March 9, 1998

HAL plans new approach to leasing out Newmark retail

By MAUDE SCOTT
Journal editor

In the process of trying to sell the Newmark Retail Center, HAL Real Estate Investments sold itself on the property and now plans to reconfigure it to take advantage of its prime location smack in the center of one of the country's hottest real estate markets.

HAL Vice President Dana Behar announced Friday that HAL is buying out the half interest of its partner, Intrawest, and will begin marketing almost 100,000 square feet of space to one or more large users. The mixed-use building is located on Second Avenue, between Pike and Union streets.

"I anticipate that the Newmark will be most attractive configured to house either a single tenant or several full-floor tenants," Behar said. "We are currently working with several prospective users who would occupy either the whole center or full floors."

HAL and Intrawest Towers acquired the Newmark residential tower and retail center in 1993 and converted the apartments to condos which sold quickly. The three-level retail base was another story. The Newmark lost one anchor tenant, Pay Less Drug, several years ago and the other anchor, Cineplex Odeon Theaters, moved out last summer, leaving the space mostly empty.

The Newmark's retail space has had troubles, but its owner is confident that almost 100,000 square feet of space in downtown Seattle will find a taker. Photo by Jon Savelle

Behar said over the time the HAL-Intrawest partnership owned the property the Seattle real estate market has made an about face and the Second Avenue neighborhood around the building has become much more attractive, with the Seattle Symphony's Benaroya Hall nearing completion to the south and Samis talking about redeveloping its block north of the Newmark.

"I started to think this is going to work someday," Behar said of The Newmark.

He admits it would have been nice to have the library go in to The Newmark's retail space but he is confident he can find a user for the space and expects the building to become "an attractive and viable part of downtown Seattle."

The Newmark's "bones are good," Behar said. It has two loading docks, below-grade parking for 235 cars and three rectangular floor plates. Ironically, Behar said it was having the building empty that allowed him to see what it could become rather than what it was.

"It doesn't have to be an urban mall. Rather than looking for small tenants we'll look for full-floor tenants. There will be no interior public space," Behar said. "We know it won't work as it is configured but it doesn't need many physical changes."

He thinks municipal/civic type tenants such as the library could work, but more likely the space would appeal to office tenants or big-box retailers such as clothing, hardware or grocery stores. "We're talking to a number of people who are interested in the whole space."

Behar said it could take as long as 12 months to lease the space and make tenant improvements. "My motivation is to be as quick as possible."

HAL is a Monaco-based, publicly traded company which was formed to act as a holding company for proceeds from the sale of Holland America Lines. It has liquid assets of over $1 billion.

The Seattle office of HAL focuses on real estate investments in the Puget Sound area. The company owns Yarrow Bay Plaza and a number of suburban and in-city apartment buildings and is a partner in the development of the Concord condominium project at First and Eagle.

Last month, an investment group including HAL Real Estate Investments purchased the 568-unit Shorewood Apartments on the north end of Mercer Island. The group, which includes Teutsch Partners and Indigo Investment & Development, plans to do a major renovation of the 38 colonial-style brick buildings in the 1949 complex, and eventually will develop more units on the property.

Behar said the entry of real estate investment trusts have made real estate investment tougher, even for well-financed groups such as his. "They buy anything, anywhere and it is going to get worse. Their appetites are seemingly unending."

Behar said the competition has forced non-REIT investors to become more creative and to seek out opportunities others don't see.