Top 10 Office Sales in Minneapolis-St. Paul in 2018
- Feb 25, 2019
The Twin Cities’ office market was one of the few to record transaction increases in 2018, as investment activity was boosted by availability and good yields. According to Yardi Matrix data, Minneapolis-St.Paul saw investment sales reach $1.3 billion, up 30 percent compared to 2017’s total volumes. Benefiting from a strong and steady economy, a large pool of educated people and unemployment rates close to 2 percent, the market continued to attract capital to its office sector, from both domestic and foreign sources. Acquisition yields for Class B properties in urban areas averaged 8 percent according to CBRE, higher than comparable metros. This value-add appeal has played a significant role in raising sales totals in 2018.
Sales activity was steady throughout the year, with several large deals closed during the first half of the year—Capella Tower and the 1.3 million-square-foot tower at 33 S. Sixth St. The second half was as dynamic as the first one in terms of number of sales, with investors focusing more the aforementioned value-add plays for suburban assets.
A Hines-developed mixed-use property, T3 is located in the Minneapolis Central Business District and is anchored by Amazon. The seven-floor, 246,300 square-foot building was completed in 2016 at 323 Washington Ave. N., combines timber and brick as materials and includes 12,300 square feet of retail space on the first floor. Amenities include a number of conference rooms, a fitness center and a roof deck. LaSalle Investment Management became the owner of the building last summer, when it acquired it from Hines for $87 million. Nearly 16 percent of the asset was vacant, the tenant roster including New York-based co-working company Industrious as well as a number of tech, finance and consulting firms. When it was delivered, Architect Magazine named it the first modern tall wood building in the U.S.
4. Marquette Plaza
After more than 20 years under the ownership of Base Management, the 15-story LEED Platinum-certified building at 250 Marquette Ave. changed hands in March 2018. The new owner, KBS Realty Advisors, paid $88.4 million for the asset in a transaction negotiated by CBRE. The 523,000 square-foot property was completed in 1970 and underwent renovations in 2002. It features an arch design on its façade, complete with a curtain wall made of aluminum and glass with granite fixtures. The building also encompasses a 1.5-acre park at the entrance, a rare feature for an office development in the CBD, and a 40,000 square-foot data center. The property also includes a direct connection to the Skyway, an enclosed sidewalk covering 9.5 miles, and benefits from proximity to the popular Nicollet Mall, the Washington Avenue Riverfront and North Loop.
3. 50 South 10th Street
The largest sale completed during the year’s second half was Menlo Equities’ purchase of the former Retek Building. The $171 million transaction closed in December 2018 and represented Menlo’s first office purchase in the Twin Cities. The seller, Germany-based Union Investment, let go of the asset after four years of owning it. The 590,000 square-foot property was completed in 2001 and encompasses 11 floors. The entire first floor and a portion of the second floor–175,000 square feet–are designed for retail use. The building hosts News Room restaurant and a CVS pharmacy among other retail businesses.
2. Capella Tower
Located at 225 S. Sixth St., Capella Tower is distinctive office high-rise on Minneapolis’ skyline, standing 58 stories tall. Shorenstein Properties bought it from ASB Real Estate Investments in February 2018, together with the adjoining Star Tribune Building. The total transaction cost the investor $255 million, $10 million more than what ASB paid for the asset in 2006. Part of the purchasing cost, $186 million, was covered via a loan with Metropolitan Life Insurance Co. ASB disposed of Capella Tower on behalf of its $7.4 billion Allegiance Fund. The LEED Gold-certified tower provides 1.4 million square feet of office space, which includes the space in the Star Tribune Building. Completed in 1990, the building underwent renovations in 2014.
1. 33 South Sixth
South Korea-based Samsung Electronics America emerged as the metro’s top buyer with the acquisition of the 1.3 million-square-foot tower at 33 S. Sixth St. in the Minneapolis CBD. The seller, HNA Property, disposed of the tower for $320 million. By acquiring the tower, Samsung also assumed an existing loan in the amount of $205 million with Metropolitan Life Insurance Co., which HNA contracted in 2016. The 48-story office building was completed in 1981 and completely renovated in 2005. A LEED Silver-certified asset, it includes 250,000 square feet of retail space on the first and second floors.
The list of top 10 largest office deals close in the Twin Cities in 2018 was compiled using data provided by Yardi Matrix.
Images courtesy of Yardi Matrix