Dec. 29, 2022

Two historic buildings in downtown Sioux Falls have a new owner making big short- and long-term plans for them.

CAM Cos., founded by Craig Markhardt, has purchased the Andrew Kuehn Building at 401 N. Phillips Ave. and the Albert House at 333 N. Phillips Ave.

The deal also includes the Murray Apartments at 2401 W. Madison St. All three buildings were owned by Arnold Murray and sold to Legacy Developments in 2015. A few years later, Markhardt approached Legacy about selling the downtown properties.

“It took us almost a year to put these three properties together and get them closed,” he said.

Because two of the three involve federally subsidized housing, the deal needed approval from the Department of Housing and Urban Development.

“It was a heavy lift and a tall task, and it was a team effort,” said Ron Nelson, president of Nelson Commercial Real Estate, who brokered the deal and is one of the investors in the project.

“What a sleeping giant – two pretty iconic corners with main-level commercial space that is tired and almost forgettable.”

There are multiple short- and long-term plans for the buildings.

Within the L’Abri Apartments, which are part of the Andrew Kuehn Building, 23 of 24 units are HUD apartments.

The commercial space, which is 11,400 square feet, is vacant and includes the first floor and lower level.

“So the first order of business is we are going to totally gut the main and lower level, we’re going to clear the whole thing out, and we intend on turning it into modern, high-quality office space,” Markhardt said.

It’s “all Sioux quartzite and post-and-beam construction, so it will look very similar to R Wine Bar with the big posts and beams and Sioux quartzite. It definitely is dated. It’s straight out of the ’80s. It was completed in 1980, and a lot of it hasn’t been updated since.”

The space can go multiple directions, from professional offices Markhardt said could be a fit for financial services or others with low-traffic needs to space for small businesses looking for an incubator-style opportunity.

Both Markhardt and Nelson plan to move their own firms’ offices into the building.

“Ron was absolutely instrumental in getting these properties closed,” Markhardt said. “I could not have done it without him believing in me and his energy and effort and dedication. He and I have mutual interests, so we both have a similar liking for an incubator style of office or an initial space for founding offices.”

The building also was included in a qualified opportunity zone, meaning businesses that use capital gains to start their businesses here can receive tax-free treatment upon the sale of the business. That includes businesses under new ownership.

The proximity to the new Startup Sioux Falls office across the street also could create synergy for businesses looking for added space to grow or something in proximity to those services, the owners said.

“We just need to get together with our designer-architects and share our vision and at the same time expose it to the marketplace,” Nelson said. “There are three or four directions it can take, and we could build it from front to back and phase it. We just plan to enhance what’s there, and it’s a great corner. It’s a gateway corner with a bunch of things happening, and we’re excited to be a part of it.”

The Albert House, which includes 47 market-rate apartments and three commercial spaces, has about 95 percent occupancy, Markhardt said. Those apartments were renovated when Legacy purchased the building.

Longer term, the owners see potential for a restaurant on the main level and are exploring options for redevelopment on the parking lot included with the building.

“I intend on utilizing that to its highest and best use,” Markhardt said.

The two dozen Murray Apartments became part of the deal because they also are HUD-subsidized apartments, and for property managers it makes more sense to have some scale with those, Markhardt said. He plans to rename the property Harrison Place Apartment Homes.

“It’s in great shape,” he said. “Those are so comfortable it felt like a place my mom could live.”

For Markhardt, the downtown investments build on his own personal commitment to the area. He has been a condo owner at the nearby Jones421 Building for several years, after serving as the finance consultant on the project to help make condos available for others.

“There’s a ton of pressure from folks wanting to own downtown because there are so few,” he said. “So I’m a big fan, and this allows us to grow the way we really needed to grow.”

With these properties, his portfolio of residential units doubles. His company also owns three mixed-use buildings in downtown Mitchell.

“I’m a big fan of bringing new life into old properties,” he said. “This is the only legacy I will leave since I don’t have children — the real estate I improve and leave for the public to enjoy in the future. So my goal is to get these prepared for the next 100 years.”