NAIOP MN Submits Objection to Proposed Minneapolis Ordinance on Advance Notice of Property Sale

October 29, 2020

The Minneapolis City Council is expected to vote on Friday, October 30 on a proposed ordinance that requires commercial property owners to give the city and tenants 60 days advance notice prior to a commercial property in certain zoning districts being made available for sale.

The ordinance is sponsored by Council Members Alondra Cano and Cam Gordon and has moved through the legislative process with very little community outreach. The matter was considered in a public hearing of the Business, Inspections, Housing and Zoning Committee in late September and there was no public testimony as may of the affected associations and businesses were unaware of the proposal.

NAIOP has been coordinating with industry groups such as BOMA Greater Minneapolis, MNCAR, and Minnesota Shopping Center Association to significantly restrict or eliminate these notice requirements. The resulting meetings with several Council Members and city staff have led to some revisions in the ordinance. The ordinance has not been finalized, but we believe that the industry has been able to narrow the ordinance scope in the following ways:

  • Smaller Geographic Area – The ordinance is now expected to apply only to non-residential property and buildings in zoning districts C1, C2, C3A, C3S and C4. This means that the downtown CBD will not be subject to the notification requirements. However, it will continue to impact many retail and service corridors throughout the City. The City’s zoning map will help you identify affected areas, such as Lake Street, Hiawatha, Lyndale, Broadway and Central.
  • Additional Exclusions – The ordinance’s original exclusion for 1031 exchanges is likely to be expanded to cover intra-company sales, certain mergers and certain portfolio transactions.
  • Post-Sale Notifications – The ordinance originally required new owners to inform tenants about their leasing plans. We believe this requirement is being dropped.
We have also gained additional information about the Council’s motivation for the ordinance. The intent is to allow more transparency in commercial real estate transactions to better facilitate opportunities for community ownership. To provide you with some context, issues the sponsors are attempting to address include:
  • Tenant Displacement – They are concerned that redevelopment plans of new owners are going to cause existing small businesses be displaced by lack of space or higher rents.
  • Parcel Consolidation – They are apprehensive that new owners will combine multiple sites into a larger development that could reduce the availability of affordable owner-occupant sites for small businesses. The sponsors appear to be particularly concerned about this risk for the Lake Street area.
  • Identify Opportunities to Reduce Barriers to Wealth Building – The Council has initiated efforts to address wealth building through community-owned real estate development projects led by Black, Indigenous, and People of Color (BIPOC) developers and owners. This includes the 2020 creation of the city’s Commercial Property Development Fund to provide patient debt capital on favorable terms to facilitate the acquisition and/or completion of commercial real estate development in areas of Minneapolis that have experienced historic disinvestment and are vulnerable to displacement pressures. The prior notification provisions of the proposed ordinance could provide lead time for tenants and small business owners to make viable offers for buildings they occupy.
These concerns may be laudable and the offered revisions are useful. But the CRE industry has continuing objections to the overall concept of providing notification prior to offering property for sale, which include:
  • The ordinance continues to intrude on private property rights. The ability to freely and privately buy, sell or lease real property is intrinsic to maintaining the value of that property.
  • There are unknown consequences of this ordinance to owners and tenants on failed transactions.
  • The professional brokerage community already provides ample market intelligence and public listing services that promote transparency about transaction opportunities.
  • The community’s public interest in the impact of redevelopment activity is already protected by existing review and approval processes.
  • Capital groups could perceive this ordinance as an example of government interference that makes Minneapolis a less inviting investment setting, potentially raising barriers for funding of the very local entrepreneurs and developers the ordinance is supposed to help.

NAIOP MN has submitted an objection letter from CRE industry groups to Council Members. Members of the NAIOP Public Policy Committee are also contacting Council Members. CRE professionals are encouraged to contact Council Members with objection. View and contact Minneapolis City Council districts & members

Please contact me if you have further questions about the proposed ordinance. NAIOP is actively representing our industry’s interests.

- Kevin Howat, Public Policy Director, NAIOP Minnesota | (952) 928-4659