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Developer pays $33.9 million for IBM campus

State and county records show that Los Angeles-based Industrial Realty Group LLC paid $33.9 million to IBM on Feb. 23 for 18 parcels with 34 buildings at 3605 North U.S. 52.

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Los Angeles-based Industrial Realty Group LLC announced Friday it had purchased the 500-acre campus in Rochester from IBM.
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Buying Rochester’s almost 500-acre IBM campus cost a California developer $33.9 million.

State and county records show that Los Angeles-based Industrial Realty Group LLC paid $33.9 million to IBM on Feb. 23 for 18 parcels with 34 buildings at 3605 North U.S. 52.

The sale was announced on Feb. 23 by IRG, though IRG declined to release the purchase price. Now that the state and Olmsted County have processed the sale, the price is public information.

It appears the deal might be a bargain for IRG.

Olmsted County estimated the total market value of the sprawling property at $61.52 million for 2017-2018. That’s up from $55.3 million the previous year and $50.33 million for 2015-2016.

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The estimated value of the campus has increased by 35 percent in the past 10 years. Olmsted County estimated the value at $45.37 million in 2008.

While Big Blue has sold the campus it built more than 60 years ago in northwest Rochester, IBM will still have a presence there.

It is leasing eight buildings for its employees on the east side of the property. State documents show that IBM has signed a 12-year lease with IRG.

In addition to the technology campus, the deal also included IBM’s adjacent park and 85 acres of farmland.

IRG, a real estate development and investment firm, describes its plans as breathing new life into the property to turn it into "a dynamic, mixed-use, multi-tenant campus, which will bring businesses and job opportunities to Rochester."

IRG will focus on putting tenants in the 1 million square feet of unoccupied space in the 26 buildings on the west side of the campus.

"There have be multiple meetings on site between IRG and our tenants since the purchase was announced. These meetings are to ensure a smooth transition through the efforts of our acquisition, leasing and property management teams and will be ongoing. We have also been contacted by several potential tenants and our team is pursuing all leads," stated IRG CEO John Mase this week. "We are in the process of hiring several people to join our local management team. It is really exciting."

The west side, which has a total of 3.1 million square feet of space, already has several non-IBM tenants, including Celestica, Charter Spectrum, HGST/Western Digital, Imanis Life Sciences, Vyriad Inc. and others.

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Gary Smith, the president of Rochester Area Economic Development Inc., says his organization is helping with finding tenants.

"We have been working with IRG, since they started negotiating for the property," he said. "We have been working with them and we will continue to work with them."

Smith said there is a proposal for a large tenant for the site, but that is in the very early stages and the potential tenant might not even chose Minnesota for its project.

Overall, RAEDI sees great potential for the campus.

"It’s a good asset to have in the community. It’s very favorably priced as for as lease rates," said Smith.

This type of project fits with IRG’s mission. It manages 100 million square feet of properties in 28 states.

IRG recently helped create an $800 million development around a refurbished NFL Hall of Fame in Canton, Ohio. The company also developed Goodyear’s 642,000-square-foot headquarters in Akron, Ohio.

In November, the Rochester City Council approved a final plat permit to divide the campus into two chunks — a 60-acre east parcel and a 430-acre west parcel. The new name for the campus was listed as Rochester Business Park.

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Rochester East Campus LLC and Rochester West Campus LLC were listed as owners of the property. Both of those companies are owned by IRG.

The 70-page campus plat permit, which includes a reciprocal easement agreement, included more detail about the plans for the site.

"Rochester East and Rochester West intend to develop and operate their respective parcels in conjunction with each other as integral parts of the campus, but not a planned or common interest development/community," according to the permit.

The sprawling campus with its distinctive blue-sided buildings has been a prominent Rochester landmark since employees moved into the first of the buildings in 1958.

It grew to be the largest IBM facility in the world under one contiguous roof. Olmsted County considers it the largest single structure in the county.

IBM’s employment on the campus peaked at more than 8,000 in the 1990s, but after a series of layoffs, employee transfers and attrition, the employee number has dropped to 2,791, according to the latest documents it filed with Occupational Safety and Health Administration. That’s down from 3,224 in 2012

IBM stopped releasing the official number of employees at each site in 2008.

The Armonk, N.Y.-based company was Rochester’s top employer for much of the late 1950s and early 1960s. In 1966, Mayo Clinic tied it, when each employed 3,600 workers. Mayo pulled ahead in 1967 with 3,850 employees compared to IBM’s 3,800.

Related Topics: IBMOLMSTED COUNTY
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