Minnesota Real Estate Journal
August 7, 2000

Sale of World Trade bldg. Closes
Wells Fargo is new anchor
By Edie Grossfield

Zeller Realty Corp., Chicago, is the new owner of the 36-story, 610,000 square foot World Trade Center at Wabasha and Seventh streets in downtown St. Paul. The sale, which had been pending for more than a year, closed July 27. Des Moines, Iowa-based Principal Financial Group sold the building to Zeller.

Neither buyer nor seller will disclose the sale price. However, industry observers say the property likely sold for about $60 million. The assessed market value for 1999 property taxes payable in 2000 is approximately $49 million, according to the Ramsey County tax assessor’s office.

Shortly before the closing, Zeller closed a 15-year lease with Wells Fargo & Co. for 50,000 square feet of the building’s 150,000 square foot struggling retail complex. The company may expand into more space, says Jim Gearen, Zeller vice president. Wells Fargo will operate a full-service bank on two floors of the three-level atrium space, which is served by escalators and elevators. The banking company is vacating some of its space in Norwest Center in downtown St. Paul. Gearen says he expects Wells Fargo to bring about 250 employees.

Wells Fargo will begin moving into the building after the first of the year and should be completed with the move by July 2001, Gearen says.

Putting the World Trade Center deal together was a rocky road, due to the departure of a significant tenant during the negotiation period and issues surrounding Principal’s operating contract for the 1,170-stall, city-owned Seventh Street parking garage, across from the World Trace building, Gearen says.

“Initially, we were going to buy the garage contract, but after discussions with Principal, it seemed to make more sense for them to keep that. But there were all kinds of other issues related to that parking garage that took until January or February to work out,” Gearen says.

Once Zeller knew exactly what it was buying, the company was able to hit the market for financing; that occurred in late February, Gearen says. Patrick Minea of Bloomington-based Northland/Marquette Capital Group Inc. lined up MassMutual Financial Group as the primary lender for the deal.

Terry Kingston and Tom O’Brien of Mendota Heights-based First Capital Financial Services represented Principal in the sale. Zeller represented itself in the sale and leasing agreement with Wells Fargo, Gearen says.

Principal is one of the largest life insurance companies in the United States, owning 80 million square feet of commercial real estate throughout the country, according to John Frandson, Principal’s assistant director of commercial real estate. The company owns more than 1 million square feet of property in the Twin Cities.

Principal owned the World Trade Center for about four years, taking it over after the developer, Brookfield Development, defaulted on a loan (MREJ, 3-22-99).

Principal’s decision to sell the World Trade building was not market-driven but rather “client portfolio-driven,” Frandson says. Principal does not specialize in downtown office properties, but rather in suburban industrial, office and retail real estate.

“We’ve engaged in disposing of many downtown assets around the country to be able to concentrate more on our suburban assets, in which we have greater expertise and experience,” Frandson says.

During negotiations between Principal and Zeller, the law firm Doherty, Rumble and Butler closed its doors, vacating three floors of the building, though one of those floors has already been filled, Gearen says.

In addition to about 75,000 square feet available in the retail area, the World Trade building has four floors and 58,000 square feet of office space available in the tower.

Mike Wilhelm recently left CB Richard Ellis to lead the World Trade building leasing effort for Zeller. Also, Chris Nimmer recently left Carlson Cos. To become the new general manager of the building. Zeller always manages and leases its own property, Gearen says. Brent Wold from United Properties, which was the management company for the building, is staying on with Zeller, as is the building’s entire engineering staff, Gearen says.

With the addition of Wells Fargo as the building’s largest tenant, the World Trade Center has become the new financial hub of downtown St. Paul, Gearen says, rattling off several other financial companies with offices in the building, including Merrill Lynch, Ernst and Young and Morgan Stanley Dean Witter. “I was really amazed by the density of the financial services firms in the building,” Gearen says.

The two second largest tenants are Video Update and the World Trade Association, each with 35,000 square feet. The building’s third largest tenant is law firm Winthrop and Weinstine, which has about 30,000 square feet.

With its drive-through facility and significant signage planned for the exterior of the building, Wells Fargo will have a strong identity in the World Trade Center and in St. Paul, Gearen says.

“They’ve made a 15-year commitment to downtown St. Paul and they’re making a very significant cash investment in building out their space and relocating; so they’re very bullish on downtown St. Paul,” he says, adding that the World Trade Center will not be renamed.

When Wells Fargo officials first looked at the atrium space, they were not greatly impressed, “until they understood how well the space could work for them,” Gearen says.

Instead of operating between several floors in Norwest Center, Wells Fargo will have just two to work with in the World Trade building. “It makes their various departments much more easily accessed by their customers,” Gearen says.

Renovation plans sustain the open, skylit feel of the atrium while creating a more formal commerce atmosphere, Gearen says. The existing “hodgepodgy” storefronts, as Gearen describes them, will be replaced with a uniform wood and glass storefront for the bank.

“Really, the atrium acts as the front door to the building, so, your first impression will be that of a higher quality financial institutional building, as opposed to coming in through a shopping center,” Gearen says.

Some of the current tenants in the retail area will be staying, while others will not, Gearen says. Most likely, those staying are service-oriented businesses geared toward the office tenants.

Considering that a few past redevelopment plans for the retail atrium never came to fruition and the number of years the shopping center languished, John Labosky, president of the St. Paul Capital City Partnership, says he is pleased about the new owner of the World Trade Center.

“I think it’s great news for downtown St. Paul. It shows that we’re having more private sector firms wanting to invest here,” Labosky says. “There were a lot of bidders and I’m glad Zeller got it because they have a lot of experience with these types of assets.”

Capital City Partnership assisted in convincing Zeller’s lenders to make the investment in the building by espousing the revival of downtown St. Paul, Gearen says. The group also worked with the city on finding solutions for making the drive-through component work.

With the World Trade Center added to its portfolio, Zeller now owns 2.5 million square feet of office properties in the Twin Cities, including International Centre and Kinnard Financial Center in downtown Minneapolis. The company’s total portfolio consists of 4 million square feet.

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