The sale of the Colonnade in Golden Valley, a suburb west of Minneapolis, was not the biggest office sale of 2022 for the Twin Cities, or even the area immediately surrounding it. But it was one of the most significant deals, nevertheless, which is why the deal has been selected by a panel of local industry professionals as the winner of the 2023 CoStar Impact Awards Sale/Acquisition of the year for Minneapolis/St. Paul.
In many respects, it was a coup for the buyer, a joint venture between Minneapolis-based Eagle Ridge Partners and BLG Capital Advisors of Chicago.
For one thing, the 16-story, late 1980s-era building at 5500 Wayzata Blvd. has long been a dominant office player in the area. It has consistently boasted a solid tenant roster, which has included more than one headquarters for national and international companies like Pentair and Buffalo Wild Wings.
The Colonnade played a catalytic role in the development of West End, a mixed-use hub just to the building's south that is roughly bounded by St. Louis Park's borders with Golden Valley and Minneapolis. In this sense, the Colonnade paved the way for the West End's most recent success story, 10 West End, one of the first speculative offices to be built in the western suburbs in roughly 20 years. That building, which sits about half-a-mile south of the Colonnade, was completed in 2021 and sold in November 2022 for $117.3 million.
Then there's the price and the circumstances surrounding the deal, which were challenging, to say the least. The property last sold to the Miami-based real estate giant, Starwood Capital Group, in 2017 for a cool $100 million. It went on the market again in July 2020, in the thick of the worldwide coronavirus outbreak and the intense economic and societal turmoil that followed. That time, the bids that came in for the building did not meet expectations. The seller tried again in 2022, and this time interest was brisk, but in a high inflation and high interest environment potential buyers were having a difficult time securing capital, which reduced the number and size of the offers extended.
Enter Eagle Ridge Partners, a firm that had once been a tenant at the Colonnade. The team there knew from first-hand experience that the building had good bones and a stellar leasing record, though at the time of the sale occupancy had fallen to 85%, a historic low for the property. It tapped BLG Capital Advisors, a past collaborator that had proven willing to take on complex deals, to partner up on the purchase.
Through a combination of bargaining, flexibility and creativity the buyer and seller came to the $79 million price tag, a 21% discount over the 2017 sale, and a financing package that minimized the amount of costly, outside debt involved.
Now that the property is in hand, Eagle Ridge Partners has a slate of improvements planned that it hopes will give the building a competitive edge. The firm intends to renovate the building's two-story atrium, expand and enhance its fitness center and refresh its on-site cafe. The piece de resistance, though, will be a new private tenant lounge, which will include golf simulators, indoor and outdoor gathering space, wine lockers and a bar area.
About the project: The Colonnade is a 16-floor, 366,000-square-foot office building at 5500 Wayzata Blvd. in Golden Valley. It was built in 1988.
What the judges said: "I don't think anyone else saw the amazing potential or was willing to take a risk on an 'old' office space right now," said Jackie Knight, chief operating officer for The Ackerberg Group of Minneapolis.
They made it happen: The team from Eagle Ridge Partners included Shannon Van Gemert, Caroline Heinlein, Kristin Myhre, Lisa Peterson and John Scholz. The team from BLG Capital Advisors consisted of Matt Tuthill and Jon Bilton. Ryan Watts, executive vice president at CBRE's Minneapolis office, coordinated the sale. On the selling side, the team involved included Tim Clinton and Brian Mellett of AEW Capital Management of Boston.
