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MINNEAPOLIS-Hempel Properties is seeking either a partner or a buyer in its $63-million effort to convert half of a 235,000-sf office building at 501 Marquette Ave. into a hotel. The Soo Line building currently has office tenants in floors 11-18 and retail on floors one and two, and there is room for about 182 units, says a company spokeswoman.

The Soo Line has been a multi-tenant office building since it was built in 1914 for First National Bank, the spokeswoman tells GlobeSt.com. Hempel bought the building from Wayzata Properties in September 2007 for $23 million. The Soo Line Railway, now owned by Canadian Pacific, was an original tenant, and was able to combine its current office operations in the building into about 63,000 sf on floors 13-17. This opened up the middle floors for hotel space, the spokeswoman says. The facility also includes other office tenants on floors 11-12, as well as at the top floor.

Geoff Davis, president of HREC Investment Advisors, is representing Hempel in its search for assistance. He says the building is in the perfect spot for a hotel, as it’s connected to the skyway system and light rail, which provides access to all the important Minneapolis destinations. “Most of the hotels Downtown are full service, some of which are older and need renovations,” Davis tells GlobeSt.com. “A smaller hotel, like a Hampton Inn, does very well in an urban setting like this, with a high RevPar index. A lot of people who travel don’t need meeting space and restaurants, and the costs associated with that, so this is a good proposition for the traveler.”

Though a Hampton Inn is being suggested for the property, the Hempel spokeswoman says negotiations for the brand are not complete. When the company bought the property, the rumor was that a Doubletree would come in.

Construction on the hotel components will begin in October 2008, and will be complete in October 2009, the spokeswoman says. She says 88% of the new office floors are occupied, but she did not provide an asking rate for the office space. Class B office space is leasing for about $18.27 per sf, according to a Grubb & Ellis report.

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