One Financial Plaza Defaults, Goes Back to Lender
Downtown Minneapolis skyscraper One Financial Plaza was recently turned over to its lenders after property owner Behringer Harvard defaulted on its loans.
Industry experts believe this is the first instance of a downtown office-tower default since the onset of the economic downturn.
Michelle Surkamp, a spokeswoman for Minnetonka-based NAI Welsh, confirmed Thursday morning by phone that the property was turned over to lender LNR Partners on December 3. NAI Welsh is working for new owner LNR Partners-a division of Miami-based LNR Property-as the property's manager, leasing agent, and building maintenance provider.
Representatives at Behringer Harvard, a Dallas-based real estate investment trust, did not immediately return phone messages on Thursday morning.
One Financial Plaza is a 40-year-old building located at 120 South Sixth Street. It contains 393,902 square feet of space and was acquired by Behringer Harvard in 2005 during the height of the commercial real-estate boom.
According to Hennepin County property records, Behringer Harvard bought the 27-story building for $57.2 million. Its estimated market value as of January 2009 was $20.9 million.
Surkamp said that the only other commercial property that she knows of that's been turned over to its lender in recent years is Woodbury Lakes-a high-end mall that sits along Interstate 94 at Radio Drive in Woodbury.
One Financial Plaza is now 62 percent occupied, Surkamp said. Major tenants include law firm Nilan Johnson Lewis and ad agency Clarity Coverdale Fury. Another sizeable tenant, the Minneapolis/St. Paul Business Journal, recently announced plans to vacate the building early next year, at which time the building will be 61 percent occupied.
Building owners have struggled to attract and maintain tenants in recent months given the current state of the commercial real estate market-which has given tenants lots of leverage and prompted some to start exploring new leasing options very early on. Landlords are making attractive offers that encourage existing tenants to re-up their leases well in advance of their expiration-and that secure new tenants several years out.