Cummins pays $18.7M for Fridley warehouse

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Cummins Power Generation Inc. paid $18.7 million for a massive warehouse just south of its Fridley headquarters, according to a certificate of real estate value made public this week.

Cummins closed Dec. 2 on the 406,164-square-foot warehouse at 7033 Central Ave. NE in Fridley, according to the CRV. The building is immediately south of the Cummins headquarters, which sits on the southeast quadrant of 73rd Avenue and Central Avenue.

The deal works out to about $46 per square foot.

The seller is Minneapolis-based Murphy Warehouse , a third-party logistics company with locations all over the Twin Cities. Murphy operates about 2.8 million square feet of warehouse space overall.

Murphy developed the warehouse specifically for Cummins in 1999, company chief executive officer Richard Murphy said Wednesday. The engine, alternator and digital control manufacturer had approached other developers for the project, but the company’s need for a flexible lease scared some away from the project.

“We had the ability for them to get what they needed, which was basically a flexible wall,” Murphy said. “…There are times when somebody needs space, but it doesn’t make sense for them to buy it or run it.”

Murphy Warehouse and Cummins shared the space for 15 years, with Cummins at different times occupying only part of the building or its entirety. Murphy’s company moved its operations out of the property a few weeks ago to other facilities in Fridley and Eagan, as Cummins exercised its first right of refusal to buy it. Cummins now occupies the full building.

“This was a good decision on their part,” Murphy said.

Cummins couldn’t be reached for comment Wednesday.

Anoka County values the building at $11.64 million, according to property tax records.

The building, which has 32-foot-clear ceilings, was developed on a former Superfund site just before the turn of the 21st century. The project involved a who’s who of local development interests including the Minnetonka-based Opus Group, and Mac and Paul Hyde’s Real Estate Recycling.

The city of Fridley contributed tax increment financing for cleanup of the site. Before the project, the site was worthless from a property tax perspective, Community Development Director Scott Hickok said Wednesday.

“It’s an excellent example of how and why TIF works and works well,” he said. “To take a site that had zero value and put 400,000 square feet of building on that site and put employees there, it was a remarkable thing.”

Minneapolis-based Hyde Development recently started work on a 122-acre warehouse redevelopment project, also in Fridley. The first of two buildings totaling about 400,000 square feet is complete, but Hickok said the city isn’t aware of any planned tenants yet.

Finance & Commerce profiled Murphy CEO Richard Murphy in 2013. His business is known as a leader in sustainability in the warehouse industry, and he extended those principles to the Fridley property. The EnergyStar building has received a silver certification from U.S. Green Building Council’s Leadership in Energy and Environmental Design.

Several other notable local companies have buildings within two blocks of the site including Target Corp. and Medtronic. Unity Hospital is about a quarter-mile northwest, and the Mississippi River is just beyond that.

Murphy said Wednesday that his company would gladly enter into an arrangement similar to the one just closed with Cummins. He said the company is “always thinking” about potential opportunities to develop new space but declined to go into detail.