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Pentagon Park, one of the first suburban office parks in the state, has a new owner with ambitious plans to redevelop the long-troubled Edina property.
Minneapolis-based Hillcrest Development, best known for its edgy development bets in the local commercial real estate market, has gone suburban by purchasing the park's two parcels, consisting of 11 buildings, for roughly $7.6 million. Hillcrest has partnered with veteran real estate developer Mark Rauenhorst to find the site's "best and highest use," according to Scott Tankenoff, Hillcrest managing partner.
That could involve a hotel, plus residential, office, health care and retail components -- it all depends on what the real estate market will bear.
Whatever the mix at the 659,000-square-foot office park, it will certainly be a multiyear, multimillion-dollar project. And it's clear Pentagon Park's current iteration, which features a series of dated buildings encased in vertical slats the color of paste-gone-bad, needs a face-lift. Despite being strategically located near Interstate 494 and Hwy. 100 in one of the Twin Cities' more-affluent suburbs, the property has long been "synonymous with failure," said Edina Mayor Jim Hovland.
Add to that choice description, "tired, ugly and not relevant," as Tankenoff noted at a reception there Wednesday afternoon. "The idea is to try to make it relevant again."
Pentagon Park fell into foreclosure when the real estate bubble burst, causing ambitious redevelopment plans proposed by local developer Maciek "M.G." Kaminski to implode. By the time Hillcrest entered the picture last fall, the properties were owned by two lenders, one linked to iStar Financial Inc. of New York, while a second portion of the park was owned by Florida-based LNR Partners Inc.
Hillcrest is known for redeveloping distressed properties, such as former factories and car repair shops, many in once-gritty, now-trendy northeast Minneapolis. As Tankenoff puts it, "we specialize in dysfunctional, challenged, and, let's face it, screwed-up," real estate. Rauenhorst, a second-generation developer and former CEO of Opus Corp., has expertise in new development projects, providing Hillcrest with skills and expertise it lacks, Tankenoff said. (Rauenhorst is an equity partner in the project, although the amount wasn't quantified.)
Ironically, Rauenhorst's father, Gerald, built much of Pentagon Park in the 1960s. An Edina native, Rauenhorst recalls visiting the construction site when he was 11, climbing up on a tower crane and fiddling with the controls.
"This is a real opportunity for Edina to be on the map again," he said.
Rauenhorst retired from Opus, once one of the region's largest commercial developers, three years ago when the company shut down after being battered by the commercial real estate meltdown and subsequent legal fallout. He is not actively involved in the new development entity, Opus Holding LLC, but does serve on the firm's board.
Instead, Rauenhorst formed a new company called Marren Properties, which has dabbled in "a few small deals" over the past three years, he said. The Pentagon Park project will be his new firm's biggest bet by far, and a big challenge for Hillcrest, too.
The developers are working closely with the city of Edina to redevelop the property, a prospect that delights Hovland. "We're elated Hillcrest ended up being the purchaser of Pentagon Park," he said. "They've got the financial resources, the real estate acumen, to really reinvent the place, which was state-of-the-art when it was built."
Hovland doesn't have an exact wish list for the property, perhaps modern office space, and maybe a hotel.
The city is studying whether to retool the Fred Richards public golf course on about 40 acres adjacent to Pentagon Park. "It could evolve into another public use, including parks and trails, or stay a golf course, or part of it could be beautiful green space," Hovland said.
Tankenoff said access to public amenities, whether it's a public golf course or a park, is "huge, huge, huge" in development circles and would help guide the potential use for Pentagon Park. The two private and public properties span about 80 acres.
As Hillcrest explores the bigger picture for Pentagon Park, it has also "stabilized" two buildings at 4570 and 4600 W. 77th St. within the office park, with an eye toward leasing the Class B-minus and C-plus space. Two other buildings in the park are slated for makeover, as well, with help from a $568,000 Metropolitan Council grant for asbestos and lead paint removal.
To that end, Hillcrest threw a soiree Wednesday at the rehabbed 4600 building that was attended by about 100 real estate brokers who noshed on wine, Perrier and hors d'oeuvres. The gathering served as a sneak peek into how Pentagon Park's offices could be remade with a little midcentury modern flair, not to mention fresh carpeting and lighting.
"We're here to court the brokerage community. Let's make some deals," Tankenoff told the crowd. "Today is the day we change the meaning of Pentagon Park."
Janet Moore • 612-673-7752