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December 6, 2010

Rehab pays off with new long-term leases

Journal Staff Reporter

Image courtesy of CB Richard Ellis [enlarge]
New office leases by two growing companies, Pensar Development and Substantial Inc., bring a former auto dealership on Seattleā€™s Capitol Hill to fully occupied.

Two companies have leased 900 E. Pine's top floor, where the landlord, Hunters Capital, is in the midst of a rehab that company CEO Michael Malone says is costing about $1 million.

Pensar Development, an engineering company that does industrial design, is renting 8,500 square feet. Substantial Inc., which designs web and iPhone applications and does branding work, is leasing nearly 6,000 square feet. The leases by the two growing companies represent a total of 11,000 square feet of positive net absorption for the overall market, and bring the 1922 building — a former car dealership with terra cotta detailings and large windows — to fully leased.

Before the rehab, the space was “classic Class B office space,” Malone said, with a drop ceiling, recessed lights, carpet — “all those kinds of typical things.”

When a long-term tenant, DMX Music, moved out a year ago, “it just showed horribly,” added Nick Carkonen of CB Richard Ellis, who marketed the space with Cavin O'Keefe and Jesse Ottele.

Fearing he'd be “sitting [on the space] forever,” Malone launched the rehab of the second floor where cars were once repaired. Workers stripped the space down to the original wood and concrete and sandblasted the surfaces. They ripped up the carpet to expose commercial terrazzo flooring. Hunters Capital designed the project and is the general contractor.

It is a costly project, said Malone but, he noted, he did fill the space with long-term tenants that he says will pay annual rents of between $26 and $27 a square foot, plus expenses.

Plus, Pensar and Substantial will have 67 employees in the Pike/Pine neighborhood on Capitol Hill, where Malone owns about 480,000 square feet of real estate. They're the type of creative companies he's targeting. “For me, it's right in the bull's eye of what we want in this urban village.”

Malone's real estate portfolio includes several old buildings, including two others he is renovating, and new ones. This year, he finished the $32 million Broadway Building, a mixed-use project.

The Pensar and Substantial leases fill one of the last large office spaces left in the submarket, Carkonen said. “There's not much more you can find than a couple thousand square feet.”

Substantial is moving out of 1,000 square feet on Capitol Hill, and Pensar will vacate 2,500 square feet in the Queen Anne neighborhood. Robert Regan and Laura Miller, both of Catalyst Commercial Partners, represented Pensar and Substantial, respectively, in lease negotiations. They said Substantial and Pensar officials were drawn to 900 E. Pine's rich architecture.

“It's pretty unique space,” said Miller, who talked about the wall of windows overlooking Cal Anderson Park. “The natural light is fabulous.” Malone “has a great history of delivering cool spaces,” added Regan, who said Pensar wanted an in-city location with “environmentally inspiring space.”

The work on of the second floor of 900 E. Pine will wrap up the latest renovation of the building. Earlier, Hunters Capital restored the terra cotta exterior, added new lighting systems, did some tuck pointing, added glazing to some of the windows, and beefed up the HVAC system. The company also did a complete build out of the interior for Blick Art Materials. Rock Box, a karaoke bar with private rooms for small parties, is the other main-floor tenant. Rock Box opens tomorrow, according to its website.

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