Costco pays $13 million for distribution site.

Byline: Matt M. Johnson

When Doug Smith got a call from a real estate agent telling him a potential buyer was interested in about 155 acres his family owned just west of Owatonna, he didn't know who he was dealing with.

It was only at a meeting on the chunk of farmland that he learned the buyer was Costco and that the direct wholesale giant wanted the land for its first-ever Minnesota distribution center.

"It wasn't until the 11th hour that I found out it was Costco," Smith said in a Tuesday interview.

Last week, Costco paid Smith $13.49 million in cash for the property, according to a certificate of real estate value made public on Friday. The sale took place less than two weeks after Costco got final approval from the Owatonna City Council to build a 354,000-square-foot distribution warehouse less than about a mile west of downtown Owatonna.

Construction of the $34 million facility at the northwest quadrant of 18th Street Southwest and 39th Avenue Southwest, is expected to start this month, said Troy Klecker, the city's planning and development director.

The deal, which closed on Sept. 12, works out to about $87,120 per acre. The price paid for acre was generally higher than what a housing developer would pay for rural land, said Laurie Karnes, a real estate broker and owner of Land for Sale in Maple Grove. She said Costco likely found value in buying the land from a single property owner. It might have otherwise taken several years to assemble enough land for the distribution center.

"It does seem on the high side. But that's a lot of land," she said in an interview. "That's a premium not to deal with a whole bunch of different sellers."

Costco declined Monday to comment on the purchase or the construction...