MINNEAPOLIS-A joint venture of Triple Net Properties LLC and LosAngeles-based Pacific Coast Capital pulled together about $82 million for its purchase of the mixed-use Northstar Center complex here, almost $20 million more than the purchase price. The property, consisting of 700,000 sf of office space and 70,000 sf of retail, as well as a 222-room Crowne Plaza Hotel and a 1,000-space parking facility, was bought from BRE/TZ Properties Tenant LLC for $62.1 million in April.
The property does have its problems. Its largest tenant, Wells Fargo, pays very low rent for more than half of the office space, much lower than the average $8 to $10 per sf for the area. The oldest section of the complex, the 13-story Northstar East Tower, was built 91 years ago. Tom Sherlock, managing partner with the financier Buchanan Street Partners, tells GlobeSt.com that pulling together funding was definitely a challenge.
"Well, first, the Midwest, Minneapolis market isn't on the top of capital providers lists," Sherlock says. "Then, you've got 20% vacancy in the office portion. We were dealing with five different land parcels where the hotel and 25% of the parking was under a ground lease that expires in 2010."
The hotel also has limited ability to control response times, and the entire project is undergoing massive renovations, Sherlock says. "We put together about $82 million in capital, and that included the senior debt and the joint-venture equity. This deal had a whole lot of complexity."
He says there are upsides for the center. The building is in a prime location and is the genesis of the city's Skywalk System. "It's a class B building surrounded by class A product at the corner of Main and Main, an unbelievably great location," Sherlock says.
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