“This will be the first space of its kind in Minnesota,” Karasick said in the release. “We will be supporting the local business community with a designated area for small retail shops and kiosks, specializing in products made here in Minnesota, including those made by local artisans and minority-owned businesses.” 601 Minnesota is partnering with The Telos Group LLC and United Properties on the project. Work has been ongoing for four years, during which crews renovated the 1.2 million-square-foot building to house retail and restaurant space on the lowest three floors and office space on eight floors, along with a library, gym and park, according to the release. Crews completed most of the work on the 12-story building by February and March of last year — one month before pandemic restrictions began. Prior to the pandemic and murder of Floyd, the developer had lease commitments from two “significant” tenants — including a national accounting firm — and was in advanced negations with one other for a 150,000-square-foot space, the complaint said.
“A predatory lender … is seeking to drive the owner-developer of a local Minneapolis real estate project out of business and take over the project for itself,” according to the civil complaint 601 Minnesota recently filed but has yet to be made public. 601 Minnesota says the leasing dates were set before dual crises enveloped Minneapolis: the COVID-19 pandemic and the civil unrest following the murder of George Floyd. Monarch is allegedly not engaging in lease deadline renegotiations, and instead is allegedly working to foreclose on the loan and “steal” the property, according to a news release about the case from the developer.
New York City-based Monarch didn’t send a comment by time of publication. Although 601 Minnesota is current in its debt obligations, the complaint said the developer is in default for not leasing up the project by leasing hurdle dates. These are scheduled dates where a property must have a certain percentage of the space leased.
601 Minnesota was — and still is — allegedly unable to meet lease-up dates, which were created when “no one could reasonably have predicted the unprecedented extent to which the pandemic and civil unrest would paralyze office and retail leasing downtown,” the release said. The Dayton’s Project is currently 98% vacant, according to the complaint. As of January this year, two prospective tenants have backed out of lease commitments, citing continued civil unrest in the downtown area. The prospective anchor tenant, a national accounting firm, deferred and “drastically” reduced the scope of its original commitment to lease four office floors, the complaint said.
This included the Dayton’s project, which indefinitely suspended its leasing program, the complaint said. However, “the Minneapolis leasing market has been virtually frozen as a result of COVID-related lockdowns and widespread civil unrest, resulting in the shutdown of retail and office operations citywide,” according to the complaint.
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