The owner of the downtown Minneapolis highrise One Financial Plaza has turned over the property to the lenders after defaulting on its loans, apparently the first such bust for a downtown office tower since the beginning of the commercial real estate crash.
Behringer Harvard, a Dallas-based real estate investment trust (REIT), turned over the 27-story building at 120 S. Sixth St. on Dec. 3, said Michelle Surkamp, a spokesman for Minnetonka-based NAI Welsh, the 40-year-old building's new property manager and leasing agent. "Basically, the owner gave back the keys."
NAI Welsh is working for LNR Partners, a division of Miami-based LNR Property. LNR confirmed Wednesday that it's the new owner of the building.
Behringer Harvard couldn't be reached for comment.
Two Minneapolis commercial real estate professionals, Brent Erickson of NorthMarq and Russ Nelson of Nelson, Tietz & Hoye, said they believe One Financial Plaza is the first troubled downtown Minneapolis building that's gone back to its lenders in recent years.
However, both said they don't think it's a sign of the condition of the Minneapolis office market. "I wouldn't extrapolate about a lot of broader insights about this deal," Nelson said. "It's not indicative of the financial health of other downtown office buildings."
One Financial Plaza was highly leveraged, Nelson said, and it suffered a big setback in 2007 when it lost a major tenant, Deloitte & Touche. Also, Erickson noted that Behringer Harvard bought the building at a time -- 2005 -- when commercial real estate was booming, meaning it paid a boomtime price.
The building sold for $57.2 million at that time, according to Hennepin County tax records. Its estimated market value for tax purposes as of Jan. 2, 2009, was $20.9 million, according to tax records.
