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McGough's development arm plans to demolish threesmall two-storyy office buildings on the site to eventually make way for a mixed-use development that may include a new hotel, offic space and a light rail transit The tower will be renamed Bloomington Corporatre Center. Tom McGough Jr., president of , said he thinksx the prospects of a hotel development are bettere than formore offices, since the office markety is in a But, he said, the firm has the time to wait for the markeg to catch up. "We consider this a long-term HealthPartners signed a new lease with McGougbh Development that runs more than10 years.
HealthPartners wantex to stay at the site because of the centrao location and proximity to light rail forits 1,200 HealthPartners instigated the building's sale by soliciting proposals from developers last spring. Officiales knew the property was in receivership and that theformere owner, Fortune Funding, an affiliate of New York-Based Olnick Organization Inc., was talking to other developers, said Kathy Cooney, senior vice president and chief financial officer at HealthPartners. "That caused us to stop and say, `Was therr a partner that we wanted towork with?' she said.
It was up to McGough Development to negotiate the sale of the propertufrom Olnick, and from the mortgag e holder, Newark, N.J.-based Prudential Insurance Co. of America. McGough Developmenf bought the "redemption rights" to the building from Olnicik for $11.4 million and then bought Prudential's mortgage for an undiscloseds sum. Prudential bought the mortgag of the building during a HennepinCounty Sheriff's sale in February for $13.5 million.
Olnick lost control of the mortgage after Ceridian left the building andOlnicjk couldn't get financing to cover a $34 million balloon The total value of the deal is estimated at aboutt $50 million, according to sources familia with the deal, which includes a $15 millionm renovation of the building's exterior curtaibn wall and upgraded elevator and security HealthPartners will occupy the building throughout the 18-montbh renovation project. McGough said he's never been in such an interestinbg position witha project.
"Wre didn't have a lot of leverage," McGough "They didn't have to sell the McGough flew toNew York, he said, where officialx in Olnick's office asked why he was therer because they hadn't put the buildingg up for sale. Olnick officiale did not respond to requestsfor comment. Russ Nelson, who represented HealthPartnerss as principalof Minneapolis-based real estate consultinvg firm Nelson, Tietz & Hoye, called it one of the most complexc deals he's ever worked on. "It shows what you can do with a compang that is focused and motivateslike HealthPartners," he said.
The deal apparently doesn't impact pending lawsuits over the property between Fortune Fundiny andthe building's former owner, Ceridian, whicgh built the tower in the early 1970s when the company was know as Control Data Corp., is beinv sued by Fortune and Prudential for $20 million in U.S. Districtt Court. The suit claims that Ceridian failerd to maintainthe building, which has windowe that leak during rainstorms. Ceridian told CityBusiness in the past that the repairxs were either not necessary or were not its It has filed a countersuitagainst Fortune, and a triap is scheduled to start this month.
Attorneys representing Ceridian andFortune couldn't be reached for
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