Developers often flip apartments

New student apartments are often sold soon after they’re finished.

Nicolas Hallett

Student housing developers near the University of Minnesota are constantly building new projects and often selling them behind closed doors.

Developers maintain that this is a common industry practice, but community leaders argue consequences for residents and the neighborhood are unpredictable.

Doran Companies CEO Kelly Doran said his company attempted to sell three of its six student housing complexes located near campus earlier this year. Doran said the company would consider selling any of his properties, even those that are still under construction, if a deal arose.

“Most developers sell buildings as soon as they build them,” Doran said. “In this business, you are always exploring values — what is something worth and what are they willing to pay you for it?”

Numerous other student housing complexes are either for sale or have changed hands recent years.

The Opus Group sold Stadium Village Flats to Chicago-based firm Harrison Street Real Estate Capital for $43 million one week after it completed construction last September.

Opus’ Venue in Dinkytown — the controversial, under-construction apartment building that displaced the House of Hanson and other businesses — will also be sold to Harrison Street after it’s completed next year.

Solhaus, which was completed in  2011, is currently for sale. Stadium View Student Apartments were sold in 2010.

Dinkytown Business Association President Skott Johnson said this trend shows developers have short-term goals for the community.

“These guys aren’t in the business of running dormitories,” Johnson said. “Developers are here to make money and move on. They aren’t invested in the neighborhood.”

Doran said he explored selling Sydney Hall, Dinkydome and the Edge on Oak — all built in 2010 or later — as a package deal. He said the sale has since stalled, but interested buyers approach him “all the time.”

“We have from time to time explored selling one or more properties,” Doran said. “We’re not contemplating a sale of anything today, but that could change tomorrow.”

These types of purchases aren’t widely known, said Daniel Oberpriller, owner of area developer CPM Companies.

“It’s very quiet,” he said. “Everything is private, meaning they only target the buyers that would particularly buy the asset, and nobody else sees the packet.”

The select few notified of a sale usually sign a confidentiality agreement just to receive the property’s financial information, Oberpriller said.

Matt Hawbaker of Save Dinkytown, a grassroots group opposing development in the area, said he dislikes how quick developers are to flip their properties.

“The point for them is to get what they want out of the deal and move on to the next thing,” Hawbaker said. “It’s a little naïve to assume that these developers want to create stake in the neighborhood beyond what can maximize their profits.”

The Minneapolis Planning Commission  only looks at land use when reviewing proposed development, not ownership, said commission President Ted Tucker.

“That is something that is of interest to neighbors and does affect how properties are maintained and operated,” Tucker said. “But it’s not one of the considerations of the planning commission … That’s not our business. So we never ask.”

Marcy-Holmes Neighborhood Association President Cordelia Pierson said Doran hasn’t indicated to her any plans to leave the neighborhood, but the neighborhood cannot keep him from selling his properties.

“He works in the private sector. He can decide to divest himself from the neighborhood if he so chooses,” she said. “It’s a natural cycle. We don’t expect [developers] to necessarily have a long-term investment in the neighborhood.”

Pierson also said she would like to see the University investing more in housing around campus, especially Dinkytown complexes like Sydney Hall and Dinkydome.

After a development moratorium that would have blocked Doran’s latest project was struck down by the Minneapolis City Council, Pierson said she spoke with Doran about his plans for the community.

“I am confident he is a developer who has a long-term stake in the neighborhood,” Pierson said after the Aug. 30 meeting.

Save Dinkytown contested developments by both the Opus Group and Doran Companies. Hawbaker said the apartment boom across Minneapolis may explain the build-and-sell business model.

“The bubble could pop soon. It’s still the time to cash in, and that’s what they are doing,” he said. “Maybe the fact they don’t want to stay around shows there is some uncertainty in the market.”