74 Sexton Lofts Downtown Minneapolis, Purchased Once Again

Firm puts $70 million into Twin Cities condo purchases

 

Sexton Condos Minneapolis

Glen Stubbe, Star Tribune, Sexton Lofts

Point Capital is buying Twin Cities distressed condos in bulk, including the troubled Sexton Lofts in downtown Minneapolis.

By JENNIFER BJORHUS, Star Tribune

Last update: April 1, 2011 – 10:55 AM

An East Coast private equity group is scooping up distressed and bank-owned condominiums in bulk in the Twin Cities, saying it’s so confident in the area’s economy that it will roll out its own mortgage program to make loans to qualified borrowers wanting to buy.

Point Capital Partners, based in Chatham, N.J., said it’s sinking about $70 million into four Twin Cities condo deals, two of which already have closed.

“We’re making a big bet on Minneapolis,” said Drew Preston, who manages Point Capital’s real estate fund. “The underlying economic trends that we’ve seen in Minneapolis are some of the strongest we’ve seen in the United States.”

In its most recent acquisition, Point Capital Partners bought the 77 remaining condos in the Sexton Lofts in downtown Minneapolis from owner Andy Chase. That deal closed March 24.

Chase, president of Burnsville-based Chase Real Estate, bought 74 of Sexton’s unsold units — more than half the building’s 123 units — out of foreclosure one year ago for about $4.5 million. He then bought three more units, added a new heating system and has been finishing off the conversion of the old commercial building, including completing the Sexton’s nine rooftop penthouse units. The work should be done in two months.

“We got a lot of stuff accomplished and now I think it’s time to go to the next level,” Chase said.

Preston wouldn’t say what he paid for the Sexton units, but said “we paid a significant premium” over the $4.5 million Chase paid.

The sale marks a bold new chapter for the Sexton, which has been clouded by the mortgage-flipping scheme that surfaced there in recent years. The scandal produced multiple convictions. Brett Thielen, a first-time developer who tried to complete the project, is serving a 27-month sentence for helping orchestrate the swindle.

The Sexton was Point Capital Partners’ second Twin Cities buy.

On March 17, the private equity group bought the 90 unsold units at the Gramercy Club of Edina — another well-known project with a tortured past — from Beal Bank Nevada. Point Capital plans to convert the senior co-op into condos, he said.

The group is scheduled to close next week on another bank-owned condo building in the Twin Cities, and has a fourth investment lined up, one that Preston called the largest. He declined to name the other two developments.

Little has been written publicly about Point Capital Partners. But according to its website, it’s a family of merchant-banking companies founded in 2003 and its private equity unit makes alternative investments in areas such as energy, health care technology and distressed real estate. It is principally owned by two classmates from West Point, from which the firm takes its name, Preston said.

Banks are generally unwilling to make mortgages for condos in buildings with heavy concentrations of units in foreclosure or that are sitting unsold or rented out, Preston said. The group aims to stabilize the troubled condo projects by providing financing so they can get the units sold at market rates.

“I’m not a fire-sale guy,” Preston said. “The value of the properties is dependent on the financing.”

Preston said his group will start listing five to 10 of the Sexton units next week.

“Minneapolis has great underlying demographics,” he said. “There’s a demand out there for this product.”

Mary Bujold, head of real estate research firm Maxfield Research Inc. in Minneapolis, said Point Capital’s type of financing play isn’t unheard of, but it’s the first time she’s seen it in the Twin Cities during this boom-bust cycle.

“Ultimately, I think it’s a smart move on their part,” she said. “It’s not really speculative as much as it’s kind of opportunistic.

Minneapolis Loft Stlyes

For many Minnesotans, moving downtown into an urban dwelling is about the lifestyle, general excitement and cultural opportunities of city living.  It often means a shorter commute to work or in some cases quite the opposite with the concept of an urban cabin.  The term ‘Loft’ is easier understood broken up into four loose categories.  There are various spin offs of the loft concept but in downtown Minneapolis there are basically 4 different styles of Lofts.

Warehouse Lofts “Hard Lofts”

A majority of the warehouse lofts in Minneapolis are located in and around downtown areas that were once industrial districts such as the North Loop. Former manufacturing plants retain their industrial flare, with freight elevators, concrete floors, exposed brick walls, timber beams and high ceilings. Loft buyers will enjoy the historical touches of these ”New York inspired” dwellings which often have open floor plans and few walls to separate living spaces.  In Minneapolis some example of  warehouse lofts in the North Loop would be the Security Lofts, Itasca Building, Bookman Lofts, 918 Lofts, and SOHO Lofts on Washington Ave N. 

New Construction Residential Lofts

If you like the loft feel but would prefer new construction there have been several condo developements downtown Minneapolis built to emulate the warehouse feel with elements like exposed duct-work and concrete floors. While not the authentic warehouse, new construction residential lofts are spaces designed in the warehouse-loft style but with post tension concrete, glass and steal. Like warehouse lofts, they often contain floor-to-ceiling windows, often times with non conforming walls and open floor plans but lack the industrial details of a historic structure.  Examples of new construction residential lofts in Minneapolis are the 710 Lofts, 720, Lofts, 730 Lofts, Bookman Stacks,  and Village Lofts.

Soft Lofts

The demand for loft style spaces but with more of a traditional layout has resulted in what is called a soft loft, or hybrid of what is known as more of a traditional feeling space with loft-style floor plans. These “softer” lofts may include room-like divisions more familiar to someone coming from a single family home but have the high ceilings and often times exposed concrete pillars.  Condo developements such as the 5th Ave Lofts, Bridgewater and Lyndsay Lofts are great examples of the the soft loft.

Live-Work Lofts

Live-Work Lofts are not as common downtown Minneapolis but a popular concept. Designed to house a home owner and his or her business, this style loft allows an  artist, manufacturer or other business owner to save moneyby living and working at the same address.  There will be some limitations to what you can use the space for in respects to retail i.e. restaurants ect. The majority of options in Minneapolis for Live-Work Lofts include the Madison Lofts, 801 Washington, CW Lofts and Tower Lofts. 

Not everyone agrees on what exactly a loft is.  The wide spectrum of loft styles in Minneapolis gives prospective buyers plenty of options tailored to personal taste. 

For a  Free Comprehensive List of Minneapolis Lofts please fill out my Condo and Loft Tour Form and I will email you your options broken down into the various categories.