A buyer has stepped forward to pay $164.5 million for 50 South Tenth St., a signature office building in downtown Minneapolis that hems Nicollet Mall.
The property — formerly known as Retek on the Mall — has been owned by an entity associated with Franklin Street Properties, a real estate investment trust based in Wakefield, Mass., which bought it for $127 million in 2006.
The 12-story multitenant office and retail building spans 498,000 rentable square feet of space and is 99.6 percent occupied, primarily by Target Corp. employees. The purchase does not include the Target store at 9th St. and Nicollet Mall, or an 850-stall underground parking garage owned by the city.
A May regulatory filing indicates the property has been on the market since January after Franklin Street executives began noticing that Minneapolis “was beginning to attract some broader institutional real estate investor interest.” The time might be ripe to sell the property, they concluded.
The board of FSP 50 South 10th Corp. ultimately recommended that shareholders approve the sale to an unnamed buyer.
Properties along Nicollet Mall, which is slated to undergo a $50 million overhaul, has attracted several out-of-town buyers in recent years, including three major retail properties, City Center and Gaviidae Common I and II, that have changed hands. In addition, the signature IDS Center sold for $253 million to a Florida firm.
“What I hear from folks is that Minneapolis is viewed as a strong, stable market with a positive medium-term outlook,” said Steve Cramer, president and CEO of the Minneapolis Downtown Council, a business group. “We’re not in a boom-and-bust cycle. We went through the recession and weathered it better than most places, reaffirming our Steady Eddie reputation.”
The Twin Cities office of CBRE Group Inc. was hired to market the 50 South Tenth St. property, and interest in it appeared to be strong, according to documents filed with the Securities and Exchange Commission. CBRE initially distributed information about the property, which was built in 2001, to nearly 5,000 potential purchasers and investors. Eighty-eight prospective buyers signed confidentiality agreements, and ultimately 12 toured the property.
The company initially received 11 offers ranging from $137 million to $159 million. A second call on April 25 gleaned seven offers ranging from $147 million to $161 million. CBRE and the company then requested a “best and final offer” on May 6, and two bids of $164 million and $164.5 million were received.
The property’s long-term lease with Target, which runs through March 31, 2030, was a key attraction to prospective buyers, the filing states. (The discount retailer declined to comment by e-mail on the lease’s terms.)
In a presentation to investors earlier this month, executives from Franklin Street Properties touted the city’s highly diversified economy, its role as a major transportation and cultural hub, and its commitment to urban “densification.”
In addition to 50 South Tenth St., Franklin Street Properties in 2010 purchased the TCF Tower and Bank Building off Marquette Avenue S. and 8th Street S. for $40.5 million. The firm said recently that it may opt to redevelop the smaller of the two buildings, a four-story bank structure, into a new office tower. Should that occur, the new tower would be the first erected downtown since 2001. The firm also owns Eden Bluff Corporate Center in Eden Prairie.
The firm invests primarily in Class A office space, primarily in four markets beyond the Twin Cities — Atlanta, Dallas, Denver and Houston. Its current portfolio contains 39 office properties spanning 97 million square feet, most of it 95 percent leased, according to its website.
Staff writer Patrick Kennedy contributed to this report.