On business: For depot developer, the result is worth all the time and money Neal St. Anthony, Star Tribune
October 2, 2005
Gary Holmes spent a lot more than he wanted getting this train wreck back on track.
But it's not too high a price, he concedes, for becoming nationally known as the award-winning developer/owner who revived in splendid fashion the dilapidated downtown Milwaukee Depot and adjacent properties decades after the last "Empire Builder" left the Minneapolis station in May 1971.
Holmes just added a final tenant to fill his new Depot Office Center, a three-story building as big as two Target stores at 5th and Washington Avenues S. that also is the new headquarters for his 2,800-employee CSM Corp. That finishes off the Depot project he began six years ago.
Suffice it to say, Holmes, the sole shareholder of CSM, has spent and built a lot more than he envisioned when he agreed in 1998 to buy the two blocks of critter-infested, decayed structures and polluted land at Washington and 3rd Avenues.
"I guess I was just always optimistic about Minneapolis," said Holmes, who started renovating and building apartment buildings while still in high school and later as a University of Minnesota student in the 1960s who rode the bus by the Depot every day. "There had been about five failed attempts to redevelop the Depot. It just ticked the hell out of me that it was deteriorating.
"And Mayor Sharon Sayles Belton, in the 1990s, was persistent. She kind of bullied me into doing it. Give her credit."
Holmes, the CEO of 30-year-old CSM -- which develops and owns office, hotel and residential properties in 22 states -- says his Depot projects have been slower to return a profit than most because of the heavier-than-expected initial investment.
"At one time we had $35 million of our money in that development," he recalled. "But I always was fascinated by the Depot, the Mississippi River and that end of town, and I wanted to help get it going again. We just got a new mortgage in December, so we got some of our money out. I knew better, put it that way, that I could make more money doing other things. But we went ahead and did it anyway. I'm glad I did it."
CSM, an $800 million, 1,400-employee developer and property manager of which Holmes is the sole shareholder, is starting to earn a return on the $93 million Depot-hotel-office building complex. The project also benefited from $8 million from the city and state that went toward ground-pollution remediation and a 650-car underground parking ramp. The once-vacant Depot hosts 300-plus corporate and other events annually, and public ice skating under the renovated train shed fall through spring.
Two linked Marriott hotels that cater to extended stays by business people and family weekend specials and also offer $300-a-night luxury rooms above the Depot's main ballroom boast a 76 percent occupancy rate. That's better than the average among loop hotels.
A Renaissance Revival-style building that features restored white marble floors and oak-paneled meeting rooms, the depot was built in 1899 for $200,000.
CSM spent $300,000 alone restoring the ceiling in the main lobby, now a ballroom.
The consolidated development throws off more than $2 million in property taxes and parking revenue to the city and county on land that several years ago was in arrears or under government ownership.
Holmes, 58, is a tall, understated multimillionaire who travels aboard his own eight-seat Falcon 2000.
"I enjoy aviation but I don't fly it," he said. "I'm the guy who sometimes takes the wrong highway exit."
Married and the father of three young kids, he thrives on business and charitable work that ranges from the board of Allina Hospitals to medical-supply and cultural-exchange trips to Cuba aboard the Falcon.
"It's cheaper than paying $1,800 round-trip apiece to take eight CSM people out to Portland, Oregon, for business," Holmes said. "We only have to spend one night instead of two because we come back late on the second day. "
Holmes' father sold appliances at J.C. Penney. Holmes began his career as an entrepreneur when he was still a boy, wholesaling light bulbs and toilet deodorizers to Minneapolis Boy Scout troops through a product manufacturer he found in a magazine.
He turned those profits as a teenager into ownership of one, then two and then several near-southside apartment buildings.
"I started accumulating real estate and I had a garbage-hauling business," he recalled. "I've lost my equity in a couple of bad deals, but most of them have turned out all right."
CSM is one of the largest commercial-retail property owners among developers in the Twin Cities. Its recent Twin Cities projects include the Shops at Lyndale, along Interstate Hwy. 494 in Richfield, and West Ridge Market, where the first Twin Cities Galyan's was built, at I-394 and the Hopkins Crossroads in Minnetonka. One of CSM's biggest deals was the conversion of an abandoned truck factory in St. Paul to a huge office building on University Avenue in the Midway.
Holmes started the lodging side of his business in 1992 with the acquisition of a down-on-its-heels Howard Johnson's along I-94 across from 3M's corporate headquarters in Maplewood. A year later it was renovated and successfully reopened as an award-winning Country Inn by Carlson, according to Lodging Hospitality Magazine.
CSM, which owns more than 20 shopping centers, 5,000 apartment units and 30-some hotels, in 2001 was named Marriott's hotel operator of the year.
Neal St. Anthony can be reached at 612-673-7144 or nstanthony@startribune.com.
