Landmark sold

BY GITA SITARAMIAH

Pioneer Press

The landmark First National Bank Building, whose spire is topped by a flashing red "1st" that can be seen for miles at night, is the latest in a string of downtown St. Paul office towers to have a new owner.

The new owner was announced Tuesday as First National Building Holdings Inc. Who's behind the company, where they're from and what they paid to buy the property out of foreclosure wasn't released. The previous owners defaulted on the mortgage in 2005.

The new owner has hired Northstar Partners, an independently operated Minneapolis unit of real estate firm Cushman & Wakefield, to lease and manage the 709,000-square-foot building at 332 Minnesota St. The property actually is a complex of three interconnected buildings that's 73 percent occupied.

Clint Miller, president of Northstar Partners, said he couldn't reveal details about the buyers or about the sale price, but his group will be evaluating what the building needs and how to market it.

"Our marching orders are to do things right, to provide great service to the tenants, to respect the history the building enjoys in the city of St. Paul, in the central business district and in the business community in general, so we're in it for the long term," Miller said.

Downtown office buildings have a vacancy rate of nearly 25 percent. But recent sales show that a drive nationally by institutional investors such as pension funds and real estate investment trusts to buy office towers is pushing sale prices higher. Investors both in the U.S. and abroad are more confident in consistent returns from commercial real estate than Wall Street, experts say.

Among the recent deals in downtown St. Paul, Unilev Capital Corp. of Beverly Hills, Calif., purchased Wells Fargo Place for $106 million in October. Also that month, Plymouth-based Hempel Properties agreed to purchase UBS Plaza, formerly known as the Piper Jaffray Tower. It went for $15 million, Ramsey County officials say.

Also in 2006, the U.S. Bank Center sold for $53.2 million. Galtier Plaza's office portion changed hands for $15.9 million. And Lawson Commons sold in 2005 for $84.5 million.

The sale prices of Wells Fargo Place, Lawson Commons and U.S. Bank Center in particular all have been considered high by real estate observers.

By contrast, the First National space is considered Class B, a step below the Class A amenities offered by Wells Fargo Place or the others. "It's tired and needs a little bit of work and hopefully the new buyer will do that," said Tom Stella, a vice president at Bloomington-based United Properties commercial real estate firm.

Bill Buth, president of the St. Paul Building Owners and Managers Association, said the dealings around the sale have been kept so quiet that even he's not in the know about the new owner — and his office is a tenant.

"When you get new owners, you get some new energy. You get some new thinking. You get some new vision," he said. "That's good for St. Paul."

The most recent owner was New York-based Vance Minnesota Street Associates LP. Foreclosure proceedings started against Vance Minnesota Street in 2005 after the company defaulted on a $47.3 million mortgage. A Ramsey County judge appointed Colliers Turley Martin Tucker as the property's manager.

First National took a blow a few years ago when many St. Paul U.S. Bancorp employees moved to a new West Side Flats location. Since then, the building has gained tenants such as the Minnesota Department of Employment and Economic Development. Other tenants include the Briggs and Morgan law firm and the Bush Foundation.

Louis Warren Hill, son of railroad magnate James J. Hill, served as chairman of the former First National Bank and was key in leading construction of the building. The first phase was done in 1915 and the complex was completed in 1970. First National Bank merged in 1987 with what's now U.S. Bank, based in Minneapolis.

Gita Sitaramiah can be reached at 651-228-5472 or gsitaramiah@pioneerpress.com.