American Realty Advisors, Vulcan Set Seattle Record

Find out what kind of purchase set a record in Emerald City.
33-085 Westlake

2201 Westlake Ave.

American Realty Advisors is boosting its Seattle area holdings with the purchase of 2201 Westlake Ave., a fully-leased Class A office/retail building in the South Lake Union submarket, from Vulcan Real Estate for $251 million.

The sale of the 12-story, 317,000-square-foot property set a record in the city per square foot at $792 per square foot. The Puget Sound Business Journal reported the previous record of $772 a foot was also for a Vulcan-owned property – 307 Westlake Ave., which was sold earlier this year.

“We were very pleased by the broad interest we received from institutional investors,” Ada Healey, vice president of real estate for Vulcan, Inc., said in a prepared statement. “The pricing reflects both the exceptional quality of the asset and the highly-desirable characteristics of the Seattle office market.”

The building’s main tenants are Amazon, which leases more than half of the office space, and PATH, an international health non-profit firm. The ground-floor retail space is occupied by Bang &  Olufsen, West Elm, Einstein Bagels and Ann Sacks Tile & Stone. Developed by Vulcan in 2009, the building is LEED Gold-certified.

“Opportunities to acquire a newly-constructed building with high-quality tenants at a ‘Main and Main’ location are rare,” Drew Hess, senior director, Investment Group, for American Realty Advisors, said in a prepared statement. “This purchase secures a fully-leased Class A asset at an ideal location and still offers strong rental growth opportunities beyond an attractive risk-adjusted return.

“Overall, this type of property checks off all of the boxes: great urban location, great tenants and new high-quality construction and amenities,” he added.

The all-concrete building has large office floorplates ranging from 22,000 to 39,000 square feet, expansive window lines and 14 foot floor-to-floor heights throughout the building. In addition to 23,400 square feet of retail, it has 336 parking stalls in a five-level subterranean garage.

“Tenants are seeking creative environments where they can not only recruit talented employees, but also locate as many people on one floor as possible,” Hess said in his statement. “The open ceilings and construction features also provide lower ongoing re-tenanting and operating costs, which in turn led to higher net operating income for investors.”

Vulcan has been an active developer and investor in the Seattle region, particularly the South Lake Union neighborhood, which has become one of the West Coast’s top locations for technology and global health firms. Vulcan Real Estate, which is currently managing about $2 billion in assets, directs all real estate investment activities for Vulcan, Inc. run by former Microsoft co-found Paul Allen.

Vulcan Real Estate has set property records before in Seattle. In October, 2012, Amazon paid Vulcan a record $1.2 billion for its 11-building headquarters, a 1.8 million-square-foot development in South Lake Union.

Vulcan stated it planned to invest the funds from the sale of 2201 Westlake into its continued development efforts as well as new land and value-add opportunities throughout the region. To date, the company has delivered 5.7 million square feet in 26 office, biotech, residential and mixed-use properties in South Lake Union. It is constructing 600,000 square feet for now as well as the Allen Institute for Brain Science and has numerous projects in pre-development planning.

Seattle is one of American Realty Advisors preferred investment markets. With nearly $7 billion in assets under management, the Glendale, Calif.-based company is an investment manager to institutional investors. American acquires assets directly or provided equity, preferred equity, mezzanine debt, debt and hybrid debt for office, industrial, multi-family and retail properties throughout the United States. The firm owns several other properties in the Seattle area, including one retail center, several multi-family buildings, one office property and several industrial assets. One of its most recent acquisitions was a two-property industrial portfolio in Northern Virginia near Dulles International Airport purchased from Clarion Partners.

CBRE handled the transaction with a team led by Kevin Shannon, vice chairman/managing director, Capital Markets, Institutional Properties. Team members included Mike Moll, Tom Pehl, Lou Senini and Ken White. Shannon, based in Los Angeles, was supported by the local CBRE office as well.