Heart of City building foreclosed, sold
The new owners of Grande Market Square – a signature building in Burnsville’s Heart of the City – hope more market-friendly rent levels will revive interest in the half-empty property, which was sold Aug. 9 after falling into foreclosure.
Delaware corporation RREF SS1 Acquisitions LLC bought the building for $2 million at a sheriff’s auction, according to Dakota County records. Developer Grande Market LLC owed $4.64 million on the $3.5 million mortgage, which dates back to December 2005, according to the public sale notice.
The president of Grande Market LLC was developer George Sherman of Sherman Associates, whose two new buildings west of Nicollet Avenue and south of Burnsville Parkway were at the forefront of the Heart of the City downtown redevelopment.
Grande Market Square, the smaller of the two red brick buildings, was completed in 2004. Grande Market Place, an apartment and retail building, isn’t part of the foreclosure or sale.
Grande Market Square is about 50 percent vacant, said Steve Shepherd, a leasing agent for Colliers International, which was recently hired to market the building.
By contrast, the office vacancy rate across Burnsville is “probably in the low 20s,” Shepherd said.
Longtime tenants Jensen’s Cafe and the Ficus and Fig gift shop remain, but a string of tenant losses includes Renaissance Floral and Royal Banquet and Ballroom, both of which closed earlier this year.
Grande Market Square was built at a time before the economic downturn when lenders and builders had higher expectations for what tenants would pay, Shepherd said. Financing deals often reflected that, leaving little room to cut rents, he said.
“That isn’t the case for my owner. We’ve certainly gotten to a pricing level that’s in touch with where the market’s at today,” Shepherd said.
“Whereas the previous ownership group was hoping to achieve rents at least in the $14 net range (per square foot), and I think higher in some cases, we’re listing it right now at $11.50 per square foot,” he said. “Just right there, the difference in quoted rates is about 30 percent.”
Businesses are responding, Shepherd said.
“We’re close to a deal, and I’ve got a couple other proposals out,” he said. “Activity has been strong.”
A potential pool of tenants is right across Burnsville Parkway at the Parkway Place building, said Burnsville Economic Development Coordinator Skip Nienhaus.
Owner Pinehurst Properties has notified Parkway Place tenants they need to be out by the end of October. Pinehurst has been silent about what is believed to be a pending sale and what will become of the building.
“There’s 10 or 11 tenants over there all needing space,” Nienhaus said.
Grande Market Square was thriving before the economic downturn, Nienhaus said. Two of the original tenants – the International Chefs’ Culinary Center and Nichols Financial – went out of business while renting space in the building, which has 31,640 rentable square feet.
“The sad thing is, prior to the downturn, the building for all intents and purposes was 100 percent occupied,” Nienhaus said. “The downturn basically took down Nichols Financial, which had most of the third floor, it took down the banquet center, which had all of the second floor, and it was probably some contributing factor to Renaissance Floral. Unfortunately, Sherman was sitting in the middle of a downturn with a whole bunch of vacancies in what had been an almost full building.”
Nienhaus hopes additional traffic to the area generated by the CVS Pharmacy under construction across Nicollet Avenue will help boost Grande Market Square.
Some business owners say past additions of two other traffic drivers in the Heart of the City – the Cub Foods store and the Performing Arts Center – boosted their business, Nienhaus said.