Nic on Fifth apartment tower on Nicollet Mall in downtown Minneapolis sells for $70M

An out-of-state company on Thursday paid $70 million for the Nic on Fifth, a 253-unit luxury apartment tower in downtown Minneapolis. The estimated market value of the property is $87.5 million.

The buyer — Kirkland, Wash.-based Weidner — bought the property from Boston-based AEW Capital Management.

The all-cash deal for the tower, located at 5th Street and Nicollet Mall, was brokered by the local office of CBRE.

"Buyer depth and interest in this fantastic property was strong, led by private capital taking advantage of market correction while having confidence in the downtown Minneapolis commercial real estate market," said CBRE's Abe Appert in a prepared statement.

Residential buildings in downtown are faring far better than office buildings, which are nearly one-third vacant and declining in value. The apartment vacancy rate in downtown Minneapolis at the end of the second quarter was 8.2%, according to Marquette Advisors. But across the metro, it had declined to 4.1%, causing an average 4.4% increase in rents — about the same increase as in downtown.

"The Minneapolis rent-to-income ratio is one of the most affordable among all major U.S. metros at 17.8% and Minneapolis was the only major metro where wage growth outpaced rent growth since COVID-19," Appert said. "This affordability has and will continue to be a key factor in future rent growth."

When the building was completed in fall 2014, it was the first high-rise luxury apartment development in downtown Minneapolis in nearly 30 years.

This transaction follows the late July sale of 16 floors of upscale office space in the nearby RBC Gateway for $225 million — one of the biggest office sales in the nation this year.

A week later, United Properties found a buyer for its former headquarters in Gaviidae Common, a mixed-use building that was once a luxury retail destination.

New Zealand-based Zuru paid $4.15 million in cash for 26,703 square feet of office space, known as Suite C, on the fourth floor of the building. The deal included $100,000 in office furniture.

Over the past several years, Weidner has made significant investments in both new and existing rental buildings in the Twin Cities. In addition to several acquisitions and new builds, the company is partnering with Ryan Companies on Fourth & Park, a 25-story apartment tower by U.S. Bank Stadium that's nearing completion.

And in June the company paid $74 million for the 36-story LPM Apartment tower near Loring Park, according to public records. That sale was in line with the estimated market value of the property.

These deals come at a time of uncommonly slow sales for commercial buildings in downtowns across the country. Office vacancy rates remain near historic highs and investors — and lenders — are especially cautious in the face of uncertainty over the value of downtown office buildings.

Demand for rental buildings, however, has been strong. CBRE's Ted Abramson, who was involved in the sale, said Nic on Fifth was about 93% occupied and that the sellers received multiple bids.

He said investors view the Twin Cities as one of the most attractive in the nation because of its strong and diverse economy.

"The reason capital likes Minneapolis and the Midwest in general is its stability," he said. "We don't see the peaks and valleys."