In downtown St. Paul, two vacant medical office buildings will be auctioned off in October by charities advertising starting bids in one case as low as $1. Another building, the former home of the McNally Smith College of Music and the Upper Mississippi Academy charter school, has been put up for sale.

The Gallery Professional Building at 17 Exchange St. W. will go to auction Oct. 7 to Oct. 9, with minimum bids starting at $125,000. That’s eight stories and 108,000 square feet of real estate next to the former St. Joseph’s Hospital on sale for less than the price of most houses, though the reserve price — or minimum selling price — has not been disclosed.

According to Ramsey County property records, the 1978 office building carries an estimated market value of $3.9 million, down from about $5.2 million a year ago. Some in the real estate development community have quietly questioned whether the county assessor’s value estimates for downtown office buildings are too generous. The building was donated, free of charge, to the Salvation Army around Christmas of 2022 by Tareen Development Partners and Reuter Walton Development. The developers had purchased it for $600,000 in 2021 in hopes of converting it into housing.

If the Gallery Professional Building sounds like an unusual deal, take a gander at the rock-bottom sale just next door. The vacant, two-story Gallery Tower Office Building at 27 10th St. W. will go to auction Oct. 21 to Oct. 23, with opening bids starting at $1.

In other words, prospective buyers can start bidding on 30,000 square feet of downtown office building for less than the price of a McDonald’s milkshake. Again, the reserve price has not been disclosed. The property, owned by Catholic Charities of St. Paul and Minneapolis, was built in 1980. Both structures in the two-building Gallery complex are connected to the city’s three-level municipal parking ramp, which extends beneath it.

The two back-to-back real estate auctions underscore the challenges faced by downtown St. Paul’s office market, which faced its share of struggles even before the pandemic. Downtown has been especially hard-hit by the uptick in remote work and suburban and online retail, the departure of state employees from the downtown core and the closing of key institutions like St. Joseph’s Hospital, which has been converted into a series of clinics and other health and wellness uses.

Former McNally Smith College building, SPAC up for sale

Not far from the Gallery Professional Building, the former home of McNally Smith College of Music at 19 E. Exchange St. is on the market as a tax-exempt specialty building.

The college closed in December 2017, and the Upper Mississippi Academy, a charter school that inhabited the space soon after, closed last May. The 129,00 square foot, three-level building currently hosts the History Theater, leaving up to 92,000 square feet available for lease.

Elsewhere downtown, the 13-story St. Paul Athletic Club building on Cedar Street failed to sell at auction on Sept. 9 to Sept. 11, despite features that made it a go-to destination when it opened more than a century go, such as an eighth-floor pool, marble lobby and former hotel rooms.

In April, Madison Equities put more than 1.6 million square feet of commercial real estate on the market en masse, most of it downtown office buildings. The same company recently lost the 11-story Lowry Apartments building at Fourth and Wabasha streets when the former hotel was acquired by its own mortgage lender at a foreclosure auction.

Downtowns suffering

St. Paul isn’t alone in facing a downturn in the office real estate market.

Downtowns across the country have suffered setbacks in the era of remote work, and the retrenchment of key industries, like the technology sector, have hit certain areas hard. The San Francisco Chronicle recently mapped 18.4 million square feet of empty office space in downtown San Francisco, with no small part of it buildings previously occupied by Salesforce and Meta/Facebook.

The Minneapolis-St. Paul Business Journal, which carried news of the Gallery Professional and Gallery Tower office building auctions last week, recently reported that two downtown Minneapolis office towers — the Forum buildings — sold in September for $6.5 million, or 91% lower than the property’s last sale, which was $73.7 million in 2019.

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