Water Street buys into the North Loop
May 29, 2019 2:59 pm
An off-market sale of a 19th century North Loop warehouse converted to offices comes with a promise from the new owner to remodel common spaces and add amenities.
Excelsior-based Water Street Partners paid $9.25 million for the Union Plaza building at 333 Washington Ave. N. in Minneapolis, according to the company. The 66,855-square-foot building, constructed in in 1895, is in a neighborhood that has seen much of its former warehouse space converted into offices and apartments. Across the street at 300 Washington Ave. N., the 124-room Hewing Hotel opened in a former manufacturing building in 2016.
The seller in the transaction was an entity related to Houston-based Hines, according to records on file with Hennepin County and the Minnesota Secretary of State’s office. An electronic certificate of real estate value for the transaction had not been made public as of Wednesday afternoon.
The deal, which closed on Tuesday, works out to $138.36 per square foot of space. The county values the five-story building at $5.78 million for tax purposes.
Tenants at Union Plaza include DJR Architecture, numerous law firms and business services providers. The property’s vacancy rate is about 30 percent, said Jim Hegedus, Water Street’s managing partner.
Water Street plans to renovate the building’s common areas, including the lobby. New amenities will likely include a conference room and a tenant lounge area, Hegedus said in a Wednesday interview. Work will begin in the third quarter of the year, according to a company press release.
The intent behind the work is to fill the vacant space in the building, he said. Water Street will likely own the property for at least three years.
Union Plaza is in a competitive office marketplace in the North Loop, which will soon see United Properties open its new, 10-story Nordic office tower at 729 Washington Ave. N. this year. Union Plaza is targeting generally smaller tenants looking for a lower price point for a lease, Hegedus said.
“We’re just going to be a little bit cheaper option,” he said. “We’re going to be a value play at the end of the day.”
The Union Plaza deal was arranged through a “mutual connection” between Water Street and Hines, Hegedus said. Hines did not immediately respond Wednesday to a request to comment.
Water Street Partners has previously invested in other types of Twin Cities commercial real estate. The company paid $10 million in 2017 for a 78,190-square-foot flex-office building at 9300 Winnetka Ave. N. in Brooklyn Park. The company plans to buy two to four more office or flex-office buildings to add to an investor fund it closed late last year, Hegedus said.
This article about Water Street Partners comes from Finance & Commerce.