LaSalle Plaza sold at steep discount, new owner to add pickleball court

Downtown Minneapolis office buildings have quickly lost value through the past couple years, but some investors are now seeing opportunity.

LaSalle Plaza, a 30-story stone and glass office tower in downtown Minneapolis, sold this week for about half its estimated tax value, making it one of the first high-profile office buildings to trade hands since the beginning of the pandemic.

Twin Cities-based Hempel Real Estate bought the tower — at 800 LaSalle Ave. about a half-block from Hennepin Avenue — and plans to invest heavily in updates to the building. Some of that will involve upgrading finishes in the building, but some will be larger projects, including adding an indoor pickleball court in place of a vacant restaurant space. A private car service of a small fleet of Cadillac Escalades will also be available to shuttle building tenants around downtown Minneapolis.

The sale is vote of confidence in the future of downtown’s office buildings, but also a reflection of just how much damage the pandemic dealt to the commercial real estate sector that thrived before it.

“We want to take a strong position [in the downtown office sector],” Hempel CEO Josh Krsnak said. “We feel now is the time where the market is starting to reset to a basis where the market now makes sense.”

Like other downtown buildings. the value of LaSalle Plaza has fallen quickly since the start of the pandemic. In 2020 — payable in 2021 — the value of the tower peaked at a bit more than $103 million, according to Hennepin County property records.

A source close to the deal said the building sold for $46 million, well below its current estimated market value of $87 million.

Hempel essentially bought the debt from Milwaukee-based Northwestern Mutual, which took possession from the previous owner, Teachers’ Retirement System of the State of Illinois, so terms of the deal are not publicly filed.

According to recent data from the city assessor, the most expensive downtown office buildings in the Cental Business District (CBD) are quickly losing value, draining millions of dollars of property tax revenue out of the city’s coffers.

Krsnak said the building was too good to pass…