by This e-mail address is being protected from spambots. You need JavaScript enabled to view it Staff Writer, Finance and Commerce

 Ramsey County has swung a deal to buy the Metro Square Building in downtown St. Paul.

The county paid $4 million for the 350,000-square-foot office building. The sale closed on Friday, Oct. 9. The rock-bottom price is not much more than $11 per square foot.

Ramsey County bought the building at 121 East Seventh Place from the Miami Beach, Fla.-based LNR Partners Inc. The lender had taken control of the property when the owner handed it back (a deed in lieu of foreclosure) in 2008.

Julio Mangine, director of property management for Ramsey County, said that when the county first began pursuing the building, the price was $14 million.

The county bought the building in order to relocate remaining county employees out of the old West Publishing complex on Kellogg Boulevard. The county has been shopping that site, overlooking the riverfront, for redevelopment for years, but plans have fizzled.

In the long term, the county is hoping to improve the redevelopment prospects for the riverfront site by vacating the building.

“The overall plan is that we’d have everyone out of the West building who’s going to go to Metro Square by late 2011,” Mangine said.

Much cheaper than building

Mangine said that the county expects to invest close to $10 million in upgrades and overhauling the HVAC and other systems.

“It’s six, seven times cheaper than building something new,” Mangine said. “It’s in a good area. It’s got lots of parking around it. We did our due diligence. Our intent is to really go down there and fix up the systems.”

The county will issue a request for proposals (RFP) for architectural and engineering services for the project.

The building is currently about two-thirds vacant. Various state agencies lease approximately 113,000 square feet there and will continue to do so, Mangine said. Mangine estimated that the county needs about 200,000 square feet for its employees.

The Metro Square deal is not the first time that the county has capitalized on distressed real estate. The county previously bought 90 West Plato Blvd. for $2.6 million, also from LNR Partners, a few years ago.

“I had experience working with LNR. That one had gone through the foreclosure process,” Mangine said of the deal for the Plato Boulevard property.

A government town

Based on current office space occupancy, St. Paul is clearly a government town.

The Greater St. Paul Building Owners and Managers Association (BOMA) calculates that nearly one-third, or 31 percent, of all office space in downtown St. Paul is government owned. BOMA’s latest market report shows that various government agencies own 5.3 million square feet of office space in downtown St. Paul.

Numerous government entities are also tenants in private office buildings in downtown St. Paul.

Statistically, the deal will drive down vacancy in the downtown St. Paul market by taking it off the private, multi-tenant market.

Building sales have been very slow amid the current economy.

But Minnetonka-based Opus Northwest sold the first phase of the recently completed Crest Ridge Corporate Center in Minnetonka for $28.4 million. The 116,000-square-foot LEED-Gold building is fully leased to Syngenta Seeds.

That deal worked out to roughly $245 per square foot, more than 20 times the square foot price in the Metro Square deal.

The Metro Square deal reflects the trend toward distressed commercial properties changing hands.

At the other end of the spectrum, the vacant, 200,000-square-foot Northland Corporate Center in Brooklyn Park sold for a mere $1.3 million to a Minneapolis investor in April. The corporate office building dates to the mid-1980s, but had gone back to the lender.

The price of roughly $6.50 per square foot for the Northland Corporate Center set a new low for the sale of a local office building.

View article on the web: http://www.finance-commerce.com/article.cfm/2009/10/15/Ramsey-County-buys-Metro-Square-cheap