Planned hotel secures financing

Listen to this article

Developers behind an upcoming luxury, boutique hotel in North Loop announced they have secured $48.6 million in construction financing for the project.

The Commutator Hotel will be located at 125 N. 1st St. in Minneapolis. Earlier this year, developer Commutator LLC considered converting its previously planned hotel into apartments due to troubles with securing funding, according to city documents.

Now, with funding in hand thanks to D2 Capital Advisors, Commutator LLC is expecting to break ground this month on the project. The 123-key hotel is slated to open in the first quarter of 2023, according to a news release from D2 Capital.

“The project has very strong sponsorship, a national and international award-winning team, and is located on the most popular block in the hottest submarket of Minneapolis,” Jack Cortese, vice president of Philadelphia-based D2 Capital, said in the release. “And for those reasons and more, we were able to overcome the challenges of financing a boutique luxury hotel development amid the current lending environment.”

D2 Capital’s Cortese and David Frankel arranged the financing, which a Seattle-based real estate investment trust provided, the release said.

Minneapolis-based Greiner Construction will lead general contracting on the project, with Snow Kreilich Architects, also of Minneapolis, providing design work. Shanghai-based Neri&Hu is designing the interior, the release said.

The 133,000-square-foot hotel will include a rooftop bar, a cellar dive bar, and spaces for retail, meetings and events. The hotel will also feature a signature, front-of-house restaurant, the release said.

“D2 understood our vision for the project and quickly became a part of our team as they worked determinedly to secure financing for the development,” David Wilson, managing partner of Commutator LLC, said in the release. “They played an integral role in helping to bring the Commutator Hotel Project to life, a hotel that will reset the standard for full-service and boutique hotels in Minneapolis.”

Commutator LLC is led by Wilson, John Gross and Andrew Commers, the release said.

The hotel will encompass historic structures on the North First Street block, located at 117-125 First St. N. These include the two-story, brick Roe Wolf Building, which “retains good integrity.” It will undergo renovation, with around 60% of the structure maintained including part of the historically significant façade facing First Street North, according to a letter from the architect included in a city report from March.

The three-story American House Hotel/Commutator Foundry Company Building is on the corner of the block. The brick building is in poor condition as the roof on its addition has fallen in, the smokestack leans, and windows are missing. However, the original structure retains “good levels of integrity” and the developer plans to rehabilitate the property as part of the project, the architect said.

The hotel will share a block with the Aria and is two blocks from the Mississippi River and Hennepin Avenue.

Commutator LLC’s hotel is a few blocks from the RBC Gateway Tower, which will be home to a Four Seasons Hotel when it opens. It’s also near another boutique hotel, the Hewing Hotel, which opened around five years ago.

City commissions approved Commutator LLC’s hotel plan about two years ago. But in March, the developer considered pivoting to a 73-unit apartment building with nearly 13,000 square feet of commercial space, city documents show.

“The applicant notes that due to economic conditions and the difficulty of funding a hospitality project, the applicant is making plans to possibly pivot,” the document said.

Numerous impacts from the COVID-19 pandemic as well as civil unrest following the murder of George Floyd caused hotels in the Twin Cities metro area to see declines in occupancy and rates, according to a February article from the Minneapolis office of HVS, a hospitality consulting firm.

The occupancy rate of Twin Cities metro hotels fell from over 66% in 2019 to approximately 33% in 2020. HVS forecast occupancy would reach 43% this year, and noted it anticipates demand for hotels to rebound once vaccines are widespread, corporate and government travel resumes and more.

RELATED: RBC Gateway one year out