Sold: Blue Cross and Blue Shield headquarters in Eagan

Blue Cross and Blue Shield of Minnesota has a new landlord at its Eagan headquarters.

On Monday, Arsenault Holdings paid Net Lease Office Properties more than $60 million for two Class A office buildings, which are known as River Park I and II. Those buildings are fully occupied by Blue Cross and Blue Shield, which said it had recently signed a long-term lease.

The health insurer vacated other buildings on its 60-acre campus last year and consolidated its offices into the River Park buildings, which are on the northwestern part of the campus near Yankee Doodle Road and Hwy. 13.

The company originally sold its headquarters in 2012.

Earlier this year, Colliers began marketing three vacant buildings on the site, including the former Blue Cross headquarters buildings, an adjacent day care and a 227,000-square-foot office building.

The River Park buildings, which are at 3400 Yankee Road and 1800 Yankee Doodle Dr., were built in 1982 and in 2000. They’re connected by an enclosed walkway and have a fitness center, full-service cafeteria and a lush, parklike setting.

Peter Loehrer, senior associate for Colliers, said interest in the buildings was extremely high.

“There’s a tremendous amount of liquidity chasing stabilized office properties if you have long-term leases and high-quality tenants,” he said. “Despite all the bad news orbiting the office ecosystem, there is still plenty of liquidity for long term leased office properties with high-quality tenants.”

Arsenault Holdings is an entity associated with a private, U.S.-based investor. The seller, Net Lease Office Properties, is a publicly traded real estate investment trust, which reported in a statement that the gross sale price was $60.7 million for the two buildings, which have a total of 347,472 square feet.

Though there are plenty of suburban office buildings for sale across metro, there have been scant major office sales since the beginning of the pandemic as vacancy rates for suburban offices remains persistently high.

In April, Colliers said that that while office vacancies remain high across the region, they are plateauing. As new leases get signed, others are expiring as companies “right-size” their offices, typically into smaller spaces.

The office vacancy rate for Class A space like the Blue Cross and Blue Shield buildings in the Burnsville-Eagan-Apple Valley area during the first quarter was about 21%. That’s on par with the vacancy rate in downtown Minneapolis and the metro as a whole.

Mark Kolsrud, vice chair for Colliers Investment Services Group, said that while market conditions are still difficult for many office owners, there are plenty of willing and able investors pursuing office properties that have solid, long-term tenants like Blue Cross and Blue Shield.

“It’s going to be a tale of two markets where some office properties are going to be troubled and will take effort; others are stabilized and have solutions,” he said. “There’s lot of capital interested in purchasing and that capital is growing on the sidelines looking for opportunities like this.”

Life Sciences is one segment of the commercial market that’s doing especially well in the Twin Cities, which continues to rank among the top for that sector in the nation.

Earlier this month, Davis Healthcare Real Estate said that it had recently completed construction of the Lakeville Specialty Center, a 100,500-square-foot medical building in Lakeville. After it was initially proposed just before the start of the pandemic as a 50,000 square-foot medical building, the scope of the project was doubled based on strong demand. The building is now fully occupied by Allina and MNGI Digestive Health.