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Kilbourne Group’s First Real Estate Fund Drawing to a Close; Multiple Properties for Sale

Kilbourne Group’s First Real Estate Fund Drawing to a Close; Multiple Properties for Sale

| Helmut Schmidt |

This article originally appeared on InForum. The featured image is by Dan Francis Photography.

Looking to own a piece of downtown Fargo? Kilbourne Group might have a deal — or several deals — for you.

The developer currently has six buildings, a plot of land and multiple retail bays in other buildings for sale in Fargo’s downtown district. Several of the properties hit the market in the last six months.

It’s a brick-and-mortar grab bag, with most of this clutch of buildings and their commercial spaces rented up, while others are little used or empty.

Among the properties available:

  • Midtown Mall, 103 N. University, $1.2 million. (First listed in November 2020.)
  • Stone Building, 613 1st Ave. N., former events center/ballroom with commercial kitchen, $2.6 million. (First listed October 2021.)
  • Former American Legion/Pickled Parrot building, 505 3rd Ave. N., $1.3 million (Posted in December 2022)
  • Loudon Building, 64 4th St. N., $3.45 million (January 2023)
  • Merchants Building, 122 Broadway, $4.1 million (May 2023)
  • The former St. Mark’s Church (home of Sanctuary Event Center), 670 4th Ave. N., $5,375,000 (May 2023)
  • 1329 5th Ave. N., a vacant 1.37-acre parcel of land zoned as downtown mixed use just west of North University Drive, $895,425, (First listed July 2018).

The former St. Mark’s Church. Photo by Dan Francis Photography

While it looks like the real estate equivalent of a garage sale, Kilbourne Group President Mike Allmendinger says it’s a development template that works well around the country.

For example, Downtown Fargo Real Estate Fund I, started in 2015, has 75-plus investors who created a $45 million pool of cash for development, Kilbourne Group spokeswoman Adrienne Olson said. The 10-year fund is now selling properties, with the goal to have them in new hands by 2027.

DFREFI properties already sold include The Woodrow Apartments, Exchange Building, Jackson Apartments, The Lofts on Roberts (home of Mezzaluna), Block 37 (buildings on the block bordered by 3rd and 4th Streets North and 6th and 7th Avenues North), plus a portfolio of other properties, Olson said.

In 2018, the Block 9 Hotel Fund was created to build the Jasper Hotel.

Between 2019 and 2021, the Great Plains Opportunity Zone raised $31.5 million from about 30 investors to build three mixed-use buildings on what had been surface parking lots (the Mercantile Building, the Kesler and The Landing at 1001 NP). Allmendinger said those buildings will be for sale around 2029.

Now, the Great Plains Opportunity Zone Fund II is raising money for two apartment projects (RiverHouse, along the Red River, and the mixed-use apartments/Fargo Moorhead Community Theatre project on the 600 block of NP Avenue).

Allmendinger recently talked with The Forum about Kilbourne Group’s strategy, a possible future for the Black Building, and the possibilities of working in downtown Moorhead. Some answers have been edited for brevity.

Q: Newsroom wags were wondering, is North Dakota Gov. Doug Burgum selling some of his assets to pay for his presidential campaign?

A. I was guessing that one. I can tell you, that is not the reason why.

Q: Newsroom wags were wondering, is North Dakota Gov. Doug Burgum selling some of his assets to pay for his presidential campaign?

A. I was guessing that one. I can tell you, that is not the reason why.

Q. Does Burgum have an ownership stake in Kilbourne Group yet?

A. The technical answer is he’s a limited partner/investor alongside the other limited partner/investors.

Q: Are the sales a rebalancing of Kilbourne Group’s portfolio? 

A: This has been the strategy since we started the investment fund in 2015. … All of the investors have the expectation that we’re selling the properties we developed (that are) in the Downtown Fargo Real Estate Fund.

They all have the expectation that we’re selling the properties within … I’ll say 10 to 12 years. So … sell them by 2025, or maybe 2027.

