Morgan Stanley Lends $53M in Minneapolis Office Acquisition

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Group RMC has landed a $52.5 million loan from Morgan Stanley in order to buy an office complex in a suburb of Minneapolis, Commercial Observer can exclusively report.

SEE ALSO: Citi Provides $49M Loan for Group RMC’s Tulsa Office Portfolio Buy

A JLL team of Adam Schwartz, Aaron Appel, Keith Kurland and Jonathan Schwartz brokered the debt for the New York City-based landlord, which controls more than 13 million square feet of commercial space, primarily in the Midwest.

Proceeds from Morgan Stanley’s debt package are funding the acquisition of Grand Oak Business Park, a 10-building campus at 860 Blue Gentian Road in Eagan, Minn., about 10 miles south of downtown Minneapolis. The eight-acre property, which includes eight office structures and two retail buildings, totals more than 550,000 square feet.

Group RMC picked up the property from Equus Capital Partners for $70 million, according to Finance & Commerce, a Minnesota business newspaper.

“One of the reasons [Group RMC] really liked this deal was the historical occupancy numbers,” Adam Schwartz explained. “The occupancy has been in the high 80s or low 90s consistently for years, so they’re buying a deal that, in their eyes, has weathered a downturn.”

“Even in 2007 and 2008, there was high 80s or low 90s occupancy,” Schwartz added.

The 10-year, fixed-rate debt is likely to find its way into a future CMBS deal, the JLL broker said.

Office tenants include a legal office, a mental-health services company and a financial-planning firm. Caribou Coffee and Jimmy John’s rank among the property’s retailers. Overall, the property is 92 percent leased, JLL said. The campus abuts a small lake and features a recreational walking trail, outdoor grills and a putting green.

Suburban office markets have taken a hit over the last decade, with office buildings away from city centers fighting vacancies that remain stubbornly higher than competing buildings in downtown areas: Commercial buildings outside of Chicago and Washington, D.C. have been especially beset.

But research from Newmark Knight Frank published late last year hinted at that trend’s reversal. Starting in 2016, U.S. suburbs began to saw 50 percent more population growth than cities in the 15 biggest office markets.

Minneapolis suburbs are home to corporate giants like 3M, UnitedHealth Group and Best Buy. Eagan itself hosts the headquarters for Sun Country Airlines—an American low-cost carrier—and a major regional Thomson Reuters office.

A Morgan Stanley spokesman declined to comment. Representatives for Group RMC didn’t immediately respond to inquiries.