Affinity Group Food Marketing | Case Study

“Our lease was up at the end of October, and I met the Paramount team for the first time during the first week of July.  After touring the potential properties, it was clear that one space rose above the rest.  Paramount worked diligently alongside the contractors to ensure that our timeline was met; and without sacrificing the quality of the workmanship.  Paramount was responsive, knowledgeable, and I felt that they worked with Affinity’s best interest in mind.”

          -Randy Fleck, Vice President | Affinity Group Food Marketing

Affinity Group Food Marketing is a manufacturer’s representative in the wholesale food industry. In the same location for over a decade and a half, they desperately needed a more efficient and larger space. The lease expired at the end of October. A large and complicated build-out was needed at any location if we were to recreate the current space.  The test kitchen and cooler/freezer space combination presented challenges when searching for a suitable location.
The benefit of occupying a former lab space was that most of the plumbing infrastructure was in place, however, the space needed reorganization and fixtures needed to be replaced. This saved an immense cost by not having to create a kitchen from scratch. John and Joe not only negotiated a good deal for Affinity in regard to the lease, but also managed the entire construction planning and buildout of the space.John Young and Joe Schultz knew the searching, negotiating, and construction processes needed to move quickly to meet Affinity’s timeline.  John and Joe organized building showings one week after meeting Affinity for the first time. After the initial tours, nothing felt like the “right fit.” Through hard work, good connections, and some luck, they uncovered a former laboratory space that was going to be vacated at the end of the year. They organized a showing, and after walking through that space, Affinity realized, with some work, it could be the perfect space.  John and Joe worked with the landlord to make sure that the timeline would be met, even though there was a standing lease on the premises.
Even well after the lease was executed, John and Joe continued to stay in constant communication to make sure that the construction was completed according to plan, schedule, and budget. They provided a level of service above that typically expected from a commercial real estate broker.

For the best in commercial real estate service and solutions 
John Young, CCIM | Vice President
(952) 854-5067 |
Joseph Schultz | Associate
(952) 854-8309 |

FreedomWorks, Inc. | Minneapolis, MN – Case Study by Bob Johnston

FreedomWorks, Inc., is a Christian post-prison re-entry organization assisting men to effectively re-enter society following a period of incarceration.  The mission is accomplished by providing a safe and encouraging environment in which program support guides men into healthy relationships by providing transitional housing, employment assistance, counseling, spiritual and vocational guidance and job coaching..  The men are required to meet a portion of their program and occupancy expenses while focused on a path to financial freedom and “normalized” living.  The program is effective . . . recidivism rates hover around 7% while the national average is nearly 69%.
Since its founding in 2003, FreedomWorks has operated in a 6,000 square foot building located in North Minneapolis.  In recent years, the organization outgrew this building as the program expanded to meet an ever-growing demand for post-prison and recovery community needs. In 2017, FreedomWorks began its search for a larger facility that could meet its long-term needs and provide additional depth to its program.  The ministry wanted a new property to accommodate the addition of affordable after-care housing, cognitive behavior therapy, drug and alcohol treatment and more comprehensive life skills instruction.
FreedomWorks became aware of a foreclosed property comprising nearly a full block in North Minneapolis.  The property contained seven (7) separate parcels:  a 2-story office building of approximately 16,000 square feet; a 4-story former skilled nursing facility of approximately 60,000 square feet. This facility also contained a large commercial kitchen and laundry facility; a 4-story assisted living facility of approximately 40,000 square feet; 3 parking lots; and a large vacant piece of land on the north side of the block.

