January 11, 2001

Real Estate Buzz: Horizon snapping up deals in Tacoma

Oakland-based Horizon Partners, headed by Mike Bartlett, has picked up a spate of Tacoma buildings at bargain prices in the past two years, becoming one of downtown’s largest private landlords.

In its latest deal, Horizon paid the Sussman family $825,000 for the 50,000-square-foot Tacoma Steel Building at 2130 Commerce St. Tacoma Steel vacated the structure after building a new steel cutting plant on Tacoma’s east side.

Bartlett plans to convert the building into parking for a 150,000-square-foot office complex located across the street, called Horizon Pacific Center, said Cameron Fletcher, a Colliers International broker who assembled the building purchase along with Colliers brokerEric Cederstrand.

Horizon Pacfic Center consists of three 50,000-square-foot buildings formerly known as the Old Lile Building that Horizon bought two years ago. The structures were previously used as a grocery warehouse.

Horizon paid $16 per square foot, or about $2.4 million, for the Lile Building and is spending another $100 per square foot to convert the space to office use, Fletcher said.

One of the three buildings is fully leased, bringing the complex to 50 percent leased, said Fletcher. Cederstrand heads the leasing effort. Tenants that have signed so far include an architecture firm, an employee placement agency, a pub and a dot-com company.

Horizon also owns the Tacoma Technology Center, a data center next to Horizon Pacific Center.

About seven blocks away, Horizon owns another cluster of properties anchored by the old Schoenfelds furniture store, which Horizon bought and leased to Total Renal Care to house that firm’s bookkeeping operations. Horizon spent more than $10 million renovating that building.

Horizon’s other downtown Tacoma office properties are the Carlton Center office building, the U.S. Bank Building and Old City Hall.

Unico Properties and Herb Simon are now among downtown Tacoma’s other large private landlords.

Bartlett couldn’t be reached to comment. J.J. McCamment of the Tacoma Economic Development Department said Bartlett’s interest in Tacoma extends, in part, from family contacts he has in the area.

Horizon may have finished its downtown Tacoma buying, at least for a while. “They’re trying to get it all stabilized now,” Fletcher said.

Downtown Tacoma has been undergoing an upsurge, boosted by the economic boom of the 1990s that took a while to take effect in downtown Tacoma. Promoters hoping to lure companies south tout rents that are substantially lower than in Seattle and on the Eastside.

The city also installed a $100 million downtown fiber-optic loop. The University of Washington opened a new campus on downtown Tacoma’s south edge that is expected to provide a long-term uplift.

New projects are planned or under construction all over downtown, from a glass museum to housing and two new office towers.

A new Tacoma company named Optic Fusion last week began marketing another data center in the downtown Perkins Building.

“This serves as fierce competition for the other major resource of its kind in the region, located in Seattle’s Westin Building,” said Optic Fusion’s Rich Shanaman.

As of the end of December, office vacancies stood at 8.7 percent for Tacoma’s 4 million-square-foot central business district, above the 5 percent that the industry considers optimal, according to Colliers’ fourth quarter report.

A development group headed by Auburn construction executive Roger Hebert plans to develop much of the new housing, eventually up to 700 market-rate apartments, on a slope heading west out of downtown.

The group has assembled properties along Fawcett Avenue. East of Fawcett it envisions developing office space, with housing to the west, Fletcher said.

The group just closed three more purchases, these under the name of Vision Duece LLC: one-fifth of an acre at 1502 S. Fawcett, three-fourths of an acre at 1509 S. Fawcett and another fifth of an acre, occupied by the Financial Building, at 1517 S. Fawcett. Fletcher and Cederstrand brokered those purchases from a collection of sellers.

Anybody want a golf course?

If you’re looking to buy a golf course, give Ken Karahashi a call.

Japanese-owned United Development Corp., which built the Mill Creek Country Club and swaths of surrounding housing starting 27 years ago, this week said it’s putting the club up for sale.

The first potential buyers United approached were club members, Karahashi pointed out.

Tokyu Corp. of Japan owns United. Karahashi said there are two reasons for the decision: “The first ... after 27 years, UDC has completed its development of the Mill Creek community and is winding down business in the area. The second is a decision by Tokyu Corp. to streamline business operations worldwide.”

Let it slow

Bellevue hotel industry consultant Wolfgang Rood says in his latest newsletter that the expected economic slowdown will lead to “a moderation in the performance of the lodging industry for the upcoming year.”

Thus he headlined his newsletter: “Let it slow, let it slow, let it slow.”

Despite that start, Rood’s write-up ends optimistically: “The same signs of deceleration have been seen before, and the resiliency of the lodging industry has continued to be a pleasant surprise.”

Bianco goes into shopping

St. Louis-based Bianco Properties expanded its Seattle-area holdings, previously all apartment buildings, by buying the 69,432-square-foot Lynnwood Plaza Shopping Center in Lynnwood.

Bianco paid Center Trust Inc. $10.5 million for the 12-year-old strip center, which Bianco executive Daniel Wolk said is 100 percent leased.

Bianco owns apartments, offices and warehouses in St. Louis and Tulsa, Okla., along with 1,000 units in four apartment buildings in Federal Way, Olympia and Tacoma.

“This acquisition will act as a catalyst in purchasing other quality investment properties in the coming months in both the Seattle and St. Louis metropolitan areas,” said Wolk, the firm’s director of acquisitions and development.

If you didn’t know, office rents are high

Oncor International pegs Seattle Class A office rents at $45 per square foot in Oncor’s year-end, nationwide office market survey.

The $45 ranks Seattle fifth-highest in the country.

San Francisco came in first on Oncor’s survey, at $76. Next came Silicon Valley with $70, Manhattan at $57.51 and Boston, $54.

Behind Seattle, in sixth place, came Washington, D.C. at $38.50, Toronto at $35, Chicago at $32.20, chad-land West Palm Beach at $31.79 and San Diego at $30.60.

And what about the lows? Edmonton came in at the bottom at $12.50; Raleigh-Durham was next at $18.75.

Previous columns:

• Real Estate Buzz: Good news: office vacancies jump, 01-04-2001
• Real Estate Buzz: Opus buys Northpointe site, 12-28-2000
• Real Estate Buzz: Remember the old days, like 1997?, 12-21-2000
• Real Estate Buzz: An old flame catches Vulcan's eye, 12-14-2000
• Real Estate Buzz: Sublease totals may be peaking, 12-07-2000
• Real Estate Buzz: Kent Valley sees sublease increase, too, 11-30-2000
• Real Estate Buzz: Vulcan, Harbor teaming up on S. Lake Union housing, 11-16-2000
• Real Estate Buzz: Downtown office buildings selling slowly, 11-09-2000