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“Nabbefeld”
Joe Nabbefeld
Real Estate Editor

December 14, 2000

Real Estate Buzz: An old flame catches Vulcan's eye

Paul Allen's next big South Lake Union purchase will probably be the 2.5-acre block occupied by low-rise Puget Sound Energy offices.

The building fronts Mercer Street between Eighth and Ninth avenues and is identifiable for its big blue-neon gas flame that beams over Mercer.

A spokesman for the Microsoft co-founder's operating company, Vulcan Northwest, said Vulcan doesn't comment on speculation about possible deals. But Bob Boyd, president of Puget Western Inc., which conducts real estate activity for the power company, confirmed he's negotiating a sale to Vulcan.

"We're definitely working on it," Boyd said. If Puget Western cuts a deal, perhaps by year-end, the power company would likely lease back half of the roughly 100,000 square feet of office space, he said.

Talks include the power company receiving an option to take the blue flame with it when it goes, Boyd said.

The property would jump Vulcan's South Lake Union holdings to almost 39 acres, with Vulcan's deal still pending to buy about five more acres along Mercer Street from the city of Seattle.


Fisher weeds out flour mill buyers

Seattle-based Fisher Properties said it has begun narrowing the field of buyers for its flour milling operations.

"We're in the process of looking at what may be an offer," said Fisher spokesman Chris Wheeler.

Fisher began in 1910 on Harbor Island as a flour exporter. In the 1920s, the company's expansion into broadcasting began by providing radio broadcasts as a way to advertise its flour. That led to ownership of KOMO TV and Fisher's aggressive move of the past decade into digital broadcasting and other high technology.

Milling operations also led Fisher into extensive real estate development and ownership, including developing a large portfolio of distribution warehouse properties. And the milling operations spawned a bakery and food distribution operation.

Now Fisher intends to sell its mill activities, which securities filings by Fisher indicate haven't performed well for a while. Wheeler said selling the mills began about a year ago. He said Fisher may not sell the bakery and distribution operations "at the same time."

Fisher's two main mills are on Harbor Island and in Blackfoot, Idaho, with a smaller mill in Portland. Together they represent the country's eighth largest milling operation, Wheeler said.


Bellevue Galleria struggling

The relatively new Bellevue Galleria retail center in downtown Bellevue is struggling, with 17 percent of its shop space vacant, but the owner says there's no panic.

"Of course we'd love to be full at the moment, but we're working on that," said Andy Lowther, vice president for Vancouver, B.C.-based Schroeder Properties, developer of the 163,000-square-foot center. "The tenants we have in place are doing very well."

Lowther said there has been no change in the property's ownership, a partnership between Schroeder USA Corp. and ING Realty Partners. Chicago-based ING is "an arm's-length extension of ING Barings Bank of Holland," Lowther said.

Galleria's multiplex theater is operated by Regal Cinemas of Tennessee, which is attempting to survive the nationwide overbuilding of movie screens. "The theater is doing very well, actually," Lowther said. "Obviously, we'd be blind not to be concerned with what's going on in the theater industry with too many screens, but sales (at the Galleria's theaters) are increasing in the time since it's opened."

A video arcade called The Garage occupied 10,500 square feet in the Galleria, but Schroeder terminated the lease because the arcade wasn't of the quality the operators had said it would be, Lowther said. Another 7,174 square feet next to the arcade space has never been occupied. This 17,764 square feet equals 17 percent of the structure's 100,000 square feet of shop space.

Lowther said Schroeder expects to combine the two spaces into one. Schroeder has changed leasing brokers, hiring Nitya Nadesan of Seattle Pacific Realty, to find a tenant. "We're looking at some nice apparel tenants," Nadesan said.

Tenants are still moving into two other spaces. The up-scale Habits For The Home, a home furnishings shop, expects to open within the week. Sahara Fine Arts will open after Christmas, Lowther said. Sahara "is considered very high end," above what average shoppers spend for holiday gifts, "so Christmas doesn't matter that much for them," Lowther said.

