How a commercial real estate developer became one of the Twin Cities biggest apartment builders

The battle lines were drawn. Some big-shot developer wanted to put a supermarket on a south Minneapolis site near Lake Calhoun. Many neighbors objected to the plan, arguing that the project would increase traffic and bring a suburban-style development to the area.

The long-vacant property was a “weed patch,” recalls Kelly Doran, then with the local shopping center developer Robert Muir Co., which was trying to redevelop the site. Doran is not one to back down from a fight. His instincts told him that the empty, polluted pile of dirt was an excellent site for retail.

“At the time, we had Cub and Whole Foods interested. And we had significant neighborhood opposition,” says Doran. “I went to literally dozens of neighborhood meetings, including some that were attended by upwards of 150 to 200 people. They didn’t want what they called a ‘suburban-style shopping center’ built at that location.”

Doran ultimately won the war. Whole Foods opened on the site in 1999, anchoring the new Calhoun Commons retail center. Today it might seem like it’s been there forever, but at the time, it was only the second Whole Foods location in the state and the first in Minneapolis.

“It just seemed to fit,” recalls Doran, saying that Whole Foods was a better match for the area than Cub Foods.

If someone is going to sell you a house, they need to have a real estate license. But if someone wants to be a commercial real estate developer, no certification is required.

“He could spot a retail site better than most,” says Dick Grones, a veteran retail real estate broker and a founding principal of Edina-based Cambridge Commercial Realty. “His timing was the best I’ve ever seen: When he built and when he sold he was at the top of the market.”

Doran built his local reputation in commercial real estate circles as a prolific shopping center developer during the 1990s. But Doran’s knack for reading markets and industry trends ultimately led him to walk away from retail.

Today he leads the steadily growing Bloomington-based Doran Cos., which he founded in 2007 after a run for governor the year before. Doran has remade himself as a multifamily housing developer; he has completed more than 1,000 apartments across the metro.

In June 2016, Doran started moving dirt for what will be his largest development to date: 1 million square feet of space on a 40-acre site in Maple Grove that will ultimately comprise up to 700 residential units, two hotels and 265,000 square feet of commercial space.

A classmate from Doran’s days pursuing an MBA at the University of Minnesota says that Doran was always driven.

“Those of us who knew Kelly in grad school knew he was going to make a big mark in the world. We just weren’t sure where it would be,” says Stew Stender, partner with Eden Prairie-based Stewart Capital Partners, a real estate investment firm. “I don’t think there’s anybody better in this town to smell an opportunity and go after it. The success that he has enjoyed the last 10 years is no surprise.”

Studying a new market

Over the last five years Doran, 59, has built his company from 30 to 140 employees. While his development work may draw the most attention, the firm also has construction, architecture and property management businesses under the Doran Cos. banner.

In October he tapped Scott Stenman as CEO of Doran Architecture and Doran Construction; Stenman joined Doran from the Wisconsin-based Hammes Co., which managed the design and construction of U.S. Bank Stadium for the Minnesota Sports Facilities Authority and the Minnesota Vikings. The Minnesota Construction Association named Doran its Construction General Contractor of the Year for both 2015 and 2016.

Doran declines to discuss company revenues, but says that its annual transactional volume is now approaching $300 million. (“Transactional volume” counts the total cost of construction projects—not just Doran’s fee.)

In the midst of reinventing himself and trying to build a new business, Doran ran into the Great Recession. He was putting together a 14-story student housing project at the edge of Dinkytown and was set to form a joint venture with a national REIT focused on student housing.

“We were scheduled to start construction of that project in November of 2008. When the financial crisis hit in September, this REIT walked away from the deal and left us holding the real estate,” recalls Doran.

Doran pressed ahead with a smaller, revised plan. National pharmacy chain CVS took an interest in ground-level retail at the site. With the economy in the tank, construction costs started to drop a little. But it was still no easy feat to find financing.

“I was able to get it financed with a bank out of Chicago,” says Doran. “I couldn’t get any of the banks here to do anything.”

With most of the commercial real estate industry at a standstill, Doran began construction on the 125-unit Sydney Hall project the following August.

“We were probably one of the very few new construction projects started in all of 2009—and maybe even 2010. There was nothing going on,” says Doran. “But I had to come up with a lot of equity to get it financed.”

Doran says that he had about $10 million in the $40 million project, which included the renovation of the adjacent Dinkydome.

With no previous multifamily development experience, Doran’s project was the first of what became — and remains — a student housing boom at the University of Minnesota Minneapolis campus. Doran ultimately developed six student apartment projects totaling more than 600 units. His last and largest campus project, the Bridges, opened in 2014.

At that point, Doran was pivoting again, moving on to other projects such as Mill & Main, a two-phase, 338-unit market-rate apartment project on the riverfront across from downtown Minneapolis.

The student housing business had become crowded with competing developers. In early 2015 Doran sold off four of the campus projects for approximately $84.5 million to Denver-based University Communities LLC, a national student housing investor. Doran still owns the 210-unit Bridges, which has a current assessed value of $45.1 million, and the Knoll, a 101-unit project valued at $22.9 million, according to Hennepin County property tax records.

