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REA
February 07, 2018  

Trammell Team Pitching Seattle-Area Tower

A partnership between Trammell Crow and Principal Real Estate Investors plans to shop a recently completed office building near Seattle that could fetch about $390 million from core investors.

The 462,000-square-foot property, in Bellevue, Wash., is 92.5% leased. At the estimated value of $844/sf, the buyer’s initial annual yield would be 4.75%. The 19-story building, called 929 Office Tower, is at 929 108th Avenue NE.

CBRE is representing Dallas-based Trammell and Principal, of Des Moines, Iowa. The brokerage is expected to launch the marketing campaign in a few days. Only one Bellevue property has ever sold for more than the $390 million expected price.

The offering comes as J.P. Morgan Asset Management has lined up a buyer for another big Bellevue office property — the 601,000-sf Advanta Office Campus. Hawaii investor Jay Shidler has agreed to pay about $225 million, or $374/sf. Eastdil Secured is advising J.P. Morgan.

The Trammell partnership’s building, which was completed in December 2015, is expected to attract strong interest because listings of new multi-tenant office properties have been scarce in the Seattle area, given that much of the recent construction has been for single occupants. Many core domestic institutional investors and foreign players that are interested in Seattle-area properties prefer a diversified rent roll, to mitigate the risk of having a sole tenant exit a property.

The listed building has 14 tenants, with a weighted average remaining lease term of 8.5 years. Some 70% of the space is leased to companies that are public and/or have investment-grade ratings. Salesforce.com leases 38% of the building. Other tenants include engineering firm HDR, Sony and Visa.

The building, designated LEED gold, has a two-story lobby, street-level retail space, 24,000-sf floor plates, a fitness center, bike storage and a garage. It is one block from the Bellevue Transit Center. High-end retail space, luxury hotels and restaurants are within walking distance.

Over the past decade Bellevue has attracted institutional capital that previously was more focused on downtown Seattle. Microsoft used to have an outsize presence in Bellevue, which made some investors skittish about concentration risk, but recent development has diversified the city’s tenant base.

At yearend, Bellevue’s 9.7 million-sf Central Business District submarket was 95% leased, with an average asking rent of $45.20/sf, according to JLL. By contrast, the 55.6 million sf of space in Seattle’s downtown submarkets, including the Central Business District, was 91.1% occupied, with an average asking rent of $40.57/sf.

The highest price ever paid for a Bellevue office property came in 2010. In that transaction, Principal Real Estate paid Bellevue-based Schnitzer West $410 million, or $543/sf, for the 755,000-sf Bravern Office Commons in a deal brokered by CBRE. The downtown complex was fully leased to Microsoft.

The estimated $844/sf price for 929 Office Tower would also be the second-highest valuation in Bellevue on a per-foot basis. The record was set in October, when the 357,000-sf Centre 425, at 425 106th Avenue NE, sold for $877/sf, or $313 million. A TriStar Capital partnership acquired the property from Schnitzer West, which was represented by Newmark. Amazon.com leases the entire building, which was completed in 2016.