Office park: A view from the Boatworks Building
Entrepreneur Rick Born repurchased the Boatworks Building on Lake Minnetonka for several reasons. One of the biggest? Attracting talent
In real estate, as in life, timing is everything. And timing played a key role in one of the most unusual recent commercial real estate deals in the Twin Cities: IT entrepreneur Rick Born's re-acquisition of the Boatworks Building on the Wayzata shore of Lake Minnetonka. The two-story brick building is not a typical mixed-use property. Boasting a marina with 80 slips for boats, it's the only shoreline office building on one of Minnesota's largest lakes.
In April, employees of RBA, Born's technology services firm, moved into about 35,000 square feet of space in the 64,179-square-foot building. But it was familiar territory for Born, who had owned the two-story brick building once before.
In 1996, Born, then CEO of Born Information Services, bought the building for $6 million from real estate investor Irwin Jacobs. He then had the building renovated, transforming it from a place to display boats into a multi-tenant office space. His company, which had more than a thousand employees at its peak, became a casualty of the dot-com meltdown, and he sold the building in 2001.
Hennepin County records show the twists and turns in ownership after that. The property was purchased from Born for $28 million by Bay Holdings, an affiliate of investor M.G. Kaminski's Wayzata Properties. After it went into foreclosure (property investor Kaminski was hit hard by the commercial real estate crash), Wells Fargo Bank reacquired it through a July 2011 sheriff's sale. Previous to Born's repurchase of the property, the listed owner was Wayzata Boatworks CSFB 2004-C4, an affiliate of Irving, Tex.-based C-III Asset Management, a special servicer of the $30 million mortgage taken out by Kaminski. Last year, Wayzata-based Boatworks II (a Born company), paid $12.15 million for the building, which by that time was only about 25 percent leased. The upscale restaurant NorthCoast, which had been on the first floor, had closed in August 2011. Today, the Boatworks Building has an assessed value of $19.4 million, according to Hennepin County.
Before Born stepped up as a buyer, the building had been on the market for about a year, says Mark Kolsrud, a senior VP with Colliers International, who was also involved in marketing it for his previous employer, Cassidy Turley. "There was a significant amount of interest, because the property offered some things many were interested in, as one of the most significant office buildings in the Wayzata market, and the only office building on the shoreline of Lake Minnetonka."
Glass act: Scene from the Boatworks Building. Glass interior walls allow the views and natural light to work their magic throughout the office
Prospective buyers had several different uses in mind, including a multi-family house and a boutique hotel concept. "But the best prospects were people who wanted to keep it an office building," says Kolsrud. "It's one of the more unusual properties I've been involved with. I sell a lot of investment real estate, and it makes the job more interesting when there is some kind of ‘twist.' And showings on beautiful summer days were always enjoyable."
At one point, Wayzata city officials hired a consultant to convene a community round-table to discuss the property's possible uses. That became unnecessary when Born repurchased the building, says city manager Heidi Nelson. "It is a key component of our lakefront, a significant part of the history of lake life here in Wayzata, so we were happy to see the property transacted and being utilized," says Nelson. "Mr. Born, the new owner, has a vision for what might be there. [He] has been engaged with the community, and we enjoy working with him."
The Boatworks Building has a colorful history. It sits on the site of the original Moore Johnson Boat Works, a boat-building operation run by Royal Moore. According to the Wayzata Historical Society, the original boat factory burned in 1892 and was rebuilt. (Hennepin County property records list the construction date as 1940.) During a 1965 tornado that wreaked havoc in the area, Boatworks employees took refuge under desks to avoid injury.
Born appreciates the property's unique qualities. "It's also not a typical office building, so it scared some [prospective buyers] away."
The fact that the building had so much vacant space made it less attractive to companies that might have leased multi-tenant space there, Born notes. "People would rather move into a full building than a half-empty building. We've always been a Wayzata-based company, and if we wanted to remain that way it was our only viable option. If you had asked me five years ago if we would move back in that building, I would have said, ‘Not likely.' But, in this case, the stars aligned perfectly and the move made sense from all angles."
