Historic 194,300-SF Minneapolis Office Trades, Preps for Makeover

For those who can secure financing in the currently chilly lending climate, there are good deals to be had, and a joint venture involving Alex Brown Realty and Hempel Properties was able to take advantage of the real estate market’s declining price tags with the acquisition of the 194,300-square-foot Rand Tower in Downtown Minneapolis. The partners shelled out $10.2 million to acquire the 26-story office building (pictured) from Gaughan Cos., which had owned the building since purchasing it in 2004 for $11.2 million. Carrying the address of 527 Marquette Ave. South, the Art Deco-style Rand Tower was originally developed in 1929 by Rufus R. Rand and designed by Holabird & Root Architects. ABR and Hempel plan to renovate and reposition the property. “It’s such an Icon, there’s not much we can do to it, but the attraction is that it is an icon,” Valerie Doleman, vice president of marketing for Hempel, told CPN. “Our plans are to be competitive to get new tenants into the building, as far as rates and brokerage cooperation.” Hempel is marketing the space at $11 to $13 per square foot. One of the newest tenants on the roster, however, didn’t require any courting. Hempel will relocate from its suburban Minneapolis headquarters in Maple Grove to the building in early 2009. Presently, the Rand Tower’s occupancy level is approximately 74 percent. For Baltimore-based ABR, the purchase marks its entrée into the Twin Cities office market, where the average vacancy rate for the Minneapolis and St. Paul central business districts are 15.3 percent and 24.5 percent, respectively, according to a third quarter report by real estate services firm Colliers International. In Minneapolis, the third quarter vacancy rate marked a 1.2 percent decline from the second quarter; additionally, the market experienced positive absorption. But for the new owners, it’s not all about statistics. “Minneapolis is fairly resilient, but what’s attractive about the Rand Tower is its location downtown, and it is one of the few historic properties on the National Register of Historic Places there that hasn’t been converted for another use,” Doleman said. “It’s right in the middle of the financial district and it’s a block from light rail. There’s no other building like it in terms of character, access and the traffic in front of it.”According to Scott Pollock, senior vice president, investment services for NorthMarq, who represented the seller in the transaction, Rand Tower is an excellent fit for the new owner. “Hempel is an entrepreneurial, hands-on operator,” he said. “They own two other properties within a block of Rand Tower, which has an excellent location in the heart of the financial district, near an abundance of amenities, and a niche in the market with limited competition. I expect Hempel to have a very positive experience with the investment.”