KBS Real Estate Investment Trust will convert some of the retail area in RBC Plaza into more office space.
A national real estate investment trust will pay $126.5 million for RBC Plaza in downtown Minneapolis, the firm said in a regulatory filing.
KBS Real Estate Investment Trust will buy 609,368 rentable square feet of office space and 68,677 rentable square feet of retail space in the deal.
The seller is Brookfield Properties, long a major player in Twin Cities commercial real estate. In 2009, the firm announced it was selling its holdings in Minneapolis, including RBC Plaza and Gaviidae I and II, where Neiman Marcus was a tenant until Saturday.
RBC Plaza was built in 1991. As of Jan. 1, it was 83 percent leased to 34 tenants who pay a total of about $8.6 million in rent annually.
KBS released terms of the deal in a Jan. 24 filing with the Securities and Exchange Commission. It also said it would convert about 32,000 square feet from retail to office space.
It is the latest in a string of developments at downtown properties, but this one is a good sign for Minneapolis, said Mark Kolsrud, a principal at commercial real estate services firm Cassidy Turley. KBS is what Kolsrud calls a "core buyer," meaning the firm only buys the best buildings in the best locations in the best cities, typically on the coasts.
"Occasionally they'll come to Minneapolis and buy a Class A asset," Kolsrud said. "KBS is a great owner."
The Saturday departure of Neiman Marcus left a void in what is already a challenged retail environment at the core of Minneapolis. The Dallas-based luxury department store chain -- which rarely shutters stores -- said it would close its sole Minnesota outlet after operating at Gaviidae for more than 21 years.
But when it comes to office space, buyers appear to be available. Brookfield is selling the tower at 33 South Sixth -- the city's fourth-tallest building -- for $207 million to a group from San Francisco called Shorenstein Properties. A Chicago real estate investment firm put the IDS Center on the market in July but pulled the listing in December.
Kolsrud expects more deals to happen as the commercial real estate market improves and rents rise, particularly for office space downtown. And tall buildings like RBC Plaza have an advantage because office space above the 25th floor is in highest demand.
"There's still a lot of interest in these quality assets, and we'll see more of them in the next 12 months," Kolsrud said.
Adam Belz • 612-673-4405