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“Nabbefeld”
Joe Nabbefeld
Real Estate Editor

November 9, 2000

Real Estate Buzz: Downtown office buildings selling slowly

Uncertainty about the economy may be clogging the sale of three downtown Seattle office towers.

Owners last summer placed up for sale the Exchange Building, the Union Bank of California Center and 720 Olive Way, previously known as the Marsh & McLennan Building. But none of the three has a contracted buyer yet, which observers say provides a market barometer reading.

There's not a shortage of interested buyers, largely institutional, with plenty of money to pay out, said Don Morioka, a CB Richard Ellis vice president for investment properties in Seattle. Rather, it appears buyers, and their lenders, see a less-rosy picture of where rent rates likely will go that the sellers do, Morioka said.

"Everybody was real bullish through the summer," Morioka said. "Then the dip in the high-tech and the dot-com shake-out came and institutional investors are looking more at in-place rents and cap rates. They're taking a closer look at what future rent rates will be."

The sellers, meanwhile, are asking for top-dollar based on their expectations of higher rents that the new owners could collect when leases roll over.

"There's probably a bit of a spread between buyer and seller expectations," Morioka said. "I think the sellers will hold off in accepting pricing that's below their expectation."

Chicago-based Walton Street Capitol put the first two buildings up for sale: the historic, 22-story Exchange Building north of Pioneer Square and the 42-story Union Bank of California Building on Fourth Avenue in the financial district. The San Francisco-based pension advisor Rreef Funds then put the 20-story 720 Olive Way up for sale.

Representatives of both sellers didn't return calls to comment.

Both sellers bought the properties earlier in this real estate cycle and said last summer that they would seek buyers to gain the increased value created by the steep rise in rents.

Morioka, who said he has closed about $100 million in commercial building sales so far this year but isn't involved in the sale of these three buildings, said he thinks the sellers will still receive the top dollar that they're looking for.

Tuesday's election created some uncertainty that is expected to be soon resolved, he said. And Morioka feels the dot-com shakeout nears a stabilization point.

"I think these properties will sell at the prices they want," Morioka said. "I think we're already seeing things correct themselves (from the slide in tech stocks). I just think it's a matter of timing."

Ann Chamberlin, CB Richard Ellis' regional operations manager, was less certain about what's going to happen with tech companies. "That's the big question in almost every meeting" lately, she said. "At every board meeting, every lunch, it's `is the market settling?' There are so many variables that we'll have to wait and see."


A look at Elliott and Clay

Marin Development's design for a new Belltown condo tower at Elliott Avenue and Clay Street features ample glass to take full advantage of views over Elliott Bay.

Elliot & Clay
The Elliott and Clay Building

Marin is a member of the Bellevue-based Murray Franklyn Family of Companies. Marin last month bought the site and a city master use permit for the 13-story tower from Seattle-based Fortune Group.

Marin plans to create 89 condos in the structure atop ground-floor retail and underground parking.

The site is a block from Elliott Bay, with only the six-story Seattle Trade and Technology Center on the block in between. Therefore, unlike many Belltown projects, there's not a lot of risk that another tower will come in to block the view.

Chris Snell of Seattle-based Snell Partnership drew the design.


Massive condo complex permitted

A huge condo project consisting of four skyscrapers for downtown Bellevue received its development permit, Bellevue records show.

The city approved Vancouver, B.C.-based Madison Homes' proposal to develop the four towers, totaling 820 units, on the former Trivista site on the north side of Northeast 10th Street between 106th and 108th avenues northeast. Madison is a division of Polygon Northwest.

The number of towers and units increased from when Madison bought the site from developer Nat Bosa more than a year ago.

Bosa had envisioned three 25-story towers. Polygon President Michael Audain said Wednesday that his company hasn't finalized its schedule for when it hopes to start construction. Nor has the company given the project a name other than the one used on permit applications: Madison Development 7.

"We're really just discussing it right now," Audain said. "We had all of our focus on obtaining development approval. We're reviewing the timing at the moment."

The topic on just about every American's minds yesterday also had Audain's attention. "We'd also like to know the outcome of your election," he said.

The company hasn't concluded whether all the units will be condos, or some apartments, he said.


Selig lands first Union Station tenant

A San Diego law firm leased three floors totaling 44,000 square feet in developer Martin Selig's planned Union Station office building.

Gray Cary Ware & Freidenrich's 10-year lease also includes naming the 10-story structure after the law firm.

Selig said he arranged financing two months ago and plans to start construction next spring and finish in April 2002.

The site, above the bus tunnel, is on Fifth Avenue between Jackson and Main streets, across Jackson from the remainder of the Union Station redevelopment on the south edge of downtown Seattle. The building would total 140,000 square feet with ground-floor retail.

Selig bought the site and an existing city master use permit earlier this year out of a previous developer's bankruptcy proceedings.

Sclater Partners of Seattle is the architect. Selig has selected Lease Crutcher Lewis as general contractor.

Brokers Derek Trulson and Hans Kemp of Staubach Co.'s Seattle office represented Gray Cary, a large firm that entered the Seattle market earlier this year via hiring nine lawyers from Riddell Williams.

Joe Nabbefeld can be reached at (206) 622-8272 or by e-mail at joe@djc.com.



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