Pickup in flex property sales bodes well for 2018

Commercial real estate experts think a spate of flex and industrial property sales in recent days is proof that these markets will be as active this year as they were in 2017.

Four suburban deals totaling $57.23 million have closed since May 15 with local companies and out-of-state real estate investment trusts doing the buying.

The sales come out of marketing done in the first and second quarter, said Judd Welliver, a senior vice president specializing in office and industrial sales with the Minneapolis office of CBRE. Welliver’s team represented the sellers in all four of the deals.

The sales come after a slowdown in commercial real estate sales that Welliver said is normal for the time of year. Brokers for sellers spent the first part of 2018 marketing properties after closing out fourth-quarter deals at the start of the year.

“You don’t typically see a lot of closings early in the year,” Welliver said Wednesday. He anticipates the Twin Cities office and industrial markets this year will achieve roughly the same sales volume as in 2017.

Even so, sales in the flex office and warehouse category in the Twin Cities are ahead of the same period in 2017. Through the end of April, $124.2 million of the real estate type had sold, according to data from New York-based Real Capital Analytics. Sales in the first four months of 2017 were $77.1 million.

Water Street Partners, the buyer in one of the CBRE deals, made its first property purchase last week in Brooklyn Park. Former Excelsior Group executives Joe Boone and Jim Hegedus formed Water Street in September, as Finance & Commerce previously reported.

Hegedus said deals have taken extra time to get moving this year as sellers hold firm on pricing. Buyers are also taking their time, he said.

“On the buyer’s side, I think we’re all being a little bit pickier,” he said.

The properties that changed hands in the last 10 days or so are in suburban communities throughout the Twin Cities.

  • Boston-based STAG Industrial paid $27 million on May 15 for two properties: a fully leased 422,727-square-foot warehouse at 411 Farwell Avenue S. in South St. Paul, and a fully occupied 87,183-square-foot office and warehouse building at 2250 Pilot Knob Road in Mendota Heights, according to a CBRE press release. The seller is San Francisco-based Farallon Capital Management, Dakota County property records show. Farallon purchased the two buildings for $21.75 million last August, according to Finance & Commerce records. Dakota County values the properties at a total of $14.23 million for tax purposes. The deal works out to $52.96 per square foot.
  • Hopkins-based Finke Associates paid $11.075 million for the City West Business Center North and South, a pair of industrial flex buildings in Eden Prairie, according to a recent certificate of real estate value. The buildings, at 6541 and 6477 City West Parkway, have a combined 172,904 square feet of space. The seller is a company related to Plymouth-based Provident Real Estate Ventures. The deal closed on May 15. The properties last sold in 1996 and 1997 for a total of $8.9 million. Hennepin County values the properties at a total of $12.96 million. The deal works out to $64 per square foot.
  •  Excelsior-based Water Street Partners on May 18 paid $10 million for a 78,190-square-foot flex office building at 9300 Winnetka Ave. N. in Brooklyn Park, according to a CRV made public Tuesday. The seller was Dallas-based Lone Star Funds, which has been selling off a number of its Twin Cities assets. Lone Star purchased the property for $10.2 million in August 2015, according to Hennepin County Property records. The 610 Business Center IV property is in the southeast quadrant of highways 610 and 169. The county values the property at $5.71 million for tax purposes. The deal works out to $127.89 per square foot.
  • The Fargo, North Dakota-based Dakota REIT paid $9.15 million for the Apple Valley Business Center, which consists of a 48,733-square-foot single-story office building at 5550 West Upper 147th St. and an adjacent 56,320-square-foot distribution space at 14720 Energy Way. Questar, a K-12 educational assessment provider, occupies both buildings. The transaction closed on May 15. The seller is the St. Louis Park-based Excelsior Group. Dakota County values the property at $6.21 million for tax purposes. The deal works out to $87 per square foot.

The year started with brisk flex space sales activity. St. Louis Park-based Eagle Ridge Partners and Maryland-based Artemis Real Estate Partners paid $70 million for a 12-building Twin Cities flex industrial portfolio in March. Minneapolis-based Capital Partners and New York-based Investcorp International paid nearly $51 million for an 11-building portfolio of in January.

Welliver said his team is presently working on about 30 deals.

Water Street will be one of the buyers in the market. The company plans to purchase four to six properties in the next 12 to 18 months, Hegedus said.

Welliver’s team at CBRE includes Ryan Watts, Sonja Dusil and Tom Holtz.

 

This article about Water Street Partners comes from Finance & Commerce.