Executives from Crestlight Capital took a look at Riverplace — a collection of four unique office buildings just outside of downtown Minneapolis — and were willing to tackle what others weren't: deferred maintenance.
A pair of parking ramps were in disrepair, the elevators were in need of modernization, and there were so many pesky leaks that plastic buckets were set out in anticipation of the next rain.
"It was definitely a fixer-upper," said Kelly Lim, senior vice president at Crestlight. "It leaked like a sieve."
But the property had one remarkable attribute: It's perched on the leafy banks of the Mississippi River overlooking the skyline in one of the most historic neighborhoods in the city.
In late 2020, Detroit-based Crestlight and Birmingham, Ala.-based Harbert Management Corp. bought it for $24.7 million — a fraction of what it originally cost to develop the complex and nearly as much as the companies are spending to repair and renovate the buildings.
"No one wanted to touch it," said Lim. "Because it needs a lot of work."
What's more challenging, the overhaul will be aimed at wooing office tenants at a time when there's a glut of office space in the city. Crestlight aims to create work spaces that will better appeal to a post-pandemic workforce.
Morgan Kane, the vice president at Transwestern Real Estate Services who is marketing the space, said Riverplace stands a chance because it's situated in an area that's already so full of life.
"There are lots of bars and restaurants and housing," she said. "It's a destination for a lot of people."
Kane said the office vacancy rate in the Central Business District and several submarkets including the North Loop, downtown Minneapolis and the Northeast neighborhood where Riverplace is located, has been hovering at 20% as companies reduce the size of their office space because so many employees have opted to only work in the office part time.
That's why the timing of the Riverplace renovation, Kane said, is an opportunity to cater to companies that are looking to downsize.
"Before the sale, Riverplace was very much underutilized," she said. "There was just no energy or sense of community and that's what this owner is investing in."
Riverplace is a mix of new and historic buildings that are connected by a glass skyway, atriums and a rabbit's warren of walkways. In the 1980s, they were converted into offices and retail as part of a much larger mixed-use redevelopment project.
The project, which helped spark the revitalization of what had been a mostly industrial riverfront, cost $120 million. It included new condo and apartment towers that were not included the Crestlight acquisition. Riverplace itself has about 240,000 square feet of offices and about 20,000 square feet of river-facing retail and restaurant space, including a former stable that's been vacant for years and is being eyed by several retailers.
Initially, Riverplace was touted as a boutique shopping destination, but the retail concept didn't thrive. Its owners then repositioned it as an entertainment venue called Mississippi Live. That concept didn't do well either. Then, it was converted into offices.
During a recent tour, Lim said the primary goal of the nearly $20 million renovation is to create work spaces that make employees want to be in the office even if it's not required. That includes more food options, bike parking and wellness rooms.
Lim also wants to capitalize on its proximity to the river by improving the outdoor space surrounding the building.
The cost of the project pales in comparison to others that are happening around the Twin Cities, including the $200 million revamp of the Northstar Center that's underway downtown. But it stands to have an outsized impact on the riverfront neighborhood if Crestlight's plans to add more public riverfront destinations come to fruition.
Frgmnt Coffee will open a third location in a brick and timbered space at Riverplace that opens to a courtyard and walking paths along the river, Crestlight said.
And in that same courtyard, Crestlight hopes to attract a tenant to an 1880s stable building, which was moved to the site decades ago and has been vacant for several years.
The two investment companies are spending nearly $1 million to repair the Grand Staircase, a set of stone stairs that link the riverfront paths to the historic Our Lady of Lourdes Catholic Church.
To design these spaces and others, Lim hired Minneapolis-based Perkins and Will. That firm is also designing more of the kinds of shared amenities that are popular in newer office buildings. That includes a newly renovated four-season outdoor plaza, a 60-person conference and training center, a fitness center, library lounge and game room.
The revamp also includes offices with fewer dedicated work spaces and more places for hybrid workers to gather. They're also adding "Zoom rooms" designed to connect those who are in the office with those who are not.
When Crestlight first acquired the project, the office space was only 75% occupied, Lim said. But now, despite the pandemic, Riverplace is 80% occupied, he said.
New tenants include Gravie, a health care start up that in June signed a lease for 27,000 square feet of space. Before that, Crestlight leased an entire floor of one of the buildings to Haberman, a branding firm that moved from downtown Minneapolis in March 2020 just as workers were being sent home.
In addition to the physical changes that are taking place, Riverplace is also getting a new identity. Haberman has been tasked with a rebranding effort that's focused on promoting Riverplace as a unique confluence of many things, including culture and business and nature and design.
"The energy here is different than in downtown," said Brian Wachtler, president of Haberman. "We're basically sitting in a treehouse. We've got the river flowing in front of us; it's kind of epic."
The focus of that effort, he said, is on highlighting the unique natural and human history of the area.
"We consider ourselves culture anthropologists," he said. "There's such a rich history here. We're not reinventing what this place is. We're expressing the story that already exists."