Stars Align for Industrial Property in Minnesota

MINNEAPOLIS—It looks like the Twin Cities' soaring industrial economy has
opened up opportunities for owners willing to sell. Fairbridge Properties, for
example, recently sold a 261,805 square foot industrial facility in suburban Coon
Rapids to Shopoff Realty Investments for about $14 million. Fairbridge owned
the property for less than three years but realized an internal rate of return of

“We were buying the property as a long-term hold,” Dr. Dmitry Gordeev,
Fairbridge’s founder and managing partner, tells The Princeton,
NJ-based firm “started improving the asset from day one as if we would hold it for
twenty years.” 

Occupied by longtime tenants Honeywell Aerospace and MEDRAD, the flex
facility benefits from a number of physical improvements made by Fairbridge.
These include repainting the entire exterior of the building, replacing the
windows, resurfacing the parking lot, retrofitting the parking lot lighting, replacing
a number of RTU HVAC units, and implementing an annual preventative roof
maintenance program.

However, “in the last two and a half years the vacancy rate has shrunk
tremendously in Minnesota,” falling to about 4.5%, Gordeev adds. “That allowed
developers to start construction on spec buildings,” and boosted the region in the
eyes of other investors.

But what made this particular deal really come together was Fairbridge's predevelopment
work on an 86,764 square foot research and development facility,
built-to-suit, on the same property. The Irvine, CA-based Shopoff has a great
reputation as a developer, Gordeev says, and will continue with the new project.
“The stars aligned; it was a perfect fit between us and them.”

The benefits to Fairbridge's investors don't stop there. The company sold the
Coon Rapids property as part of a reverse 1031 exchange. And it used the
proceeds to help complete the $21.5 million purchase of Landmark Center, a
class A office tower in downtown Indianapolis. The office market in that CBD has
struggled a bit in the past few years, but as reported in, recently it
hasshown signs of revival. And a new agreement between a health services
firm and Fairbridge has brought the 12-story Landmark up to 100% occupancy.