Q: Does selling properties give you seed money for new purchases?

A: No, it doesn’t. All this money goes back to our investors.

Q: For these buildings being sold, are the tax incentives exhausted? Or do you sell even if there are incentive dollars left?

A: Every building has a different answer to that. There are some buildings that only received a five-year Renaissance Zone (tax break). Some buildings didn’t receive anything. There are some buildings that will continue their TIF (tax increment financing) or PILOT (payment in lieu of taxes) and transfer to the new owner. There’s not one consistent answer for that.

The way that we think of that, is that the TIF or PILOT or Renaissance Zone that was awarded to each project, that stays with that project for a certain amount of time. When that property sells, that incentive needs to remain with that project.

Q: What sort of market are you seeing?

A: There’s two different types of buyers that are interested in downtown Fargo. There are local buyers that are interested in retail or office space in downtown Fargo. Some of those buyers want a vacant building, and some buyers want a building that’s occupied and leases are in place.

The same goes for retail. … For example, people can buy the (empty) retail bay that’s the old Subway space. … Or they could buy retail spaces where there are tenants there and then they’ll have a tenant. It’s a pretty broad mix.

We do have buyers from outside of the Fargo market interested in owning property for apartments units.

For example, the RoCo (Roberts Commons) and Dillard properties are not on sale, but those will be for sale eventually as well.

web Dillard2020 76

Dillard Apartments on Roberts Street. Photo by Dan Francis Photography

Q: Are you focusing now more on building resident space or commercial properties?

A: We are definitely focused on the multifamily residential projects right now. The downtown Fargo fund purchased dozens of properties across downtown Fargo. Some of them were historic buildings that were renovated, and some of them were infill buildings, like RoCo and Dillard …

As a result of our team’s work over all of these years, we absolutely have an expertise in building multifamily projects in walkable districts. So that’s what we’re going to continue to look for.

Q: Moorhead’s downtown looks like it has space to develop. It could be walkable. Are you thinking of Moorhead?

A: Yes! We like Moorhead’s vision for their downtown and their Center Mall (redevelopment plan). And we would like to be one of the developers building a project over there. We’ve been told there will be multiple developers working on projects there, and we are interested in that.

Q: Across the country, there is a movement toward converting commercial properties into residential properties. Do you see the same as being possible here, perhaps with the Black Building?

A: Yes. Two parts to that answer. The first part is, the Black Building would be a great residential space. And we are considering that.

But the change from office space to residential at the Black Building, I just say it’s manageable. We’re looking at how complex it would be to do that. The benefit of the Black Building is that it has windows on four sides, and it’s about 75 feet wide. A lot of natural light (is) coming in.

The second part of my answer would be, when you have large buildings in larger markets and the buildings have a 200-foot by 200-foot footprint, its 20,000 square feet or 40,000 square feet per floor, I think that will be very hard to make residential happen, because you end up with so much darkness, there’s no natural light inside the building.

Q: You have been developing downtown for awhile now. How does it feel? Do you find yourself walking or driving along the street and saying, “Yeah, I got that built!”?

A: There’s not one project that I liked more than the other. What we measure and what we are most excited about, is all of the people who continue to come to downtown Fargo, and there’s more and more every single year, to enjoy their unique experience in downtown Fargo, living in downtown Fargo. … The way to measure that is how many people are on the sidewalk. We oftentimes talk about this in our office.

Is it a busy day on the sidewalk? Or is it a slow day? … But realizing people on the sidewalks, that’s the result we are all looking for, that is how we measure success. Getting a building built is the way to attract people to downtown Fargo.

Second, our team you hear us talking about the businesses and the local owners, local entrepreneurs that are starting their business, taking a lot of risks in downtown Fargo. That’s the awesome part … that creates a unique experience that you can’t have anywhere else in the world. You can’t go anywhere else in the world and have the experience you have in downtown Fargo. And the experience is awesome.

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