An HR asset
RBA has about 310 employees and is adding more; Born wanted to consolidate about 100 employees from 12,000-square-foot spaces the company was leasing at two locations: the TractorWorks building on Washington Avenue in the North Loop neighborhood Minneapolis, and at 100 West Lake Ave. in downtown Wayzata.
Many of the company's senior employees live in the western suburbs of Minneapolis. "There were a lot of options in the commercial real estate market," Born says. "We ‘kicked a lot of tires' along the 494 strip, in downtown Minneapolis, and along 394. But when it came down to polling our people, they overwhelmingly wanted to be on the lake. There's no parking or traffic hassles, and on a day like today when it's 80 degrees and sunny ...
"We're in a highly competitive business. The only way we can grow as a business is to attract more quality people. It's a challenge, so we're trying to employ every strategy we can."
Karen Bros, RBA's human resources manager, agrees that the Boatworks Building is an HR asset, particularly in its redesigned form. "The space we have is very open and creates a lot of collaboration among people," she notes. "It's also a great space for holding after-hours events, with kitchen facilities."
The space also features a counter overlooking the lake, where people can plug in their laptops and get a break from their usual work area, Bros notes, and year-round natural light flooding the space through the large windows creates an appealing environment.
Pier review: Rick Born steps outside the office
The decision to buy was not one Born would have anticipated even a few months previously. As his companies have grown, he's relied on two- to three-year leases to provide the needed office space flexibility. But with RBA on solid footing and projected to do about $50 million worth of business this year, the time seemed right to make the investment, Born explains.
In making the own-versus-lease decision, "flexibility and control" were major factors for the growing firm. "We're growing fast, and we're making investments in the building for the long run," Born says. He notes that one Boatworks tenant has been there for 15 years — the firm originally known as John Kinard, later acquired by Wells Fargo Advisors. That's a "pretty good testament" to the building and the value of its upscale location, Born says.
"We wouldn't have been a buyer of any other building," he says. "But this was a very unique opportunity. When it was being offered by the receiver, it was two-thirds empty. And the building wasn't drawing as much interest as it might have, because it was still a relatively ‘soft' market."
From the seller's perspective, he adds, "we had the most valued commodity: a tenant willing to take half of the space."
The deal depended on refinancing the debt on the building, which Born was able to accomplish by working with Merrill Lynch and Bank of America. Once he decided to make a bid to purchase the Boatworks Building for the second time, Born didn't have to go far to arrange financing. His longtime friend, Mike Swenson of Merrill Lynch's private banking and investment group, has an office across the street from the Boatworks Building.
"When he mentioned to me he was going to put a bid in, we did a lot of ‘pre workup,' to make sure we didn't have to spend a lot of time gathering documents and information," says Swenson.
Michael Mrnak, a business banking executive with the Minneapolis office of Bank of America, helped Born put together a deal to refinance the mortgage loan on the building.
"Typically, real estate transactions take 60 to 90 days to complete, but in this case we were able to pull everything together in about 30 days," Mrnak notes. The low-interest-rate environment also helped expedite the transaction.
Seeing the light
When Born was preparing to move his firm into Boatworks, he knew he wanted an office space with an open, collaborative environment.
The team at Minneapolis-based Shea Inc. — including designers Kim Anderson and Amanda St. Jacque, plus architect Steve Haasl and principal David Shea — came up with a remodeling plan to realize his vision. By removing a number of interior walls and installing glass-walled offices around the perimeter, most of Born's employees would have access to the lake view and plenty of natural light.
Shea Inc. also used pastel paints to "lighten up" the dark, heavy woodwork in the space. The improvements helped create a welcoming workspace that should be an asset in competing for quality tech talent, notes Anderson. It's also useful for training sessions and other customer events hosted by RBA as a designated Microsoft partner.
As a landlord, Born has found renewed interest in the Boatworks Building from companies looking for multi-tenant office space. He also hopes to recruit a new restaurant to replace NorthCoast. "We have several notable restaurant companies, both local and national, interested in the space."
Born, who also lives on Lake Minnetonka, could take his 52-foot Bluewater boat to work, rather than driving. He doesn't have any plans to do so, except when RBA hosts employee and customer events. But on a daily basis, Born, his employees, and his customers will enjoy one of the most appealing office building vistas in Minnesota.