Brookfield to bow out of Twin Cities market

A major player in the Twin Cities commercial real estate market is preparing to pull up stakes.

Brookfield Properties plans to sell all its properties -- RBC Plaza, Gaviidae I and II, 33 South Sixth Street and the attached City Center complex -- this year, according the company's most recent annual report. The buildings total more than 3 million square feet, one of the largest holdings by a single owner in downtown Minneapolis.

"We intend to exit this market in the next 12 months through the sale of the properties," the annual report said.

The report didn't say why Brookfield is leaving the Twin Cities. Melissa Coley, a spokesman at Brookfield's New York headquarters, said Monday that the company continually looks for ways to redeploy capital to create shareholder value.

Coley said it hasn't determined how or when the properties will be listed. Brookfield tried to sell the RBC Plaza office building last year, but has now added the other properties to its list of ones to be sold. Its annual report listed all four as "discontinued operations."

Brookfield's role as major Twin Cities commercial landlord dates from the 1980s, when it was known as BCE Development Properties Inc. At one time, BCE also managed the IDS Center in downtown Minneapolis and Wells Fargo Place (formerly the World Trade Center) in downtown St. Paul. Brookfield, with principal offices in New York and Toronto, moved its Midwest regional office from Chicago to Minneapolis in 1990.

The Minneapolis properties are the only ones in Brookfield's vast commercial portfolio tagged for sale this year. Brookfield has interests in more than 100 buildings totaling 74 million square feet in several large cities, including New York, Boston, Los Angeles, Washington, Denver, Houston and Toronto.

Debt due to mature this year on RBC Plaza may be another reason, Pollock said. "Replacing the existing financing in this market will be a challenge," he said.

Rumors that Brookfield might sell some Minneapolis properties have circulated in the local commercial real estate community for about a year. The company confirmed last year it had put RBC Plaza on the market but had declined to comment on speculation it might also be seeking a buyer for Gaviidae I and II, the two adjoining retail buildings anchored by Neiman Marcus and Saks Fifth Avenue Off 5th.

Brookfield also said last year it was trying to sell some debt attached to 33 South Sixth and the adjoining City Center retail complex.

In January, David Sternberg, a senior vice president who heads the Minneapolis office, said the listings for both deals had expired with no buyers, and there were no immediate plans to re-list them.

Area real estate experts said Brookfield now may have an easier time selling 33 South Sixth and City Center since securing Target Corp. as a tenant. The giant retailer announced last week it had renewed its lease for about 1 million square feet. The new lease extends through December 2023, with renewal extensions through 2038.

The lease extensions have helped Brookfield keep the occupancy rate for all its Minneapolis properties to a relatively healthy 90 percent.

Although tight credit and a weak economy have severely limited sales of large commercial properties, it's possible Brookfield could attract interest from foreign investors, Pollock said.

"The question is, at what price," he said. The dearth of deals in the last year or so has made it difficult to establish a market for properties that go on the block, he said.