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Downtown Minneapolis Office Building Under Contract for $20M

GOVREIT is Disposing of One of its Two Minnesota Sites
March 1, 2018
Newton, MA-based Government Properties Income Trust (GOVREIT) is selling off an eight-story office in downtown Minneapolis formerly known as the Towle Building.

In January, GOVREIT entered into an agreement to sell the property at 330 Second Ave. S. to an undisclosed buyer, according to the trust’s annual report for fiscal year 2017, which was released on Tuesday.

The purchase price is reported at $20 million. The building has a total area of 241,213 square feet, according to the city of Minneapolis, of which 193,594 is rentable space, as per GOVREIT’s disclosures. Using the total building area, the purchase price works out to almost $83 per square foot.

The deal is expected to close during the first quarter of 2018.

Executives at GOVREIT did not respond to requests for comment.

GOVREIT has owned the building since July 2010, when it bought the 38-year-old structure from HUB Acquisition Trust for $23.23 million ($96 /SF), according to CoStar data.
See CoStar COMPS #1957307.

It is currently 93 percent leased. The three biggest tenants are the retail consultancy BTM Global, engineering and professional services firm Idom Inc., and the City of Minneapolis. The property is located 0.2 miles from two light rail stops: the Government Plaza Station and the Nicollet Mall Station.

The building had an assessed value of $9.94 million for taxes payable in 2018, according to Hennepin County property records.

GOVREIT’s other holdings in Minnesota include two parcels that are part of the Rosedale Corporate Plaza in Roseville, office buildings D and E, which sit at 2545 and 2655 Long Lake Rd. The trust acquired the two properties in 1999.

GOVREIT describes itself as "the U.S. Government’s largest landlord." As of Dec. 31, 2017, the trust owned 108 properties (167 buildings), with an aggregate 17.5 million rentable square feet, according to the REIT’s annual report for 2017. Of GOVREIT’s total RBA, about 44.6 percent was leased by federal government entities, 18 percent was leased by state government tenants, and much of the remainder was leased to smaller governmental units or government contractors.

To date, the trust has generally disposed of properties that are vacant and would be difficult to re-lease, would require high capital investment, or are subject to a weak leasing environment. However, GOVREIT said in its annual report that it would "expand and change" its criteria for property disposition, citing the likelihood of large cuts to the federal government’s workforce.

It reportedly hopes to generate $500 to $700 million from property sales before 2018 is out.

Clare Kennedy, Minneapolis / St. Paul Market Reporter  CoStar Group   
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