Originally posted on Sioux Falls Business Journal

Two years ago, a listing hit the Sioux Falls real estate market unlike any most can remember seeing.

The listing included 13 properties – among them were some of the more easily identified buildings in Sioux Falls.

Many were apartments. Some were single-family houses. A couple included retail and office space. One was an industrial property.

The asking price: $25 million.

This was the last chapter of a story started when Arnold Murray, as the legend goes, arrived in Sioux Falls on a boxcar and decided it was the place to start in business.

He would grow his construction and development company into one of the top 10 largest property owners in the city.

His holdings included well-known buildings such as the Albert House and the L’Abri Apartments on Phillips Avenue, the Cliffhanger Apartments on North Main Avenue and Plaza 600, a mixed-use building on West 11th Street.

Before his death in 2002, he deeded his portfolio to his children. His daughters and their children managed the properties until they put them on the market and sold them last year to two local investors.

“The uniqueness of it was just the size of the project held by one owner,” said Scott Van Ginkel of Vantis Commercial Real Estate Advisors, who represented the sellers. “From our perspective, we had confidence and knew we could sell it as one.”

The properties went on the market in spring 2014 and immediately drew local and national interest, he said.

“Tons of people” wanted to buy pieces of the bundle, but a buyer for the whole thing emerged when Norm Drake of Legacy Developments teamed up with Kevin Keating, a Sioux Falls native who owned Nebraska-based Urban Housing Partners LLC but wanted to focus on development here.

“It was mostly not advertised,” said Keating, a business lawyer who later moved into development. “It was kind of word-of-mouth. I received a call saying, ‘Hey, this portfolio is available. Would you have an interest in looking at it?’ ”

Drake got a similar call, and they ended up deciding to partner.

It took more than a year of due diligence evaluating the properties, but the deal closed in August 2015. The buyers won’t disclose the final price, and it isn’t public information because the properties sold as a limited liability company.

While the family left the business when it was sold, there is a staff of 13 dedicated to the new Murray Properties Acquisition Group.

“We met with the staff and let them know we’re interested in continuing their employment, so we hired all the existing staff,” Keating said. “But Arnold Murray’s history goes back a long time. Everybody has an Arnie story.”

Colorful character

He has been gone more than 15 years, but stories about Murray still flow freely and with detail.

“There were numerous unique things about Arnold,” said Rick Knobe, who served as mayor when Murray was beginning in development. “He was always wearing a blue coverall, and it was always tobacco-stained. When he was smoking he would use his upper pocket as an ashtray. Always needed a shave. Always needed a haircut. His language could be beyond salty. Most of the time it was not mean-spirited. Every once in awhile it was.”

An Army veteran with a distaste for the authority of government, Murray had a history of fighting in court and at City Hall on issues involving easements, drainage and snow removal. Former planning director Steve Metli recalls his secretary throwing Murray out of the office for his language. Knobe once arrived at his office to find Murray sitting in his chair.

Murray likely holds the record for the number of parking tickets issued to a single person in Sioux Falls, Knobe said.

Murray always drove a Cadillac and replaced it every couple of years, said Craig Lloyd, a contemporary in development.

“The passenger side had everything from sunflower seeds to chew spit on the floor,” Lloyd said. “He was a different cat. I always saw the humor in him. I was about 23 years old (when we met) and I said, ‘Who’s the homeless guy?’ At one point he was one of the biggest landlords in Sioux Falls.

“You talk about a rags-to-riches guy. He did it. He built a lot of units, was able to do a lot of good things, and a lot of people don’t know he was very philanthropic.”

While the rumor has him arriving in Sioux Falls on a boxcar, his obituary reveals Murray was born in Watonka, a town in McPherson County in northeast South Dakota that registered eight residents in the 2010 U.S. Census.

The oldest of six children, he moved to Aberdeen in 1947, where he met his future wife, Eleanor. They later moved to Sioux Falls and started in construction followed by development.

The biggest Murray project Metli recalls is the development of land between Westport and Louise avenues and 49th and 57th streets.

“He built a lot of those apartments that you see in that area, but he sold a good deal of land to other developments. Arnie wasn’t a spectacular builder, but I would say he was an average builder.”

Murray distinguished himself, however, by building housing people could afford. While a couple of his properties specifically served income-qualified residents, several were priced at the low end of market rate.

“Arnold cared about poor people before it was fashionable to care about poor people. He and his wife, in the properties they had, they helped out a lot of poor people,” Knobe said. “And they didn’t brag about it. They didn’t make a big deal about it. But they did it. And there’s a lot of people that lived in Murray’s apartments that maybe wouldn’t have had much housing any other way. So that was a really positive thing about him and his family and his legacy.”

