City Center Buys 316,375-SF MXD for $27M

"A lot of the buildings here in Warehouse Row area were converted," says Nathan McElmurry, director of GE Real Estate, which provided the buyer with a $28.5-million loan for the acquisition of the property. "The Downtown Minneapolis CBD is really geared toward Target, most of the tenants in the high-rises are suppliers. However, on the edge of the CBD is the Warehouse District, where some businesses such as architects, engineers, software developers and lawyers moved into these large buildings, which were gutted and redone as office space." The submarket is made up of Washington Avenue, along with converted loft and condo developments. "It's a real live-work atmosphere," McElmurry says.

The seller was Ames & Fischer Co. II, based in Apple Valley, WI. "The family trust had owned the property for a long time, and they aren't real estate people by career," McElmurry says. The new buyer will spend about $4 million in renovations and upgrades, and has hired United Properties to manage the property. "City Center feels like they can increase the rent and occupancy quite a bit," McElmurry tells GlobeSt.com. The occupancy rate is 80% for the entire building, and 70% for the office.

As a former warehouse, the property is not a straight tower, but rather a giant rectangle with half being nine stories high, and the other half being six stories high. Major tenants include Provation Medical, a software company for the healthcare industry that takes about 15% of the office, and Benesyst and Warner Music Group. At the north end of the building is a large parking garage. "That's another reason that this was a good deal, there had been litigation over the ownership of the garage, and the previous owner took the garage back from the city," McElmurry says.

The director says that the parties involved in the deal felt it was a success if only, in this market where credit has dwindled, that GE delivered the deal that it said it would do from the beginning. "There's no question that lending right now is a giant mess, a disaster," McElmurry says. "However, we're a balance sheet lender, we haven't been nearly as affected as most players, this is a time where we typically shine. We sat on the sidelines and passed up a lot of deals during the froth of the market, and we didn't get hit very hard during the securitization mess. Our balance sheet is very strong, and we have the ability to keep lending."