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“Nabbefeld”
Joe Nabbefeld
Real Estate Editor

December 7, 2000

Real Estate Buzz: Sublease totals may be peaking

Office sublease vacancies in and around downtown Seattle, mostly from the dot-com shakeout, rose the past few weeks to more than 760,000 square feet, by the count of broker Dan Dahl, who thinks the worst may be over.

"Oh, it's up," said the CB Richard Ellis office broker who's currently marketing the Dexter Horton Building near Pioneer Square. "But I think we're kind of stabilizing now. I think we've borne the brunt of it."

Dahl tabulated 360,000 square feet in subleases in and around downtown at the end of the third quarter. His count of 766,000 square feet is as of yesterday.

The largest sublease on Dahl's list is 96,698 square feet by the software company WRQ on Dexter Avenue on the west side of Lake Union.

Next biggest: Amazon.com's 72,000 square feet at Opus Center South at Union Station on downtown's south edge.

Third: RealNetworks' 70,701 square feet at World Trade Center North on the downtown waterfront.

Most of the list's new additions are much smaller, Dahl said.

Downtown's central business district has a total of 215,294 square feet of sublease space available. The largest available in the CBD is 28,900 square feet in Puget Sound Plaza, according to Dahl's survey.

Pioneer Square totaled 175,598 square feet of available subleases. The largest of those, after the Amazon.com space, was 16,900 square feet in the Provident Building.

The Denny Regrade had 102,785 square feet of available subleases. Both the Fourth and Blanchard building and 720 Olive Way had 32,000 square feet available there.

Lower Queen Anne came in with 101,217 square feet, led by WRQ's space.

The waterfront totaled 90,701 available square feet, led by RealNetworks'.


720 Olive could fetch $70M

Rreef Funds appears close to landing a buyer for the former Marsh & McLennan office building in downtown Seattle for double what Rreef paid four years ago, so the word on the street goes.

A "buyer from the East Coast" is close to closing on the 20-story building on downtown's north edge for about $70 million, a knowledgeable source said. The building totals 286,427 square feet, so the price would come to $244 per square foot.

Rreef dealmaker Jim Carbone couldn't be reached to comment.

The California-based pension fund advisor bought the building for one of its clients (and later renamed the structure after its address at 720 Olive Way) in December 1996 from GE Capital for $34.6 million. The commercial real estate market was just starting to heat up then from its early-1990s slump.

Even the sharpest of market followers now say they had no inkling that the market would come to as full a boil as it has and keep boiling for so long, as rent rates more than doubled, in many cases, to more than $50 per square foot for the most-choice offices.

The building's main tenant, Marsh & McLennan, moved out. In this market, however, that didn't harm landlords but rather gave them an opportunity to replace the tenant with a higher-paying one.

By last summer, Rreef figured it could already land a handsome profit by selling.

The only wrinkle: tech stocks plummeted, generating the first uncertainty in years about whether the Seattle-area economy would just keep flying. Prospective buyers offered lower prices than Rreef asked, based on the chance of dimmer prospects that rents will keep soaring. The apparent deal suggests Rreef and the buyer have resolved that difference.


Vulcan, Cuginis still talking

Paul Allen's troops and the Cugini family continue negotiating over the Port Quendall site in Renton and now they face less pressure to reach a deal.

The Renton City Council this week extended a Port Quendall development moratorium for six months, a move that tells the negotiators they don't have to report in until either they have a finalized deal or the six months are about to run out.

Allen's operating company, Vulcan Northwest, is negotiating to buy the Cuginis' 20-acre Baxter Mill site for somewhere in the range of $15 million. The property would give Vulcan more than 60 acres on Renton's Lake Washington shore on which to build a massive project of housing, offices, retail and more.

The Cuginis at one point looked likely to sell, but earlier this year they decided Vulcan's reported $11 million offer wasn't enough. The Cuginis responded last summer by filing for Renton permits to develop their property exclusive of what Vulcan would do on the other 40 acres.

The city, which has worked for years on traffic, pollution and other issues under the notion that Vulcan would develop the entire site, responded by rejecting the Cuginis' application and enacting a moratorium on patchwork Port Quendall development. The Cuginis sued to challenge the legality of the moratorium, but they also returned to the bargaining table with Vulcan.

After imposing the three-month moratorium in August, the City Council by law had to hold a public hearing about the moratorium. The council extended the moratorium another three months in October, to end next Monday.

Each Monday night, Renton economic development director Sue Carlson would start the public hearing by saying both sides report the negotiations are proceeding and that the negotiators asked for a continuance of the public hearing.

Carlson asked Vulcan and a Cugini representative to make that presentation themselves last Monday night. She and Vulcan's Larry Martin waited in Carlson's office until 11 p.m., when three and a half hours of discussion of airport noise concluded. Then the council rewarded them by extending the moratorium six months, to June 11.

"We want to be sure not to have to keep coming back for these public meetings," Carlson said.

Vulcan and the Cuginis expect to cut a deal before June 11, Carlson said.


Spokane mall sells for $44M

A Los Angeles investor paid $44 million to buy a grocery-anchored shopping center in Spokane.

Ruben Poplawski's Barclays Management of Los Angeles bought the 350,000-square-foot Northpointe Plaza Shopping Center from Vancouver, B.C.-based Wesbild Shopping Centers, said Colliers International broker Paul Sleeth.

Sleeth and Terry Moss of Commercial Realty Group represented Wesbild. Steve Daneman of Portland represented Barclays.

Northpointe is located on the north end of Spokane. Sleeth said it's a power center-style property. First Western Development finished building the center in 1993.

Sleeth described Barclays as "a classic retail real estate investor, a continual buyer" that owns about five other Washington retail properties.

Wesbild stabilized the center's tenants and saw a chance to make a sale, he said. Wesbild's Western Washington holdings include the Westwood Village shopping center in West Seattle, which Wesbild put through a $10 million rehab this year.



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