Beacon JV Buys Minnesota’s Highest Skyscraper for $253M

A Class A office property just traded for a quarter billion dollars, and it didn't happen in New York City or San Francisco or Washington, D.C.

A Class A office property just traded for a quarter billion dollars, and it didn’t happen in New York City or San Francisco or Washington, D.C.; it occurred in Minneapolis, Minn. Beacon Investment Properties L.L.C., acting in a joint venture with Harel Insurance Investments & Financial Services Ltd. and Menora Mivtahim Insurance Ltd., snapped up Minnesota’s tallest office tower, the 1.4 million-square-foot IDS Center, from Inland American Real Estate Trust for $253 million.  

“It’s a downtown property, it’s the premier property in Minneapolis,” Thomas Dunsmore, a senior vice president with commercial real estate services firm NAI Everest, told Commercial Property Executive. “The IDS building obviously is a trophy property so there’s going to be an intrinsic value.”

Inland had owned the asset since 2006, when it paid $277.9 million to acquire it. Inland is moving forward with its portfolio repositioning plans–the REIT wants to focus on the hospitality, retail and student housing sectors–and put the landmark skyscraper up for grabs, relying on commercial real estate and capital markets services firm HFF to find a buyer. It probably wasn’t a terribly difficult task.

“Minneapolis is attracting a lot of investors that have been priced-out of the top-tier markets,” Dunsmore said. “There are better cap rates and I think you’re seeing that there’s existing money that’s chasing properties here, and now there’s outside money chasing properties here.”

And it wasn’t just the building’s record height that attracted what Jamie Fink, a senior managing director with HFF, described in a prepared statement as “very strong interest in the property from international and national investors.” Case in point: Florida-headquartered Beacon’s partners in the purchase are both based in Israel.

Designed in 1972 by renowned architect Philip Johnson, the tower carrying the address of 80 S. 8th St. in the heart of downtown Minneapolis is 93 percent leased and has a very loyal tenant base; more than 30 occupants have called the IDS Center home for 20 years or more.  Additionally, the asset features the Crystal Court retail plaza, which is 100 percent leased.

HFF also worked on behalf of Beacon and partners to orchestrate a 10-year, $182 million financing package provided by JP Morgan Chase Bank NA.

The sale of the IDS Center is just one of many trades that have occurred in Minneapolis over the last year, and experts forecast that the trend to continue.

“There are a number of great elements about the Twin Cities marketplace that have always made it attractive, and we’re starting to see capital migrate into second-tier markets like ours,” Tom O’Brien, executive director with commercial real estate services firm Cushman & Wakefield/NorthMarq, told CPE. “There is lots of capital chasing deals and we expect to see continued activity and interest in the Minneapolis market throughout the year, whether it’s the central business district or the suburbs. There’s a lot of interest, but not enough product.”