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September 12, 2018  

Investcorp Showing Renovated Seattle Offices

An Investcorp partnership is pitching a newly renovated Seattle office tower that’s expected to command bids of about $310 million.

The 41-story building, at 901 Fifth Avenue in the Central Business District, encompasses 537,000 square feet. With top new properties in the city commanding more than $900/sf, the listed tower’s anticipated price of $577/sf could prove alluring to investors. At that valuation, the capitalization would be about 5%.

Bahrain-based Investcorp and its partner, Schnitzer West of Bellevue, Wash., awarded the listing to Newmark. The marketing campaign, expected to launch soon, will tout the potential to raise below-market rents as leases roll over.

The occupancy rate is 92%. Major tenants include Allstate, PitchBook, the City of Seattle, State Farm, SVB Financial and Washington State University. The rents are 20% below the average market asking rate.

The Class-A tower, at Marion Street, was constructed in 1998. The Investcorp partnership acquired it for $223.5 million, or $413/sf, in 2016, when the occupancy rate was 86%. Eastdil Secured advised the seller, Deutsche Asset Management.

The Investcorp team pumped $7 million into a renovation, including upgrades of the lobby, fitness center and conference center. Leases were subsequently signed at rents 15-20% higher than the previous rates. The pitch is that a buyer could continue to capitalize on the improvements by raising rents as more leases roll.

The Central Business District’s 34.5 million sf of Class-A office space was 94.6% occupied at midyear, according to Cushman & Wakefield. The average asking rent was $45.63/sf.

The surrounding neighborhood has been improving recently. For example, Seattle technology company F5 Networks has fully pre-leased the 28-story, 516,000-sf office component of the 44-story F5 Tower, nearing completion at 801 Fifth Avenue, across the street from 901 Fifth Avenue. A luxury hotel will occupy the lower floors.