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September 4, 2012

Vulcan Expects Amazon Global HQ in Seattle to Sell Quickly

By Scott Baltic, Contributing Editor

For Sale: 1.8-million-square-foot, 8.4-acre corporate headquarters. Nine new Class A buildings and two historic renovations are occupied by a single, steadily growing credit tenant. Complex is in a newly revitalized downtown area of a major Pacific Northwest city and includes 100,000 square feet of street-level retail along a streetcar line. If interested, act soon; property expected to generate substantial interest.

This complex is, of course, Amazon.com’s global HQ in Seattle’s South Lake Union neighborhood, as announced last Thursday by Vulcan Real Estate, of Seattle. Vulcan plans to deploy earnings from the sale into ongoing development of its other substantial land holdings in SLU.

Lori Mason Curran, director for real estate investment strategy at Vulcan, told Commercial Property Executive that the complex is being marketed either as a whole or in parts and that she expects a closing by year’s end.

“It’s an interesting time to sell,” she said. “There’s been some big interest in Seattle as an investment market” by institutional investors. She declined to estimate a price for the property.

CBRE is the listing agent, with a team led by CBRE vice chairman Kevin Shannon.

“The Amazon Corporate Headquarters buildings represent exactly what core capital wants today: new product featuring durable, credit income streams in great CBD locations,” said Shannon. “Technology and corporate tenants love state-of-the-art campuses in amenity-rich, transit-oriented environments like Amazon’s, because these locations allow them to attract and retain the best talent in the workforce.”

In her exclusive interview with CPE, Mason Curran sketched out SLU’s recent history.

In the early 1990s, a Seattle newspaper columnist proposed that the city develop a park in SLU, somewhat along the lines of New York’s Central Park that would encourage the building of residential properties nearby. The area was then primarily warehouses and light industrial.

To help buy land for the project, called Seattle Commons, Paul Allen, owner of Vulcan, co-founder of Microsoft and owner of the Seattle Seahawks and Portland Trail Blazers, chipped in a $20 million loan, to become a gift to the city if the park went forward. The park, however, was twice shot down by voters.

By the late ’90s, after the 11.5 acres already purchased had reverted to Allen, Vulcan began to acquire more land in SLU. By 2001, the company owned about 45 acres and had several buildings under development. Vulcan’s holdings peaked at 64 acres, and by 2006 it had built 1.2 million square feet, with an additional 3 million in development. (A few parcels were sold off without having been developed, Mason Curran said.)

Negotiations in 2006–07 resulted in Vulcan agreeing to build a five-phase office development for Amazon, which had been growing rapidly, but whose Seattle headquarters operations were scattered across various buildings, including a U.S. Public Health Service hospital.

Construction started in 2007, with Schnitzer West as development partner on the first two phases. After starting in 2010, Amazon’s move is just about finished, Mason Curran said, with the latest building just being completed. The leases are all for total terms of 14 to 16 years, she said.

As of now, Vulcan owns about 55 acres, largely contiguous, in SLU. In addition to Amazon, Seattle’s largest office tenant, Vulcan’s SLU tenants include Microsoft, Skanska and the headquarters of Tommy Bahama.

To date, including the Amazon HQ, Vulcan has delivered 4.6 million square feet in 22 new office, biotech, residential and mixed-use projects on about 25 acres in SLU. It has also developed one hotel, the only U.S. property of Singapore-based Pan Pacific Hotels and Resorts.

In the ongoing redevelopment of SLU, Vulcan also has several projects currently under way:

* An 185,000-square-foot research facility for the University of Washington School of Medicine, scheduled for completion in the first quarter of next year. It will be Vulcan’s fourth building in SLU for the med school.

* Stack House, a 278-unit, two-building new-construction apartment complex.

* The rehab of the historic 35,000-square-foot Supply Laundry building into spec office and retail space.

In addition, nearly 600,000 square feet of office space is in pre-development in SLU, said Mason Curran. Vulcan plans to redevelop its other 30 acres in SLU “organically,” with no specific masterplan, she said.

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