Evaluating opportunities

If buyers could have cherry-picked the Murray property bundle, two buildings likely would have drawn the most demand.

The Albert House and L’Abri Apartments are on Phillips Avenue on the south and north sides of Sixth Street and represent opportunities for redevelopment.

Built in the early 1900s as a hotel, Albert House is a mixture of sleeping rooms and efficiency apartments on five stories.

The units are full with “a mix” of people, Keating said. “It’s really kind of interesting. We get people who want to live downtown. There are younger people and older people.”

The new owners are in the process of renovating the lobby and office. The building’s most recent remodel was in 1972.

“Albert House is a neat building. I like the bones in it. I like that it’s on Phillips Avenue. I like the parking associated with it,” Keating said.

For now, the building will operate as apartments. That’s also the plan for L’Abri Apartments. Built in 1903 as The Andrew Kuehn Co. building, the quartzite building originally housed a wholesale grocery distribution center and warehouse.

It was converted to apartments, office and commercial space in 1983 after Murray bought it. Eleanor Murray named it L’Abri after the French phrase for “the shelter” and saw it as a space for recovering alcoholics, according to information from the South Dakota Housing Development Authority.

It now leases to people with mental illness through a government contract.

The main floor is commercial space that has attracted tenants Exposure Gallery & Studio and Jam Art & Supplies.

“It’s another nice building. I love the location,” Drake said. “The lower-level floor is unoccupied and needs to be renovated. We need to just demo to the walls and kind of start over. We’ve started some but aren’t ready for a lot of it, and there’s a really neat space in there with exposed walls.”

One main level space could be available to lease soon and be renovated if there were tenant interest, he said.

There is no set timeline for redeveloping either Phillips Avenue building, the owners said.

“It’s going to be really fun to develop L’Abri and Albert House,” Keating said. “It may be that if we decide to do it right we should have someone else do it. My focus really is getting the properties operated efficiently.”

They both emphasized the need to continue to have housing that is accessible to people with limited options.

“That’s part of the attraction of this portfolio,” Drake said. “There are a lot of affordable units that are market rate today that aren’t requiring taxpayers to subsidize these products, and they stay consistently full and offer multiple opportunities going forward.”

While the new owners encountered deferred maintenance needs – they have dealt with water issues, replaced furnaces and made other improvements – most units were well-maintained, they said.

“Some of them look pretty tired, but the Murrays did a nice job of maintaining the interiors, the living space of the units, and across the portfolio it’s in better condition than you would expect,” Keating said.

One property that presents a larger redevelopment opportunity is Plaza 600 on 11th Street west of Duluth Avenue. After acquiring one of the mixed-use buildings in the Murray deal, Drake and Keating teamed up to buy the western portion of the center from Clausen Enterprises LLC.

“I think since we’ve owned it, we’ve done a good job cleaning it up,” Drake said.

The retail portion is 60 percent leased, and there is residential space above.

“That’s a project we need to spend a lot more time figuring out,” Keating said. “I think we’ll have ideas soon. We’re going to want to address that sooner in terms of cleaning up the area, however that takes form. From the point we’re at today, it’s still a year before we can. You’ve got to develop a plan, structure your financing; all that has to be done yet.”

Another opportunity is on the north end of downtown at Cliffhanger Apartments at 925 N. Main Ave. Across the street from The Bakery, they are next to an area envisioned to be developed into housing.

“Again, it’s a property that’s always occupied,” Keating said. “When you get inside, the units lay out nice. They’re decent units. It surprises you. It kind of surprised me.”

It sums up the Murray legacy in many ways, he said.

“The impression the sellers left me with was they cared about the business they were in. They cared about providing affordable housing for tenants, not trying to get the last penny out of every unit and every tenant,” Keating said. “Sometimes there probably was some deferred maintenance because of that, but it was honorable that was the market they were trying to serve. I was impressed by that.”

MURRAY PROPERTY DEAL

•Albert House, 333 N. Phillips Ave.

•Amidon Properties, LLC, 901 and 905 E. Amidon St.

•Arnolds Park Apartments, 812 W. Bailey

•Cliffhanger Apartments, 925 N. Main Ave.

•Eagles Nest Apartments, 4404 S. Louise Ave.

•Eastview Apartments, 3300 E. 11th St.

•L’Abri Apartments, 100 W. 6th St.

•Murray Apartments, 2401 W. Madison St.

•Plaza 600, 601 W. 11th St.

•Westwood Apartments, 3000 Mayfair Drive

•Various rental houses, townhouses and storage units