It's been a few years since Brookfield Properties publicly announced it was kissing Minnesota goodbye and selling off three major properties in downtown Minneapolis.
Now it appears that the Toronto-based asset manager is getting serious about what has been a slow farewell. Brookfield plans to put 33 South Sixth -- a 50-story office tower -- back on the market by June, according to sources with knowledge of the listing.
The building, once known as the International Multifoods Tower, is one of the city's tallest and home to part of Target Corp.'s workforce. It includes the City Center retail complex.
Brookfield owns two other major properties in Minneapolis -- RBC Plaza/Gaviidae II and Gaviidae I, across the street from 33 South Sixth on Nicollet Mall. Brookfield will likely try to sell them after it tests the market with 33 South Sixth, one of the sources said.
The combined book value is $316 million, according to Brookfield's latest annual report where it reiterates its intention to exit the Minnesota market. The buildings are classified as "assets held for sale," and the revenue and expenses classified as "discontinued operations." The portfolio carries $165 million in debt.
Brookfield tried unsuccessfully to sell its office-retail buildings in 2007 and 2008, during the recession and with tight credit markets.
At more than 3 million square feet, the three properties form a good chunk of the downtown Minneapolis core near the IDS Tower. A new owner could potentially change the strategy for some prominent retail space.
David Sternberg, head of Brookfield's Minneapolis office, wouldn't discuss the matter. Neither would a spokeswoman for the company in New York.
Brookfield has never specified just why it's leaving Minneapolis, but company officials have talked about transforming the firm into a global office company focused on prime properties in "gateway cities." It owns more than 100 office properties in the downtown cores of cities such as New York, Houston, Los Angeles, Toronto, Calgary and Sydney. Brookfield is part of Toronto-based Brookfield Asset Management Inc., which manages more than $100 billion worth of property, alternative power and infrastructure projects around the world.
John Guinee, a managing director at Stifel Nicolaus & Co. Inc., said it's been expected that Brookfield would eventually relist its Minneapolis portfolio, and the timing is right. There's a "tidal wave" of private and public capital looking to invest in real estate, he said, and because the price tags are getting so fat on trophy properties in first-tier markets around the country, investors are gravitating to the best of the second-tier markets, such as Minneapolis.
Not only are do investors perceive bargains because of the drop in property values, but financing is easier thanks to the revived market for commercial mortgage-backed securities, or CMBS, which are pools of commercial mortgages packaged together and resold on the secondary market to investors, Guinee said. Then there's the belief that real estate is an excellent hedge against inflation.
"Any asset that a company has wanted to sell for the last three to four years and has been unable to sell is back on the market, or will be on the market in 2011," Guinee said.
Jon Dahl, who just left Brookfield to be a senior vice president at Jones Lang LaSalle handling the office leasing for Brookfield, said he hadn't heard about the offering.
Altogether, the office portions of all three buildings are about 98 percent leased, Dahl said. 33 South Sixth is more than 99 percent leased. In 2009, Target Corp. renewed its long-term lease in the tower, where about a third of its headquarters employees work.
City Center, however, has struggled and is about 82 percent leased. The Forum restaurant just closed there. But there have also been positive steps. The restaurant chain Rosa Mexicano is opening in City Center this summer and Kaplan University has signed a lease for a skyway spot, according to Dahl.
Brookfield is also negotiating with another entity that will take about 10,000 square feet on the ground floor, although not the prominent ground-level corner at S. 7th Street and Nicollet Mall across from Macy's, a spot that has sat empty for years.
Jennifer Bjorhus • 612-673-4683