” Ultimately, church leaders persuaded the development team to scale back the Nye’s project to six stories. City leaders required preservation of the historic elements of the Nye’s building which were incorporated in the redevelopment project. During construction, church leaders granted the developer construction rights through an easement over church property. Brandi Kerber negotiated the terms of the easement, “which allowed the contractor to swing their cranes over the church property.”  Kerber said, “We put a number of provisions in the easement to address construction vibration and compensation for any damage to church property, as well as restoration of the site.” Another case study presented by the panel involved the reconstruction of the Dorothy Day Shelter in downtown St. Paul across from the historic church of The Assumption.  Victoria Dutcher and Brandi Kerber assisted the church in detailed review of title documents dating to the 1800s.  “Catholic Charities approached the City to use a public right of way for parking,” according to Dutcher. “We learned that the church had underlying rights to the real estate on which the parking was proposed and investigated title for the church.  In the end, this discovery led to a long-term parking arrangement between the City, the church and Catholic Charities.” An often overlooked federal law has helped local churches negotiate with government officials in matters of land use and zoning. Bryan Huntington described how the Religious Land Use and Institutionalized Persons Act (“RLUIPA”) was recently used to secure zoning for a drop-in site for the homeless in St. Paul.  First Lutheran Church has a relationship with Listening House, which provides services to the homeless. The City of St. Paul placed restrictions on Listening House, including that only 20 homeless persons a day could be served—even though there was capacity to serve many more.  The church sued under RLUIPA and, following a settlement, was awarded over $300,000 in attorney’s fees.  “Attorney’s fees are a powerful remedy in a land use case.  The threat of attorney fee recovery dramatically changes the stakes in favor of churches and religious institutions,” according to Huntington. Brandi Kerber also addressed the importance of understanding whether rental restrictions apply to church housing and knowing how to file for real estate tax exemption. “We were faced with trying to figure out how to transport cloistered nuns from their property for a routine property inspection,” said Kerber.  “We convinced the City that the nuns were exempt from the rental housing provisions and some cities later changed their ordinances to exempt church property.” Whether negotiating leases for cell towers, parking or charter schools, or negotiating zoning approvals, real estate issues increasingly present complex decisions for churches. Church business leaders are learning to develop sophisticated strategies and policies for protecting church assets and often turn to land use and real estate attorneys for critical advice. Bill Griffith practices land use, real estate and municipal law at Larkin Hoffman. He represents a number of churches, charters schools, and nonprofit institutions, among his other real estate clients.  Bill served as moderator of the real estate panel.

October 16, 2019

Real Estate

Bisnow “State of the Market” Offers Upbeat View of Commercial Real Estate in Minneapolis