Galleria lost a restaurant, too: Bob's Rambunctious Seafood Joint on the third floor near the theater. Schroeder has yet to find a replacement, Lowther said.

The center opened in March 1999, but suffered from the start without some key tenants. A Gene Juarez spa and a Cafe Habits restaurant both didn't open until last April. "That hurt a lot," Lowther said. "Both are open now, though, and doing great."


Costco won't buy Renton lot

Count Costco out as a potential buyer of half of the large Boeing Lot 6 development site next to Interstate 405 in Renton.

The Issaquah-based warehouse retailer indeed has looked hard at setting up a store in Renton, but Lot 6 isn't as wide as Costco desires, said Joel Benoliel, Costco's senior vice president for real estate.

Fry's Electronics of California recently bought the 21.3-acre Lot 6 from Boeing, but Fry's only needs half of the property on which to build the chain's first Washington store, so the other half is up for sale.

Speculation immediately turned to Costco as a possible buyer, but Benoliel said in an interview this week to cross Costco off the list.

"We look in Renton all the time," Benoliel said. "But the configuration (of Lot 6) didn't work. It's too narrow for us."

Benoliel said "there are other sites" for Costco to consider in Renton. But Costco isn't likely to leap too fast, either, because it already operates a store somewhat close by at Southcenter in Tukwila, and one up 405 in Kirkland.


Costco will buy in Federal Way

Meanwhile, Costco paid shopping center developer Robert Knutsen $3.75 million for five undeveloped acres at the West Campus Square shopping center in Federal Way, King County property records show.

Benoliel said Costco bought the land at 35020 16th Ave. S. to "protect" its West Campus Square store from losing parking spaces if a developer had bought and built out the five acres. If a developer put up new retail there, some of Costco's parking would serve that space, reducing slots for Costco, he said.

Costco isn't sure yet whether it will attempt to develop the five acres itself -- and may at least put a gas station there, as it has at some of its other stores, Benoliel said. Or Costco may sell to another developer, provided that developer won't build something that reduces Costco's parking, he said.

Brian Leibsohn of Bellevue-based Leibsohn & Co. represented Knutsen.


Knutsen sells West Campus Square

Knutsen, meanwhile, sold the rest of West Campus Square for $20.43 million to investors out of Beverly Hills, property records show.

Leibsohn, who represented Knutsen in this sale, too, declined to further identify the buyers, other than to say they're a family that already owns two Western Washington shopping centers. The buyers recorded the purchase under the name of West Campus Square Co. LLC.

Knutsen and Jim Lagerquist developed the 163,000-square-foot Federal Way retail center in about 1990. Knutsen bought out Lagerquist last year.

Main tenants include Circuit City and Office Depot. Costco owns the building it occupies at the center.

Knutsen sold, Liebsohn said, "to pursue other projects, some commercial, some multifamily."


Westlake buildings sold to Casey

County property records show that the Casey Family Program bought four properties on Westlake Avenue near the program's offices on the west side of Lake Union.

The purchases cost a total of $16.5 million, records show.

A program representative couldn't be reached to comment. Paul Chiles, a Seattle commercial brokerage company owner who assists the program, said information would only come from the program.

The program, which provides family assistance, is housed at 1300 Dexter Ave. N. Records show last week it bought properties at 1101, 1105, 1207 and 1219 Westlake Ave. N.


Skyway tenant takes off

Triad Development confirmed it's no longer talking to the unnamed high-tech company interested in leasing 100,000 square feet of office space in the former Skyway Luggage warehouse on the downtown Seattle waterfront.

For a translation, that would mean RealNetworks, headquartered next to the vacant Skyway structure that Triad would refurbish, is looking elsewhere.

Sources say RealNetworks has lately focused its search for future growth space on the South Lake Union area.

Joe Nabbefeld can be reached at (206) 219-6518 or by e-mail at joe@djc.com.



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