In One of 2010’s Biggest Deals Yet, Suburban Seattle Office Property Trades for $310M
In Bellevue, Wash., the change in ownership of City Center Plaza, leased in its entirety to Microsoft's Bing division, is turning heads. Phoenix-based Cole Real Estate Investments' $310 million all-cash acquisition of the nearly 583,179-square-foot office property from Boston-based Beacon Capital Partners marks one of the largest commercial real estate transactions in the U.S. to date this year.
July 13, 2010
By Barbra Murray, Contributing Editor
In Bellevue, Wash., the change in ownership of City Center Plaza, leased in its entirety to Microsoft’s Bing division, is turning heads. Phoenix-based Cole Real Estate Investments’ $310 million all-cash acquisition of the nearly 583,179-square-foot office property from Boston-based Beacon Capital Partners marks one of the largest commercial real estate transactions in the U.S. to date this year.
City Center Plaza, developed by Wright Runstad & Company for Beacon Capital, sits about 10 miles east of Seattle at 555 110th Ave. N.E., in Bellevue’s central business district. Microsoft has been on the tenant roster since the 26-story building opened its doors in May 2009, and the company has a triple net lease agreement to occupy its digs through 2024. City Center Plaza also features approximately 19,800 square feet of fully occupied retail space and a parking facility with over 1,400 spaces. The office tower was developed as a premier asset, but Microsoft has taken the property to an even higher echelon by investing funds beyond the $43 million Beacon Capital had allotted for tenant improvements.
A bevy of City Center Plaza-size transactions in the Seattle area are not on the horizon, however, transaction activity in general is on the upswing, smaller trades have been buoying activity. While the majority of the second quarter’s 29 office transactions were under $20 million, the overall transaction volume rose to $430 million, the highest since the fourth quarter of 2007’s total of $843 million, according to a report by real estate services firm Grubb & Ellis Co. Additionally, the average per-square-foot sales price jumped in the second quarter from $150 to $200, a 25 percent quarter-over-quarter increase.
“There is a lot of capital placed to acquire properties and Seattle is on everyone’s radar screen,” Richard Wieneke, Senior Vice President with Grubb & Ellis, told CPE. “There is still a gap between what sellers want to sell for and what buyers want to pay, but it has narrowed somewhat, and there are a lot of transactions around the corner.”
The investment market, he adds, is a split market; there are two types of buyers. “There are those entities looking for properties with high-level credit tenancy on long-term leases. They’re buying for the cash flow and they’re paying prices that are almost unheard of. They’re buying the assurance of a AAA credit tenant.” And then there are those investors who want to acquire assets to capitalize on the future–the eventual decline in vacancy rates and increase in rents. “They’re willing to take on a substantial amount of risk.”
Of the two investor types, the group of buyers seeking troubled assets will account for the anticipated continued increase in sales activity. “There’s the impending debt maturity problem, so within the next 12 to 36 months, we’ll see more distressed property sales,” Wieneke said.
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