“There was so much activity [at the U of M],” says Doran. “When you have that much activity, yields tend to drop.”

Retail roots

While apartments have become his dominant line of business, Doran built his reputation as a retail developer in the 1990s with the Edina-based Robert Muir Co.

“He’s aggressive and smart. He’ll fight for a deal, tooth and nail,” says Grones. “I always got along with Kelly. He’s tough, but you can get along with him.”

The 1990s were boom times for brick-and-mortar retail and retail development. Big-box stores opened left and right. Online shopping was in its infancy. It was a good time to be in the business of building shopping centers.

An industry adage holds “Retail follows rooftops.” Doran says that tracking suburban growth often comes down to a key fundamental: sewers.

“There’s a growth pattern in the Twin Cities that is based around the Met Council’s expansion of what’s called the MUSA line. It’s an acronym and it stands for Metropolitan Urban Service Area. It’s basically access to sewer [service],” says Doran. “When they pushed the MUSA line out, there was significant growth in those areas because land was made available for that growth. When Maple Grove exploded, it was because they moved the MUSA line out. When Woodbury exploded it was because they moved the MUSA line out.”

Doran says that he and Muir built nearly 4 million square feet of retail projects, including Tamarack Village and Woodbury Village (both in Woodbury), Northtown Village in Blaine, and Rivertown Village in St. Cloud.

“We were the village people, I guess,” jokes Doran. He was inducted into the Hall of Fame for the Minnesota Shopping Center Association in 2009, in recognition of his role in local retail development.

“This market was underserved at that point for retail, and there was an explosion of new retail concepts that were looking to come to the market.” Doran mentions Walmart, Home Depot and Lowe’s as examples of national retailers building a presence in the Twin Cities at the time. Minneapolis-based Target Corp. was opening its largest-ever stores with its SuperTarget concept.

“The big term back in the ’90s was the ‘category killers’,” says Doran. “Things like an OfficeMax or a Toys ‘R’ Us or sporting good concepts like Dick’s or Sportmart, Best Buy, Circuit City.”

The Tamarack Village project was 800,000 square feet, nearly as big as the Maplewood Mall in terms of rentable retail space. In the retail business, such big-box-driven projects were known as “power centers.” But by 2005, retail development had become much tougher. Instead of booming, some big-box retailers were going out of business.

As the market changed, in 2005 Doran sold the Village of Blaine shopping center for $38.75 million.

“The returns weren’t there,” says Doran. “Big tenants, big national retailers were in demand, they were able to use that to leverage their positions to lower their rents . . . the risk-adjusted yields kept shrinking to the point where it didn’t make sense to take the risk to build it.”

From pol to builder

Doran took a step back in 2005, taking a sabbatical from real estate. But he did not go to a mountaintop to meditate. He launched a campaign for U.S. Senate, then switched gears to run for governor of Minnesota in the 2006 campaign.

He was the best-financed candidate in the race because he was spending his own money on the effort. He touted himself as a “centrist Democrat,” an affiliation shared by few of his colleagues in the commercial real estate business. But as a political unknown, his support was thin. Doran dropped out of the race in March 2006 after having spent nearly $2 million on his campaign.

“His main attribute was he had a lot of money. He had billboards everywhere,” recalls Larry Jacobs, director of the Center for the Study of Politics and Governance in the Hubert H. Humphrey School of Public Affairs at the University of Minnesota. “Having money is not the same as having a campaign.”

Doran says that he has no regrets.

“Let’s put it this way: Maybe I was having some sort of mid-life crisis,” says Doran with a laugh. “Instead of running for political office, I should have bought a red convertible.”

Despite self-deprecating jokes, Doran took the bid seriously.

“I probably naively had an idea that one person could make a difference, and what I misunderstood was there’s a whole industry of politics,” says Doran. “People are a little bit reluctant to support candidates that don’t have track records or some sort of personal notoriety.”

In his view, the two major political parties were “controlled by their fringes. . . . That’s not where most people are. Most people are in the middle,” says Doran. “Most people want the government to run efficiently . . . and most people don’t really care what happens in somebody else’s bedroom.”

After his short-lived political career, he started Doran Cos. in 2007. At the outset, the company was doing property management work and scouting potential development deals. He bought out Muir’s interest in Muir-Doran Construction and renamed it Doran Construction. Doran’s business building projects for other developers has steadily increased; the third-party work has become another growth engine for Doran.

Minneapolis-based Alatus LLC hired Doran as the general contractor for its Latitude 45 project, a 13-story, 318-unit luxury apartment complex in downtown Minneapolis. The project, which opened in 2015, was completed on time and on budget, says Bob Lux, a veteran multifamily developer and founder and principal with Alatus.

“The fact that he is also an owner and developer,” says Lux, “gives him a unique perspective on the quality that we demand.”

