The Excelsior Group and Goldman Sachs made close to $50 million profit by selling the West End Office Park on Friday.

The St. Louis Park complex sold to Atlanta-based Bridge Investment Group for $130.8 million, according to a certificate of real estate value that was made public on Tuesday.

Five years ago St. Louis Park-based Excelsior Group and New York-based Goldman Sachs Asset Management Private Real Estate paid $40 million for the six-building, 568,000-square-foot campus. They spent $27 million on upgrades to common areas, elevators, restrooms, parking areas and other areas of the property.

Those improvements helped the complex bring in new tenants and renew existing tenants. In total, 360,000 square feet of new leases and renewals were signed.

Excelsior Group and Goldman Sachs had to also pay for tenant improvements and leasing costs. The market average for tenant improvements is about $30 a square foot, according to a Colliers International Minneapolis-St. Paul report from last year. That would add another roughly $10.8 million to the project cost.

And leasing costs, according to industry sources, were likely a few million dollars.

That means that all-in, Excelsior Group and Goldman spent roughly $81 million and sold the property for $131 million — giving them a profit in the ballpark of $50 million.

The sale price works out to $233 per square foot, which rivals some recent downtown Class A office tower sales.

Excelsior Group CEO Chris Culp declined to disclose total costs for the project, but acknowledged it was a very successful venture.

“It was a great financial success, but more importantly we are really proud of what we have been able to do for the West End,” he said.

The West End has been a hot real estate market, even though the retail space has struggled inside of the Shops at West End development. Already, Excelsior Group and Ryan Cos. US Inc. have broken ground on a speculative, 343,000-square-foot office building next to the West End Office Park.

“The attraction is the energy level,” said Jason Butterfield, a senior director at Frauenshuh who specializes in suburban office leasing. “There’s a tremendous energy level because of its central location and accessibility.”

Brent Erickson, senior managing director for Newmark Knight Frank’s Minneapolis office, said the purchase price is a reflection of the high demand for quality office space with a lot of amenities.

“It’s also a reflection of companies needing to have office space where they can position themselves best to hire employees,” he said.

January 28, 2020  |  By MSP Business Journal |  Original Article