Real estate

Office space overhead
boosts revenue at
renovated Java Jack’s

Jerry Nelson, long in the real estate business, wasn’t in love with retail when he bought in 1999 Java Jack’s, a coffee shop in south Minneapolis. “I was nervous about the retail. Retail is a draining business,” he says.

He completed in February a complete overhaul of the building, adding a second story with 2,800 square feet broken into six offices. The space was 100 percent rented in a week’s time, he says, and he just vacated his own office and moved to the basement to make room for one more tenant.

“It increased our rental revenue by 40 percent,” he says, adding that it was costly to renovate the building’s basement, for example, but relatively cheap to add the second story. “You get economies of scale when you get two stories.”

The project got started when Steve Horton wanted to start a bakery, but a potential partner got cold feet. Nelson invested, and Horton opened Rustica in the expanded Java Jack’s space.

The entire project took the building from 1,000 to 9,000 square feet and cost $800,000, financed with a conventional loan. Nelson says they need to generate about $7,000 a month to pay the bills, and they were hitting that mark in early 2005. “We’re on track to do close to double that right now,” he says.

Nelson says the development process was a battle, especially getting variances so they could add the second story, and so they didn’t have to add parking spaces. He praises Steve Poor, zoning supervisor with the city of Minneapolis, for expediting every step.  “He’s one of the guys who says, ‘how can we make this work?’ ”

Nelson says there’s a lot of opportunity to develop small spaces in Minneapolis, but for now he’ll stick with Java Jack’s. “We’re not looking for huge. We’re just looking for a certain lifestyle.”

Jerry Nelson, Java Jack’s Coffee Café Inc.: 612.825.2183