Canadian investor buys Mill Place on edge of downtown Minneapolis

An investor purchased one of the last brick-and-timber office buildings in downtown Minneapolis not yet stripped to its original bones and repurposed — and plans to do just that.

ICM Realty Group, based in Calgary, bought three brick buildings downtown that date to Minneapolis' milling days. The Canadian investor sees untapped potential in the largest structure, which is the heart of the acquisition.

The group purchased the properties — at 111 3rd Av. S., 201 3rd Av. S. and 333 S. 1st St.— for $9.25 million last week, ­according to a certificate of real estate value.

Mill Place, the building at 111 3rd Av. S., is the largest and sits on the S. 1st Street corner at the south end of the Mississippi River's 3rd Avenue bridge. It is actually two four-story red brick buildings connected by a large glass atrium.

It was built in 1880 to serve the city's flour milling industry as the Hall and Dann Barrel Factory. At its peak, it was the largest manufacturer of barrels in the U.S. When the industry's packing methods changed about a decade later, the ­building was turned into a sack and bag factory. In the 1980s, building tenants were not keen on warehouse space, so the site was renovated into a standard office building. With today's office users gobbling up any available authentic brick-and-timber space, ICM plans to strip the buildings of their drop ceilings, carpet and finished floors.

"Our intention is to do a full renovation that will take it back to its original roots," said Andrew Webb, managing director of ICM. "We are a value-add group. We don't buy stable assets. We look for opportunity properties."

In addition, he said the company plans to spruce up the rooftop terrace and add other modern amenities like bike storage and a fitness center. It will redesign the entrances to "give the building more of a presence" on the streets.

Mill Place is currently fully leased with several long-term tenants, including the University of Minnesota Press, Itasca Consulting Group and Dunn Bros. Coffee headquarters.

Webb said the owner will start with renovations on the common spaces and move into work spaces as tenants leave or request updates. With rents being slightly lower than the market, Webb said, "We believe there could be additional ­opportunities to capture growth in the rents in the future."

Scott Tankenoff of Hillcrest Development, a Minneapolis firm that specializes in adaptive reuse development, said such renovations can be costly, but there is demand for it.

"There is no brick and timber left. It's either been ruined, demolished or perfected — or it's been used for something else like housing," Tankenoff said. "So from a commercial [real estate] standpoint, there's a very limited supply out there."

The other two buildings in the deal are much smaller and ICM has no plans to make changes to them. One, built in 1879 as the Milwaukee Freight House, is now home to a marquee Dunn Bros. Coffee shop. The coffeehouse will remain the sole tenant of that ­property.

Riley Hayes Advertising will also remain the only ­tenant of the Engine House, a low-slung building built in 1878 for the Minneapolis Eastern Railway Co., that skirts the Mississippi riverfront.

ICM has more than $500 million in real estate holdings in the U.S. and Canada. It owns International Plaza in Bloomington and maintains an office in Minneapolis. "We love the Minneapolis market and have been trying since making our first investment in 2006 to buy again here," Webb said.

He said ICM hired Ryan Cos. to manage Mill Place and is actively interviewing leasing brokers and architect firms.