08/10/2011

JP Morgan Strikes Deal for 2 Seattle Towers

In this yearís biggest office transaction on the West Coast, J.P. Morgan Asset Management has agreed to buy two new Seattle office towers from developer Schnitzer West for about $475 million.

The investment manager is acquiring the 668,000-square-foot building at 1918 Eighth Avenue and the 232,000-sf building at 818 Stewart Street. CB Richard Ellis is advising Schnitzer, of Portland, Ore.

The $530/sf price is near the high end of estimated valuations when the properties hit the market in May, which bodes well for other Seattle listings. J.P. Morganís capitalization rate is unknown, but market players estimate it at about 5.5%.

Nearly a dozen investors participated in the second round of bidding, and almost all made offers for both buildings, which Schnitzer was willing to sell individually. The towers have the characteristics most desired by institutional buyers: recent construction, a downtown location and high occupancy by big-name tenants. The properties are about a block apart in the sought-after Westlake Triangle section.

The 36-story tower at 1918 Eighth Avenue, which was completed in 2010, will be 94% occupied once Amazon.com finishes moving in later this year. The on-line retailer signed a 500,000-sf lease in March.

The 14-story building at 818 Stewart Street, which was completed in 2008, is 90% leased. The tenants include public relations giant Weber Shandwick, consulting firm Accenture and software developer FiberCloud.

Although the average office occupancy rate in Seattle is still just 85%, demand for Class-A space is growing, primarily on the strength of booming technology companies.

The improving outlook is encouraging some owners to sell. Schnitzer has put two other Seattle-area buildings up for grabs. The properties, at an office park in Bothell, Wash., encompass 199,000 sf that are 96% leased. Bids are expected to weigh in at about $350/sf, or $70 million. The buildings, listed with CB, are at 11724 Northeast 195th Street and 12100 Northeast 195th Street.

Also, health insurer Regence Group of Portland has listed a 312,000-sf tower at 1800 Ninth Avenue in Seattle. The 15-story building, also in the Westlake Triangle, will be vacant when sold. It is expected to attract bids of $70 million. Pacific Real Estate is the broker.

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