FARGO - Kilbourne Group has an agreement with Swanson Properties to buy a slate of notable downtown buildings, including sites of the former Avalon and Metro Drug as well as those that house Moxie Java, Subway and King House Buffet.
Financial terms of the agreement, which includes 11 downtown properties among 17 parcels, were not disclosed. The deal would add significantly to Kilbourne's growing downtown presence and is expected to close in June.
Three decades ago, Lee Swanson and his late brother Jay began buying the properties, many of them on Broadway, where Swanson Health Products has long maintained a store.
"In the mid-1980s, Jay and I saw tremendous potential in downtown Fargo," Lee Swanson said in a statement. "We did our best to keep these unique and historic buildings occupied and viable. We are pleased that Kilbourne Group is driven to carry our vision forward for future generations."
Swanson Properties upgraded the storefronts of buildings along Broadway in 2010, including those housing Swanson Health Products, Teaberry, Sweeto Burrito, Moxie Java, Subway and the former Metro Drug.
The properties fit well with the mixed-use approach, which combines a commercial and residential vision of high-density, walkable development that Kilbourne Group is promoting in and near downtown Fargo.
Kilbourne Group was founded in 2006 by Doug Burgum, who led Great Plains Software and shepherded its acquisition by Microsoft for $1.1 billion. Burgum is seeking the Republican nomination for governor.
Mike Allmendinger, Kilbourne Group's general manager, said the firm would be honored to "take on such a significant piece of Fargo's historic architecture" if the deal closes in June.
"Especially exciting pieces of the acquisition would be the vacant former home of Avalon on the 600 block of First Avenue North, and the vacant Metro Drug building, at the corner of Second Avenue North and Broadway," Allmendinger said.
If the Swanson Properties purchase is completed, Kilbourne Group will own 37 properties in downtown Fargo and expand its market share to include the following, according to Kilbourne figures:
• 80 apartment units, or 5 percent of all downtown apartments.
• 605,983 building square feet, or 6.9 percent of the downtown total.
• 17.3 acres, or 4.8 percent of total acres in downtown.
Kilbourne hasn't decided what to do with the vacated Avalon Event Center at 613 1st Ave. N. Lee Swanson and a partner have an Avalon Event Center at the former location of the Hub, and Kilbourne is converting the former St. Mark's Lutheran Church in downtown to host weddings, receptions and events, Allmendinger said.
Originally, the Avalon served as the music conservatory for Concordia College. It has a second-floor ballroom that housed several restaurants before it became an event center.
The Avalon property includes an adjacent parking lot, which could become a building site, he said.
The former Metro Drug building at 121 Broadway has potential, Allmendinger added, to continue as retail and other uses.
Kilbourne's "due diligence" will include inspections of the heating and mechanical systems of the buildings, many of which likely are original, he said.
All current leases will be honored, a provision of the purchase agreement. It is too early to say whether rents will increase if significant upgrades are required, Allmendinger said.
"We'll have a better perspective for that answer when we complete our due diligence," he said.
Lee Swanson, who became president of Swanson Properties when his older brother died in 1996, was not available for comment. WDAY reported earlier this week that Swanson Health Products is up for sale.
"We've been in touch with Lee for quite some time," about acquiring his downtown real estate holdings, Allmendinger said. "It was the right time for him, so we were excited for the opportunity."