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BAE to stay in Fridley

Adam Voge//February 2, 2015//

Work is nearly complete on a 213,000-square-foot bulk warehouse just south of BAE Systems’ facility at 4800 East River Road in Fridley. Demolition on parts of the BAE building will begin next week. (Staff photo: Bill Klotz)

Work is nearly complete on a 213,000-square-foot bulk warehouse just south of BAE Systems’ facility at 4800 East River Road in Fridley. Demolition on parts of the BAE building will begin next week. (Staff photo: Bill Klotz)

BAE to stay in Fridley

Adam Voge//February 2, 2015//

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In something of an audible for the project, defense and security company BAE Systems has agreed to stay in a commercial redevelopment in Fridley long-term, with plans now shifting from demolition to renovation of one of the area’s largest buildings.

BAE, Minneapolis-based Hyde Development and the Minnetonka office of Colliers International announced Monday that BAE has signed a new 10-year lease for about 561,184 square feet of the massive building at 4800 East River Road in Fridley, which is on Hyde’s $100 million to $150 million Northern Stacks project site. Hyde had planned to tear down the sprawling 2 million-square-foot building as early as next year, once BAE’s lease had expired.

“I’m really excited about this project for BAE Systems,” Paul Hyde, principal of Hyde Development, said in a prepared statement. “They’ve been the cornerstone of this site from the beginning, and now, these highly skilled engineering and technology jobs remain in Minnesota.”

With BAE on the hook for another decade, Hyde now plans to leave a quarter of the existing building, updating it with a more modern exterior and state-of-the-art features.

“This is a very unique project,” said Mark Kolsrud, senior vice president for Colliers, said in a prepared statement. “With a major overhaul planned, this building will be a prominent asset on the site and will give BAE Systems a state-of-the-art home for the next 10 years and beyond.”

Kolsrud and Jason Simek, a vice president for Colliers, helped negotiate the lease extension.

Simek said Monday that demolition of the existing BAE building is set to begin next week, working from south to north.

BAE uses the building for manufacturing of naval guns, artillery, advanced weapons and precision munitions. The 73-year-old structure has been primarily used for weapons manufacturing for most of its life.

BAE’s “decision is a great example of the private business working with the city to reach a decision that is good for everyone,” Fridley Mayor Scott Lund said Monday. “Retaining these jobs is important for the local economy and the state of Minnesota as well.”

BAE will consolidate from its current 1.1 million square feet in the building into its newly leased space, about half that amount.

The existing building is on the southeast quadrant of East River Road and 51st Way in Fridley, immediately east of the Mississippi River. Interstate 694 is within a mile to the north and downtown Minneapolis is a few miles south.

While the BAE announcement is a change in Hyde’s long-standing plans for the 122-acre River Road industrial project, the developer has already completed other new development on the site, just south of the BAE space.

Simek said Monday that work is nearly done on a 213,000-square-foot spec warehouse building on the site. Colliers hasn’t signed any tenants for the project now, but is “courting several different options” for the space.

“Now that we have a completed product, it’s a little bit easier for a tenant to envision what the building could look like,” he said. “We should have it leased up in short order.”

Hyde is also planning a 135,000-square-foot office-warehouse, and is prepared to build it on spec once some of the first building is leased, Simek said.

The warehouse has 32-foot-clear ceilings, while the office-warehouse will have 24-foot-clear ceilings.

Future phases of Hyde’s plans include about 461,000 square feet of office-warehouses, a 187,000-square-foot bulk warehouse and a 66,500-square-foot office showroom building, according to a concept plan shared with Finance & Commerce Monday.

Golden Valley-based Mortenson Construction is general contractor for the Northern Stacks project.

Hyde paid $13.75 million for the property in July 2013 and has been planning its project since. Anoka County values the site at $11.5 million, according to property tax records.

“We’re excited to be a part of this new development,” Mike Hoyne, BAE Systems site manager, said in a statement. “We have a proud history of providing cutting-edge products and engineering expertise to our military customers, and we look forward to continuing to build on our 75-year legacy at this location.”

The 135,000-square-foot building, if Hyde decides to start work this spring, could be ready as soon as this fall.

Related story: Report: Vacancy rates in Twin Cities industrial buildings are the lowest in nearly 20 years

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