History: Hennepin County has been in discussions with Thrivent Financial for Lutherans (Thrivent), the owners of an existing office building located at 625 4th Avenue South in the City of Minneapolis, for the acquisition of the Thrivent Building. These discussions have taken place in light of the County’s workforce planning and space needs. The acquisition of the Thrivent Building meets identified needs of the County, provides for the consolidation of County functions, permits the vacating of space leased by the County and enables certain County real estate to be vacated and declared surplus.

In addition to the Thrivent Building, Thrivent is the owner of three surface parking lots east of the Thrivent Building. Thrivent has indicated plans to move ahead with the construction of a new corporate campus on property it owns within the block bounded by 6th Street South, Portland Avenue South, 7th Street South and 5th Avenue South.

Built in 1981, the Thrivent Building is a 525,000 gross square foot (475,000 usable square foot), 18 story office building. The negotiated purchase price of the Thrivent Building is $55,000,000. Using the replacement valuation methodology, the cost of the acquisition of the Thrivent Building is $105 per gross square foot as compared with the cost of new construction of $325 per gross square foot.

At the same time, Hennepin County has been in discussions with Interstate Parking Company (Interstate) for the acquisition of parking stalls and related spaces (skyway connections and pedestrian circulation) within a development to be constructed on the half block, surface parking lot immediately east of the Thrivent Building (fronting onto 6th Street South, 5th Avenue South and 7th Street South). Under a purchase agreement that has been entered into between Interstate and Thrivent for the purchase of the land on which Interstate’s development is to be placed, Interstate is proposing a mixed use development on the property consisting of street related retail, 87 housing units, and approximately 750 parking spaces located in a facility with one level of underground and seven and one half levels of above ground parking. The County parking stalls will support operations at the Thrivent Building, provide for County related parking that will be lost with the demolition and redevelopment of the parking ramp on the corner of 4th Avenue South and 5th Street South, and permit the repositioning of the parking facility at the Government Center.

Current Request:

Authorization to negotiate Purchase Agreement (A177629) with Thrivent for the acquisition of the Thrivent Building, 625 4th Avenue South, in accordance with the following business terms:

• Property – the Thrivent Building located at 625 4th Avenue South;
• Purchase Price - $55 million. Earnest money of $250,000 paid at the execution of the Purchase Agreement (the Effective Date) with the balance to be paid at closing;
• Contingency period of 45 days from Effective Date for the County to satisfy itself on title, survey, and environmental considerations;
• Conditions to closing:
  • Government approvals to be obtained by Thrivent and Interstate, respectively, for the new Thrivent corporate campus and the Interstate development
  • Parking and reciprocal easement and operating agreement with Interstate
  • Design and architectural approval of the parking ramp and skyway connections
  • Agreement for the extension of the skyway system, cost sharing and operating costs
  • Leaseback with Thrivent, and
  • Period of 180 days from the County’s waiver of all contingencies.       

An inability to meet any of these conditions to closing permits Hennepin County to terminate the Purchase Agreement and receive a full refund of earnest money without penalty or deduction;

• Closing date – 30 days from the waiver of all conditions to closing; and
• Leaseback with Thrivent – proposal to permit Thrivent to occupy the Thrivent Building for a period of up to 36 months from Closing at a net rent of $8/rentable square foot (an annual payment of $3.8m). Thrivent will pay all operating costs, property taxes and assessments.

Authorization to negotiate Purchase Agreement (A177630) with Interstate for the purchase of parking spaces located in a mixed use development to be constructed on the half block immediately east of the Thrivent Building (fronting onto 6th Street South, 5th Avenue South and 7th Street South) in accordance with the following business terms:

• Property – approximately 332 parking spaces located in the parking facility to be constructed by Interstate. The location of the parking spaces to be purchased shall be segmented from a real estate perspective to the satisfaction of Hennepin County;
• Purchase price – an amount not to exceed $11,500,000 for the approximately 332 parking stalls, skyway connections and related spaces. A guaranteed maximum price of $31,500 per parking stall has been established. Interstate shall provide Hennepin County its development and construction proforma setting forth the proportionate costs attributed to various uses and users in the development and shall provide a line by line accounting of the per stall cost of parking. Interstate shall provide Hennepin County access to its budgets, bid documents and contracts. Should Hennepin County not find the proforma or accounting satisfactory it has the right to terminate the Purchase Agreement. The guaranteed maximum price and cost of skyway connections are subject to review and adjustment as the project is bid and contracts awarded;
• Financing - Hennepin County or affiliated entity may provide project financing for the construction of the parking facility. An initial payment shall be made to Interstate as of the Effective Date of the Purchase Agreement with progress payments be advanced throughout construction;
• Contingencies – without limiting the generality of the foregoing, Hennepin County must be satisfied as to title, survey and environmental considerations;
• Contingency period – 45 days from the Effective Date of the Purchase Agreement;
• Conditions to closing:
  • Government approvals
  • Parking and reciprocal easement and operating agreement detailing sharing of operating cost and revenue sharing
  • Design and architectural approval
  • Skyway agreement for the extension of the skyway system and the sharing of capital and operating costs
  • Proof of financing
  • Right of first option, where Hennepin County will hold the right to purchase the parking interests of Interstate should it decide to sell those interests
  • Meeting of Hennepin County contract hiring goals and small business utilization goals, and
  • Period of 180 days from the County’s waiver of all contingencies. 

An inability to meet any of these conditions to closing permits Hennepin County to terminate the Purchase Agreement  without penalty or deduction;

• Closing – at substantial completion of the construction of the Interstate development (anticipated to be spring/summer 2019).

The County Attorney will prepare a purchase agreement that incorporates the above noted business terms along with standard legal provisions associated with a real estate transaction.

The County Administrator is directed to include project costs associated with the acquisition of the Thrivent Building and parking from Interstate Parking Company within the 2018 – 2023 capital plan. 

Authorization to enter into Agreement A177703 with NTH Inc. for the provision of real estate and consulting services related to the transactions with Thrivent and Interstate.

Impacts/Outcomes: The adoption of this Board Action Request and its specific actions will permit the county to negotiate the purchase of Thrivent Building and associated parking from Interstate. This purchase would strategically address the county's long term space needs, allow for consolidation of operations, the sale of county properties and a reduction of leasehold interests.