Benaroya Capital Co.

Specialty: Develops, manages and invests in office, industrial, data center and retail space in the greater Seattle area

Management: Larry Benaroya, Marc Nemirow, Joseph Alhadeff, Dave Vranizan, Bob Bingham, Mark Johnson, Lisa Goodman and Terry McAleer

Headquarters: Seattle

Year founded: 1956

Current projects: South Hill Business + Technology Center, a data center in Puyallup; 1.3 million-square-foot Benaroya Business Center, an industrial project with some retail in Fife

Benaroya Capital Co. sat tight during 2009, selling only two properties and buying none. Its primary focus was converting its South Hill Business + Technology Center in Puyallup from a computer chip manufacturing plant into a data center.

“I expect 2010 will be more of the same,” wrote company Principal Larry Benaroya in an e-mail response to questions. Next year, the company will covert a second building on the 92-acre Puyallup campus to a data center. He expects to lease the South Hill data center space but the company is offering to sell it.

“Data center demand is strong and growing with few other options available in the market,” he said, adding the company will probably not be actively buying or selling.

“Having said that, if we see a compelling opportunity, we will buy it,” said Benaroya, who thinks that in addition to data centers, medical office may be a commercial real estate bright spot in 2010 and 2011.

Ready to build in Fife

Also in the South End is Benaroya Business Center. The company is ready to build the first 420,000-square-foot warehouse if someone takes the space, Benaroya said.

“We’re fortunate not to have other projects at this time,” wrote Benaroya, who noted commercial real estate prices have dropped across the board “and they’re continuing to drop,” though “prices for well-leased, well-located quality assets have dropped less.”

Even though the industrial sector remains soft, he expects it will be among the first to re-emerge from the recession.

Most existing warehouses lack the 30-foot ceiling heights, up-to-date sprinkler systems and larger truck-maneuvering areas and parking that most users want today, he said.

Other soft markets

Retail also remains soft as does office. Benaroya thinks it will be years before any speculative Class A office development occurs.

The company’s portfolio now stands at just under 1.2 million square feet. “We have slimmed down significantly in the past few years,” wrote Benaroya, adding that the holdings are less than one-third of what they were a few years ago.

He did not say how the size of the company’s staff compares to 18 months ago. Currently, the company has 30 team members.

For commercial real estate, the gear in the works has been a lack of capital. Benaroya thinks capital markets are thawing a bit, but said loan underwriting is being done on “a very conservative basis.”

A few sales

At the start of the recession, Benaroya said his company would offer seller financing. In May, the company did offer seller financing for a retail building on Seattle’s Crown Hill. The company’s other sale was land in Fife, which he said was an all-cash deal.

Benaroya added that his company is about to sell the Kent building that houses an LA Fitness. “We expect to be under contract to sell that property within the next several days,” he said.

Benaroya Capital Co. still owns the Denny’s site in Ballard. The mixed-use project got help up as part of the city of Seattle’s landmark designation process and then stalled when the market tanked. An apartment developer had planned to buy the site and build a 287-unit project with 32,000 square feet of retail. Benaroya has a master-use permit for the property, and plans to sell the site to another apartment developer when the market improves.

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