Specialty: Commercial, residential and multiuse investment and development
We’re in the midst of “the strangest market I’ve ever seen,” said Dan Ivanoff, founder and managing member of Schnitzer West. “Without a doubt.”
Chalk it up, in part, to the alarming speed with which the real estate market imploded locally and around the world. Stranger still, Ivanoff said, was to see tenants fail to take advantage of the sharply reduced market rents that followed.
“They were more concerned about their lenders, and didn’t want to take a long-term liability on anything,” he said.
Ivanoff compared current market conditions to the doldrums of the early 1990s rather than the briefer downturn that followed the dot-com bust last decade. This time, it will take longer for market conditions to recover, he said, perhaps 2014 or 2015.
Schnitzer West has had a strange year itself. Despite the well-publicized slow start for the retail and residential components of the upscale Bravern, which opened in Bellevue last year, a lot of the firm’s recent news has been positive. It sold the Equinox apartments in Seattle and the Advanta office complex in Bellevue to JP Morgan Asset Management over the summer for $306 million, and sold the Bravern office towers in September for $410 million to Principal Real Estate Investors of Des Moines, Iowa.
The sales were for “very attractive prices,” Ivanoff said.
Schnitzer West has also received unsolicited interest in its 14-story 818 Stewart office building in Seattle. The building, completed in 2008, is 90 percent leased.
New strategic plan
Though the property sales have left Schnitzer West well capitalized, the firm expects to take its time before diving in again. New development will remain a less appealing option until developers can earn back their costs.
“I’m not sure the market has gotten to the bottom yet this year,” Ivanoff said. The firm may reenter with a “very deliberate approach.”
Schnitzer West has been hammering out a new strategic plan, and Ivanoff was noncommittal about its future plans. “Until we do our homework, I couldn’t tell you where we think we’re going to be,” he said. Current conditions call for staying flush with capital, being careful about taking on risk, hanging on to tenants, “and working real hard to make sure they survive.”
New eatery for Bravern
The Neiman Marcus-anchored Shops at the Bravern opened 85 percent leased last year, but has weathered closings of LJT Arthur, an underclothing retailer, and a pair of eateries, the Artisanal Brasserie and the Artisanal Table.
The closings have been offset by other openings, including Karen Millen and David Lawrence stores, but the 310,000-square-foot luxury shopping center remains about 85 percent occupied. The firm expects to make an announcement in the spring regarding a high-profile restaurant that will take another 8,000 square feet.
Ivanoff suggested the center could be fuller, but the firm wants to be meticulous about getting the right mix of tenants.
A taller order may be filling the 36-story 1918 Eighth office tower, which opened last year in the Denny Triangle.
Leasing activity has been slow — it’s about 35 percent leased — but some deals are in the works that could fill another 85,000 square feet in the 660,000-square-foot building, Ivanoff said.
Industrial is strong
Other properties are in better shape. The firm’s industrial portfolio is 97 percent leased, and its North Creek business campus in Bothell, comprising 1 million square feet, is 94 percent occupied. The Brix condominiums on Capitol Hill are sold out, and 20 units remain at the Gallery in Belltown, which Ivanoff expects to sell out by the first or second quarter of 2011.
The Bravern’s two residential towers are being converted to apartments. The first tower is 70 percent leased, and leasing is getting under way for the second.
Ivanoff said many of the Bravern renters are the same people who would have been buyers for the condos. After the way the first tower quickly filled up, he said he probably should have priced the units higher.
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