As one can imagine, the deal was extremely complicated; and numerous steps were required to reach a potential purchase of the property:
FreedomWorks commissioned a well-known commercial appraisal firm to complete an appraisal of the property.  This satisfied a number of concerns with respect to financing, insurance coverage, liability, potential tax issues, etc.
Property Inspection.
Although the buildings were in good shape structurally, there was a significant amount of deferred maintenance.   The former skilled nursing facility had been vacant for nearly three (3) years.   Mechanical systems were old and nearing their life’s end.  Inspection of those systems along with electrical, roofs, windows, elevators, parking lots and life safety issues were completed.  In addition, Phase I and Phase II environmental studies, respectively, a site survey and civil engineering site analysis were completed.
Operating Analysis.
The office building and assisted living facility were occupied and operating. However, determining the cost of operation of each building and the property was complicated.  Records were incomplete and spotty at best.  For example, the heating and cooling units of one building served the HVAC needs of another.  Finding the right meters and determining past utility and operating costs were difficult.  Understanding the terms and conditions of existing leases and speaking to those tenants was exhausting.  A laundry service and a catering food service were operating out of one of the buildings, and there were no written agreements with respect to their use.
Letter of Intent.
Weeks of negotiation were required to complete a mutually acceptable Letter of Intent.  The church directly adjacent to the property utilized some of the parking area and meeting areas in the office building; and the property provided some of the utility services to the church.  Consequently, as a part of the Letter of Intent, FreedomWorks had to negotiate a Shared Services Agreement providing the terms under which the parking and meeting areas and services would be provided and maintained.
Through numerous discussions/negotiations with a local financial institution and through the significant contributions and guarantees of generous donors, FreedomWorks was able to secure financing for the purchase of the property under very favorable terms.
Purchase Agreement.
Based on the business terms outlined in the Letter of Intent, FreedomWorks executed a Purchase Agreement in late March 2018.  The foreclosure dictated that the redemption period be sixty (60) days, with the anticipated Sheriff’s Sale occurring in mid-June.  Once a number of other details were completed, and the fact that no party responded during the redemption period, FreedomWorks was able to close the transaction in mid-July, 2018.
Conditional Use Permit.
The broad zoning classification of the property is R-4.  However, due to the change of use of the property by FreedomWorks, a conditional use permit was required to utilize the property as “supportive housing.”  As a result, FreedomWorks had to twice go through the expense and lengthy public process of being approved by the City of Minneapolis for a Conditional Use Permit . . .   once in May for the former skilled nursing facility and a second in October for the former assisted living facility.
After eleven (11) months of due diligence, inspections, coordination and negotiations, FreedomWorks now had a facility it could utilize well into the future.  The work had just begun, however.  Volunteers provided thousands of hours of labor to clean, paint, and repair the property to prepare it for occupancy by FreedomWorks and other collaborative ministries.  And the work continues as plans are made for the growth of the ministry.  It was a gigantic effort . . . but it is now done!!

For the best in commercial real estate
service and solutions

Call Bob Johnston
(952) 854-7425

The FOURSOME | Wayzata, MN – Case Study by Bob Johnston

The FOURSOME, an 80 year-old premier clothier in the Twin Cities, and a long-time tenant in the Wayzata Bay Center, wanted to look at its business focus for the future and consider the need for new space.  A developer had purchased the shopping center site and planned to demolish the existing buildings to make way for a new mixed-use project involving significant retail space, a hotel and market rate and senior housing.  The FOURSOME was very much a part of the developer’s plans, and Bob Johnston of Paramount was asked to assist The FOURSOME in its negotiations with the developer.
The assignment eventually involved five separate assignments that were unanticipated at the time the initial assignment commenced.
The FOURSOME operated five different retail operations at the Wayzata Bay Center . . . men’s clothing, men’s big ‘n tall clothing, women’s clothing, children’s clothing, and men’s/women’s shoes.  Over the course of several months, Paramount facilitated various meetings with consultant groups to determine what operations should remain based on current and future market demand and financial performance.  In the end, three of the operations were shuttered and two, men’s clothing (including big ‘n tall) and men’s/women’s shoes, were retained.
Paramount then developed an architectural RFP, developed a comparative matrix to evaluate the proposals and set up interviews with the respondents.  The FOURSOME selected an architect, and the programming function commenced to determine The FOURSOME’s future space requirements.
Lease Negotiation
Paramount then commenced negotiation of the business terms for a FOURSOME lease in the new development.  After several months of discussion, a contractual agreement was executed, including agreement as to the delivery condition of the vanilla shell, the Landlord’s construction contribution and lease rate, escalations, etc.
Lease Buy-Out
Months following execution of what The FOURSOME thought to be a long-term commitment in the new development, the developer came back to Paramount saying that it wanted to renegotiate the business terms of the deal.  Since the Landlord’s rates and terms differed significantly from Paramount’s recommendation, the deal was rejected.  As a result, Paramount recommended The FOURSOME request a buyout.  Consequently, based on the Paramount recommended terms and price, a buyout agreement was finalized.
New Search
As a result of the termination and buy-out, Paramount started the process all over again, attempting to find a suitable location for The FOURSOME.  Since the operation had been located in Wayzata for so many years, Wayzata was the preferred location.  However, after a lengthy search and discussions with area landlords, The FOURSOME determined that the rental rates were simply too high, and Paramount commenced a search elsewhere.
At that time, Inland Real Estate, who controlled a site near the intersection of Hwy 55/Vicksburg Lane in Plymouth, was considering the development of a small retail strip center on the site.  After several discussions with the developer, Paramount negotiated a long-term lease . . . and, because those discussions took place early in the development process, The FOURSOME was able to make significant design changes to the exterior and interior of the building to more closely fit The FOURSOME’s operation.
FOURSOME Design/Construction
Paramount negotiated a new architectural contract, recommended the general contractor and negotiated its contract; and coordinated and managed the design, pricing, shop drawings and site construction.  The FOURSOME was able to use buy-out funds to fund the new construction.  After almost three years of discussion and negotiation, everyone was glad the journey was over.  The space is impressive, The FOURSOME is pleased, and its business continues to grow and prosper in the new location.