Call it planning ahead. But when the Tax Cuts and Jobs Act of 2017 unveiled the Opportunity Zone program, officials with Minneapolis’ NAI Legacy saw potential. And the firm acted on that potential.
Duane Lund, chief executive officer of NAI Legacy, said that he and other executives at the Twin Cities commercial real estate firm looked hard at Opportunity Zone legislation way back in the summer of 2018. They studied what Opportunity Zones could mean for NAI Legacy’s business model.
And that foresight? It’s paid off. Since launching its Opportunity Zone program, NAI Legacy has completed four Opportunity Zone investments totaling about $50 million.
“We educated ourselves on the program from the business side,” Lund said. “We surrounded ourselves with law firms and accounting firms that were diving deep into it, too. We’ve since given many of the investors in our program comfort with the assets we’ve targeted.”
One of those assets? Birdtown Flats, a new luxury apartment building in the Minneapolis suburb of Robbinsdale. This apartment complex opened for initial occupancy in February of 2020, and is located near downtown Robbinsdale.
Birdtown Flats includes 152 units and features amenities that include a rooftop deck, fitness center, business center, common area, underground heated parking, dog walk and bike-storage area.
NAI Legacy partnered on this project with Minneapolis-based The Beard Group, the project’s developer; Minneapolis’ Steven Scott Management, which will provide daily property management of the building; and Minneapolis-based CliftonLarsonAllen Wealth Advisors, which assisted in raising capital.
This project is just one example of the success that NAI Legacy has experienced with its Opportunity Zone fund. It’s unclear how COVID-19 will impact the fund. But NAI Legacy has been successful with it so far because the company is careful about which buildings it targets.
Michael Klisanich, managing director of investments with NAI Legacy, said that Birdtown Flats is a good example of the type of asset that the company targets. Klisanich said that new apartment supply had been lacking in Robbinsdale for decades.
And Birdtown Flats wasn’t just new. It also came with features that made it stand out among the stock of existing apartment products in Robbinsdale.
“Birdtown Flats came with some amenities that don’t currently exist in Robbinsdale and the surrounding communities,” Klisanich said. “It features amenities that you see in Minneapolis’ newer apartment products. But these amenities don’t exist in the Robbinsdale market. The leasing activity we’ve seen in this development solidifies our belief that there is a demand for a new building with high-end amenities in this market.”
What are these amenities? Birdtown Flats features a high-end fitness center, a spacious rooftop deck, dog-walking paths, a dog-wash station, underground parking, an automated package system for tenant deliveries and a business center.
“We haven’t seen an amenities package like this before in Robbinsdale,” Klisanich said.
Lund said that the suburb of Robbinsdale was also an attractive location for NAI Legacy’s Opportunity Zone fund. The suburb is about a 15-minute drive from Minneapolis, making it what Lund calls a first-tier Twin Cities suburb.
Not only does the suburb attract Millennials who want to be close to downtown Minneapolis, it’s also attractive to people in their 50s and 60s.
“People who are entering their empty-nester stage are selling their homes right now. They want to live in an area that has restaurants and shops and grocery stores, but they might not want to live in downtown Minneapolis,” Lund said. “A suburb like Robbinsdale gives them an alternative.”
As Lund says, renters here, both young and old, are a quick trip away from the center of Minneapolis. But they can also enjoy the quieter atmosphere of Robbinsdale.
“Birdtown Flats fills an interesting niche,” Lund said. “It is not too dependent on one class of consumers or tenants.”
The results bear this out. Lund said that Birdtown Flats is already nearly 70 percent occupied.