Real estate firms donate downtown St. Paul office building to Salvation Army

The Twin Cities Salvation Army received an unusual and unexpected year-end donation: an entire downtown St. Paul office building — the largest real estate donation to the nonprofit in recent history.

Basir Tareen, of Tareen Development Partners in Roseville, and Nick Walton, of Reuter Walton Development in St. Louis Park, donated the Gallery Professional Building, a former medical office building, last month. The Salvation Army is planning to move some offices into the building at 17 W. Exchange St., but it's too early for the organization to announce plans for most of the eight-story structure.

Adding more transitional or permanent affordable housing is a possibility, said Maj. Scott Shelbourn, who leads the Twin Cities unit of the Salvation Army Northern Division, which includes Minnesota and North Dakota. Such housing is urgently needed, especially in St. Paul, he said. It would be the nonprofit's largest permanent affordable housing downtown.

"This property could possibly be a very good way for us … to help people get on their feet," he said. "Our beds are constantly full because there is a demand out there."

The real estate firms bought the 108,277-square-foot building in 2021 and planned to convert it into affordable housing. But Tareen said rising construction costs, high interest rates and the pressing need to help a growing number of homeless adults prompted them to donate the building instead.

"There's this huge need, but we don't know anything about running a homeless shelter," he said. "And my 10-year-old said why don't you just donate it to someone who does."

While the firms could have sold the building for more money, Tareen said the two families behind the firms decided together to make a difference for Minnesotans living without a home.

"It sort of checked a lot of boxes. It did something good. We realized that was probably the greater need," he said. But developing affordable housing "was going to be much more of a challenge ... It was a win-win on many fronts."

The office building was purchased in 2021 for $600,000, according to Tareen Development Partners, but the building was appraised at about $5 million.

"There are so many developments that have paused in the last six to 12 months just in general with construction prices and interest rates," Tareen said. "You couldn't build that building for ... $20 million today."

As a nonprofit, the Salvation Army could apply for public grants and will fundraise to support a multimillion dollar renovation and costs to operate the large building. The project also received a $1.5 million affordable housing grant from Ramsey County, which Tareen said will be transferred to the Salvation Army.

"This gives us a head start on getting some affordable housing done," Shelbourn said. "It opens up a bunch of possibilities for us."

Property, usually farmland, occasionally is donated to the Salvation Army, but it's rare to receive a large building in a prime downtown location, he said.

The donation comes as the Salvation Army is facing a decline in financial gifts, reflecting a national decline in philanthropy in 2022. The nonprofit fell about $2 million short of its year-end goal to raise $12.5 million. Shelbourn said the nonprofit will scale back resources — from food to financial aid — that is distributed to Minnesotans in need this year as a result.

"We're thankful, whether it's a building donation or a handful of change that went into our kettle or somebody donating online," he said. "It makes a difference in a lot of people's lives."