In Uptown, the Graves Uptown, a boutique condo building for Minneapolis-based Graves Hospitality, is under construction with Doran. “It’s a smaller project and he’s done a lot of housing projects . . . He has done some projects at about that scale. We thought he was an appropriate guy for the job,” says Ben Graves, president and COO.

Graves recalls sitting down for a meeting at Doran’s office, where he met Doran’s dog, Miley, a fixture at the firm’s headquarters. “I just remember thinking ‘This guy is a down-to-earth guy.’ It was more of a personal buy-in,” says Graves. “It just kind of clicked.”

Hard-nosed competitor

Many of Minnesota’s largest development and construction players—Ryan Cos., Opus, Kraus-Anderson, Mortenson—are family companies with histories that go back generations. Not Doran Cos. Doran grew up in south Minneapolis, with three sisters and a single mother. He went to public Southwest High in Minneapolis.

He says his hard-driving determination comes from his mother.

“First of all, she believed in education. Going to college was not an option, it was a requirement. I think maybe through her own struggles as a divorced mother of four kids in 1963, she had to persevere in what was really a man’s business world at that time,” says Doran. “She worked multiple jobs and at the same time continued her education. . . . I had enormous respect for her. And she was just tenacious: Failure was not an option.”

It’s hard to be in the real estate business for very long without rankling someone. Doran hasn’t won every battle over the years. In 2014 he clashed with residents who strongly objected to his pitch for a hotel in Dinkytown that called for demolishing some existing buildings. Other large projects in the area had already raised concerns about the changing character of Dinkytown.

In 2015 the city designated the Dinkytown Commercial Historic District. The designation protects some properties in the area from demolition.

“I think the Doran hotel project really was a catalyst for all of that to happen,” says Hung Russell, co-chair of the land use and development committee for the Marcy-Holmes Neighborhood Association. “It was a little contentious because there was a feeling that Doran as a developer was not being very sensitive to what the neighborhood was trying to say about saving Dinkytown.”

In 2012 the North Central States Regional Council of Carpenters began picketing Doran’s office and protested at Minneapolis City Hall objecting to Doran’s hiring of non-union carpenters on a project. The council did not return phone calls seeking comment.

“I terminated my relationship with the carpenter’s union and they didn’t like that,” says Doran, who had concerns about having to pay into union pension and health care obligations. “It’s a matter of the pension fund obligations.”

A building agenda

Today Doran is busy with suburban projects including the Moline, a 241-unit apartment building that will open in September close to a future Southwest light rail stop in Hopkins. In Brooklyn Park he’s developing 610 West, which will ultimately include 480 apartments. It’s the first new apartment project in Brooklyn Park in more than two decades; city leaders had associated apartments with crime and other problems.

“We had to convince the local leaders that we weren’t building apartments like they’re used to seeing from 25 or 30 or 40 years ago. These are really rental condominiums,” says Doran. “Our No. 1 demographic right now in Brooklyn Park for the 610 West project are empty-nesters.”

Doran’s project is just down the street from Target Corp.’s northern campus, notes Erik Hansen, Brooklyn Park’s economic development and housing director. Hansen calls Doran’s development, the first new apartment project built in the suburb since 1992, a “pioneering” project for the city that helps establish a new market for future projects.

Hansen says that Doran gave Brooklyn Park city leaders tours of some of his other apartment projects to give them a sense of what he could build and what he was envisioning.

“He really came to every community meeting we needed him to be at,” says Hansen.

“This is luxury rental, and he’s delivering on that. He’s been a good partner for us.”

In April 2015 Doran Companies paid $10.6 million for 40 acres of land in Maple Grove next to the Shoppes at Arbor Lakes. Doran expects it will take five to six years to build out the housing, two hotels and commercial space.

Doran secured concept approval from the city because the plan offered a mix of uses on the site, says Dick Edwards, Maple Grove’s community development director. A previously floated plan from Opus was not quite what the city had in mind.

“The Opus concept included mostly retail including a Hy-Vee [grocery] anchoring it,” says Edwards of a plan discussed in 2014. “It was starting to become a very retail-oriented development and we wanted to mix it up a lot more.” (Edwards says that Opus ultimately withdrew.)

While apartments are keeping him busy, Doran hasn’t completely given up on retail. In August, Doran Cos. acquired the Calhoun Village shopping center in Minneapolis for $24.9 million. Current tenants include Walgreens, Barnes & Noble and Punch Pizza. Doran says he was drawn to the “long-term potential” of the property. He knows the neighborhood: He developed Whole Foods-anchored Calhoun Commons across the street.

“Our hope is that we can redevelop [Calhoun Village] in some manner,” says Doran. “We’d like to add some residential component to it if that’s feasible.”

At the end of the day, Doran has a knack for being able to identify the opportunity, sell the vision to neighbors and city representatives and get projects financed, designed and built.

“I consider myself a real estate developer. I own an architectural firm, a construction company and a property management company,” says Doran. “I look at those three things as being tools in our toolbox to make us a better development company.”

This article is reprinted in partnership with Twin Cities Business.