Tighter lending requirements and high interest rates have made purchasing property in Minneapolis difficult over the past few years but that didn’t deter a team from CBRE from pulling off a $225 million deal that marked the largest office transaction of 2023.
The sale of 17 stories in the 37-story RBC Gateway development included 525,000 square feet of office space, a ground-floor office lobby and 296 executive below-ground parking spaces. It also came with high-quality tenants that occupied 99% of the office space in one of the newest buildings on the market.
CBRE was originally hired to raise equity for the project in 2018 but it was retained by the owner, United Properties, in 2022 to lead the sale. Despite the effects of the COVID-19 pandemic on office real estate, CBRE launched a robust marketing campaign emphasizing the rare opportunity to buy nearly half of RBC Gateway along with its substantial amenities within the dynamic Minneapolis central business market. The team also highlighted the property’s in-place cash flow from tenants including Pohlad Companies and real estate firm JLL in addition to the tower's namesake, RBC Wealth Management.
The economic uncertainty and reduced investor activity induced by the pandemic added numerous twists and turns to the search for the right buyer. In the end, a deal was struck with San Francisco-based Spear Street Capital at $429 a square foot. The deal’s size completed in a difficult market led to its selection as the winner of the 2024 CoStar Impact Award for sale/acquisition of the year in Minneapolis/St. Paul, as judged by a team of real estate professionals familiar with the market.
About the Deal: The $450 million RBC Gateway was completed for $450 million in 2018. In addition to office space, the property also includes 34 luxury homes, the 222-room Four Seasons Minneapolis hotel, a public plaza and skyway to the Minneapolis Public Library.
What the Judges Said: "In what has been a difficult office market, this sale was truly remarkable [in] setting a high-water mark in Minneapolis," said Joe Conzemius, vice president at CBRE. Ackerberg President Jackie Knight said the transaction was huge at a time when other office buildings were being given back to the lender in the same area.
They Made it Happen: CBRE professionals involved in the deal included executive vice presidents Ryan Watts and Tim Holtz; Brandon McMenomy, executive director of global capital markets; Steven Ward, director of capital markets; Harrison Wagenseil, first vice president; and Thomas Williams, associate.