Political storm clouds may be gathering over Washington, D.C. and trade wars may be roiling financial markets in the U.S. and overseas, but in Minneapolis-St. Paul, the real estate market continues to move steadily along with an uptick in speculative office projects and continued low vacancy rates in multifamily projects.  That was the assessment of a panel of real estate experts who presented as part of the State of the Market hosted by Bisnow recently in downtown Minneapolis, where over 200 people gathered for an update on commercial real estate projects. Anne Behrendt, who recently took the helm as the President of Doran Companies, kicked off the panel by saying, “As developers we tend to be an optimistic bunch, and I don’t see anything in the real estate fundamentals that gives me concern.  In the Great Recession, real estate was highly over-leveraged but that is not the case this time around.”  She noted that falling interest rates have offset cost increases in labor and construction materials. Lance Wright was the only lender on the panel.  As Managing Director for ACORE Capital, he manages the Central Region, including Chicago and Minneapolis, from offices based in Dallas.  His group closed $1 billion in real estate deals last year and is on pace to beat last year.  Wright said, “Compared to other cities,  the Twin Cities is not overbuilt and construction costs remain relatively reasonable.  And you don’t suffer from the traffic gridlock that is happening in faster growing markets.” Jeremy Jacobs recently jumped from Mortenson Development to head up Colliers Minneapolis office as Managing Director.  He said that outside investors are looking at Minneapolis as an alternative to tech cities that have experienced problems that come with rapid growth, like high housing costs, congestion and construction interference.  Jacobs also noted the trend to create walkable communities with services and amenities nearby is here to stay, “this is what buyers, renters and office workers are looking for, along with a sense of community.” One recent development that has the potential to disrupt the pipeline for new multifamily projects is inclusionary zoning.  Cities have attempted to solve the shortage in affordable housing with housing ordinances that require developers to set aside affordable units or buy their way out of the requirement.  So far, Minneapolis, Edina, Bloomington and St. Louis Park have enacted ordinances that mandate affordable housing. “We didn’t really have a seat at the table,” said Behrendt.  “It can work but it makes projects much more difficult when putting together a proforma and each City has a different approach.  It would be better if there was a regional or statewide solution to the problem.”  Jacobs also acknowledged, “the need for housing is real but it won’t be solved on the backs of developers. Housing is a societal problem and we are going to need a societal solution.” Several panelists commented on the recent spate of new office projects. Wright is partnering with Ryan Companies to finance 10 West End, a new office project in St. Louis Park. “I looked at this market and noted that it’s been 18 years since a major new office project has been delivered to the market.  Besides, your rents aren’t sky high and demand is improving.” Earlier in the program, Bill Katter of United Properties gave an update on the Gateway project on the north end of the Nicollet Mall, which broke ground in June.  The 37-story mixed use project is anchored by a Four Seasons hotel and the offices of RBC, and topped off with high-end condos.  In addition, The Nordic and 419 Washington are two new downtown office projects delivered to the market in 2019. Erin Fitzgerald, a principal with Transwestern, is bullish about leasing almost 200,000 square feet in the Wells Fargo Center.  “It’s almost its own market – this landmark building has never had this much space for lease since it first opened.  People love the location and amenities in the core of downtown.”  She’s also looking forward to the renovation of the former Dayton’s department store with new offices, retail and a food hall.  “We need retail in downtown with so many people living and working here and the food hall is going to be one of those places we tell visitors, ‘you just have to see it’.” A bright spot in the office market across the country is “co-working” office space.  It’s both an opportunity and a risk for landlords, according to Wright. “It’s been a great way for landlords to fill space and help startups, but we haven’t seen what happens to this space in a downturn, that’s why we recommend limiting co-working to no more than 20 percent of a building.” As the panel closed out the morning, no one sounded the alarm on the market and all four panelists remain optimistic about the future of commercial real estate in the Twin Cities.  “When things do slow down, you want to have capital and ask yourself ‘where do we want to be, where are the opportunities?’” according to Behrendt. Bill Griffith is a shareholder at Larkin Hoffman and practices land use, real estate and municipal law.  He represents Mall of America and the City of Columbus, as well as a number of local and national real estate owners, managers and investors. Bill served as moderator of the State of the Market panel hosted by Bisnow.

October 1, 2019

Firm Highlights

Blog Post
The FTC’s Aggressive Approach to Non-Compete Agreements
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Larkin Hoffman Attorneys Recognized in Legal 500’s Minnesota Elite Guide
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Health Care Attorney Angela Mamaril Joins Larkin Hoffman
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Larkin Hoffman Attorneys Named 2026 Super Lawyers and Rising Stars
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Larkin Hoffman Attorneys Named Top Lawyers by Minnesota Monthly
Blog Post
Department of Labor Restores 2019 Salary Thresholds for FLSA Exemptions
News
Craig Hardie Joins Habitat for Humanity of Minnesota Board of Directors
Blog Post
Can Employees Be Prohibited From Recording Workplace Conversations?
Blog Post
Four Months of Minnesota Paid Leave: Frequently Asked Questions
Blog Post
Why All Employers Should Understand Protected Concerted Activity
Blog Post
The FTC’s Aggressive Approach to Non-Compete Agreements
News
Larkin Hoffman Attorneys Recognized in Legal 500’s Minnesota Elite Guide