Hennepin County to Buy 701 Building for $25.8M
The Hennepin County board on Wednesday approved the county's purchase of the 18-story 701 Building in downtown Minneapolis for $25.8 million.
The county has been in discussions with the building's owner-CH701, LLC-for several months about purchasing the 286,596-square-foot building, which is located on the corner of Fourth Street South and Seventh Street South.
CH701 is a partnership between Dallas-based Cawley Partners and an unnamed capital partner firm in Chicago.
The county plans to move about 150 employees from the Environmental Service Building (ESB) to the 701 Building by November. The ESB is located near Target Field and is being demolished to make room for a transportation hub.
Public defenders who work for the county already occupy more than 63,000 square feet of space in the building-which has a total of about 20 tenants.
According to Michael Noonan, manager of the county's real estate division, CH701 purchased the building in 2007 for $15.3 million. At that time, the building was only 30 percent occupied.
Noonan said that the current purchase price is “below book value” considering that the building is now 90 percent occupied and that CH701 has performed several improvements for tenants-including adding a fitness center and conference rooms.
The purchase is expected to close in June. The actual sale price of the building was about $23.3 million, with the remaining money being held in a reserve account to cover the cost of tenant improvements, landlord costs, and brokerage commissions.
In its proposal to the board, the county said that the purchase of the building “represents a good value to the county” because the cost of the building is much lower than the cost of construction, and it will create cash flow for the county.
Noonan said that the county expects the building to be paid for in about 12 years using the money that it is saving from consolidating operations and rent money it receives from tenants.
About 32,000 square feet remain vacant in the building. Noonan said that the next logical county candidate to move into that space would be employees from the Minneapolis Grain Exchange offices, but no move date has been set.