By FREDERICK MELO
St. Paul Pioneer Press
ST. PAUL, Minn. (AP) — Built over a century ago as headquarters for James J. Hill’s two railroad enterprises and First National Bank, a mammoth Lowertown building is getting new life as an office for government agencies and their clients.
The 14-story, block-length Great Northern Building at 180 E. Fifth St. opened in 1916, the year Hill died. It remains St. Paul’s largest office building and was the largest in the Twin Cities until the IDS Center’s construction in Minneapolis in the late 1960s.
“It’s a significant piece of downtown architecture, and we want to make it shine again,” said Matt Jacobs, managing director of New York-based Gamma Real Estate, which has taken an interest in real estate ventures throughout the South and Midwest.
The Great Northern, which is listed on the National Register of Historic Places as a contributor to the Lowertown Historic District, is Gamma’s first venture in Minnesota’s capital city, the Pioneer Press reported.
When Gamma, a Park Avenue real estate firm founded and operated by multiple generations of the Kalikow family, discovered the Great Northern Building, a significant amount of its more than 600,000 square feet of office space was empty. Gamma purchased the building out of receivership for $52 million in 2019 and has invested $2.5 million into remodeling floor space and common areas, including the former Great Hall, a ballroom-like lobby so large it once held weddings and other events.
Following a $1 million renovation, the Great Hall now is a 500-person lounge, two stories tall and unique among downtown office amenities. Improvements are planned for the adjoining 267-seat Jerome Hill Theater, which could play a central role in a future conference center beneath the suite of existing conference rooms on the second floor.
Jacobs called the remodel the upside of having “well-capitalized landlords” with “a very strong reputation in the market that we work in for fulfilling promises that we make, that level of institutional practice where you know what you’re getting.”
The Great Northern — not to be confused with the Great Northern Lofts condo building on Kellogg Boulevard, which was the previous headquarters for the Great Northern Railroad — once housed the offices of Gander Outdoors before the retailer declared bankruptcy in 2017 and consolidated its offices in Bloomington.
The stately structure near Lowertown’s Mears Park almost housed Ditech Financial, formerly Green Tree Servicing, Inc., a mortgage and lending company that took its residential lending unit through bankruptcy in 2012 and ultimately left the state. An 11th-floor space that had been built out for Ditech never was occupied.
Cray, the supercomputer company, also had overflow space in the building. They too left St. Paul, leaving then-owner Talon Holdings with few big tenants.
Gamma Real Estate, which completed major renovations a year ago, saw a diamond in the rough.
“We were enthusiastic about downtown St. Paul, and St. Paul in general, viewing it as a value play over Minneapolis which has had explosive growth over the past few years,” Jacobs said. “I’m from New York, and I take Brooklyn over Manhattan as an example.”
Jacobs said the Minneapolis skyway system has fostered its own indoor urban environment with seating areas and rows of vendors, while “St. Paul seemed to be missing the same thing, even though it had the bones for it.”
Gamma courted Green and the Grain, a fast-casual salad eatery with multiple locations in the Minneapolis skyways. The Great Northern building will be both a retail location and their Twin Cities catering hub. “They’re on the ground level, so they’ll have both indoor and outdoor visibility,” Jacobs said.
Chris Gliedman, a senior associate with CBRE, the project leasing team, said Green and the Grain almost was ready to open in March 2020 when government lockdowns sent office workers scrambling home in light of the pandemic. He’s hoping as office workers return, so will the salads.
Potential tenants are offered net rental rates of $11-$12 per square foot, on top of $8 per square foot in operating costs.
Jacobs declined to give specific occupancy levels, though national listing agencies describe the building as about 70 percent occupied. Most of the tenants are “government adjacent,” said Jacobs, meaning contractors and consultants who do business with government agencies.
In an unusual twist to pandemic-era real estate negotiations, two government agencies with sizable presences downtown will switch office buildings.
The Minnesota Department of Employment and Economic Development, currently based in the First National Bank building on Minnesota Street, will occupy floors 11-13 in the Great Northern by August, bringing over 700 state employees. The lease involved securing some 500 stalls of nearby parking.
In a written statement last February, DEED director Steve Grove said the move to the Great Northern will “save taxpayers thousands of dollars every year with a reduced footprint, while substantially improving the workspace for our employees.”
The U.S. Army Corps of Engineers also has a sizable presence in the Great Northern, but has planned a $10 million build-out of office space within the First National Bank building. They could relocate within a year. In effect, DEED and the Army Corps are swapping addresses.
“There’s some large deals in the pipeline,” Jacobs said. “There’s still space for lease.”