By Matt Johnson - Finance & Commerce
January 15, 2018
A Bloomington office building with a 30 percent vacancy rate has attracted an institutional investor after being taken off the market a year ago.
The Johns Creek, Georgia-based Piedmont Office Realty Trust paid $35.5 million in cash for the 213,851-square-foot Norman Pointe I building at 5601 Green Valley Drive, according to a certificate of real estate value made public last week. Piedmont has a handful of properties already in the Twin Cities.
The property is the second of two Norman Pointe-branded buildings to be sold by New York City-based Gramercy Property Trust in recent years. The buildings are in an office-heavy area in the southwest quadrant of Interstate 494 and Normandale Boulevard.
The purchase price for Norman Pointe I works out to $166 per square foot. Hennepin County values the building at $32.97 million.
Indianapolis-based Duke Realty built the seven-story building in 2001, said Colin Ryan, a senior vice president with the Minneapolis office of Colliers International. Duke then sold the building to Chambers Street Properties, a real estate investment trust Gramercy acquired in a 2015 merger. Ryan, along with Colliers colleagues Mark Kolsrud and David Berglund, represented the seller in the transaction.
Norman Pointe I had been on the market for about a year before Gramercy pulled it back, Ryan said. Gramercy took Norman Pointe I off the market in late 2016 after reaching its asset sales goal for that year, he said. Piedmont, a real estate investment trust, was one of several institutional investors that had expressed interest in buying the property.
Piedmont buys into a small pocket of Class A office properties with the purchase, Ryan said. Gramercy sold the 10-story, 322,000-square-foot Norman Pointe II, at 5600 American Blvd. W., to Ohio-based Boyd Watterson Asset Management in August 2016 for $52.5 million, or $163 per square foot. The building was 92 percent leased at the time, according to Finance & Commerce archives.
The appeal of Norman Pointe I is its amenity-rich location, Kolsrud said. The property is near housing, dining, and the Hyland Park Lake Reserve.
“Tenants want to be in that area,” Kolsrud said in an interview. “It’s always been the Main and Main of suburban office.”
Neither Piedmont nor Gramercy responded immediately on Monday to requests to comment on the deal, which closed on Dec. 8.
Piedmont owns four other Twin Cities office properties, including the 935,651-square-foot U.S. Bancorp Center at 800 Nicollet Mall in downtown Minneapolis, and the 300,633-square-foot Crescent Ridge II at 10900 Wayzata Blvd. in Minnetonka. The REIT owns “high quality” office buildings in eight U.S. cities, according to its website. Colliers’ Ryan said Piedmont is a “long- term” property owner.
Gramercy, a publicly traded REIT, still has several properties in the Twin Cities, its website shows. They include 213,117 square feet of industrial space in the Northern Stacks and 585,225 square feet in another industrial building on East River Road. Both properties are in Fridley.
Gramercy spent the past year marketing Norman Pointe I to prospective tenants. The building’s vacancy rate is 30.2 percent, according to CoStar. Pearson VUE – a developer of computer-based testing – occupies the first five floors of the building. The top two floors remain empty.
Gramercy recently updated Norman Pointe I, adding a fitness center and a “grab-and-go” food service provider, Ryan said.
The office vacancy rate for the I-494 corridor is 17.1 percent, according to the Minneapolis office of CBRE.