Travelers had two buildings in downtown St. Paul that previously housed the St. Paul company’s headquarters. When combined, the two Class A buildings consisted of approximately 1.1 million square feet. After acquisition by Travelers, the 485,000 square feet North Tower was highly underutilized.
This presented a steep challenge. Not only had downtown St. Paul experienced over 20% vacancy for a couple of decades, but there was minimal growth occurring in St. Paul.
Quietly we began the process of approaching large users of space in the market and reaching out to the brokerage community through a non-disclosure statement. Travelers was not in a rush to dispose of the space and was willing to work a methodical process to connect with likely users. It helped that Travelers was willing to be patient as we worked a difficult task of finding the ideal user(s). The ideal user needed to be a company that would complement Travelers since the common areas of the two buildings, including the cafeteria, would continue to be shared. After being in dialogue with prospective companies for about one year, two prospective companies emerged as possible tenants. Both companies needed a large amount of space and it was not possible to accommodate both. The challenge became that neither company was anxious to commit expenses after coming out of a deep recession.
Ultimately, Ecolab emerged and changed from being a prospective tenant to desiring ownership of the entire north tower building. This created additional complexity as Travelers desired to continue to lease a portion of the north tower back from Ecolab for several years. A lease to address this short-term need had to be completed on top of negotiating a purchase price.
Our efforts included direct marketing efforts, negotiating the terms of the purchase price and common area lease. In addition, our services include providing a valuation analysis and assisting with due diligence activities including discussions around rentable square footage and common area allocations. We were fortunate to have strong assistance from the Travelers team, legal professionals and architects throughout the process. In the end, we helped Travelers monetize an asset that was a sunk expense prior to these efforts.