Lender takes control of downtown office building

The developer of an empty new downtown Seattle office building has turned the project over to its lender to head off foreclosure.

The 7th & Madison building is the first significant office building in the downtown area to go back to the bank since the commercial real-estate market began its nosedive two years ago.

Now an affiliate of lender U.S. Bank has put the building up for sale — for roughly half what it loaned developer Opus Northwest less than three years ago to build the project.

Bellevue-based Opus deeded the nine-story, 204,000-square-foot building to the affiliate earlier this month, according to county records. The building has been vacant since Opus completed it 16 months ago, and has been for sale since last fall.

For months, the building, highly visible from northbound Interstate 5, has sported a marketing banner touting to prospective tenants the opportunity to put "your sign here."

Since taking title, U.S. Bank has retained GVA Kidder Mathews to market the building to prospective buyers. The asking price is about $35 million, said Garth Olsen, a senior vice president with the brokerage.

The bank gave Opus a $67.5 million construction loan for the project in April 2008, according to county records.

7th & Madison was one of about 10 new office projects in the downtown area totaling more than 2.5 million square feet that began construction during the real-estate boom, but were completed after the recession took hold.

While most now are at least partly leased, all that new supply has helped push the Seattle office vacancy rate to record highs.

It's now around 20 percent. "The market has been in the tank," said Tom Parsons, Opus senior vice president and general manager.

While the 7th & Madison building continued to advertise space for lease, Parsons said, Opus stopped actively pitching it to tenants last fall because of the dismal market and focused instead on trying to sell it.

He said the decision to turn it over to the bank was part of a broader restructuring of Opus' debt.

Kip Spencer, co-founder of commercial real-estate database Officespace.com, said 7th & Madison was a victim of "very poor timing." He called its visibility from I-5 "stellar."

Still, the location, just across the freeway from the downtown office core, "was always a little tricky," Spencer added. It's actually closer to the central business district than some competing buildings, he said, but the freeway might have been a psychological barrier to some prospective tenants.

"Many people associate that side of I-5 with First Hill, Pill Hill, medical," Spencer said.

Parsons disagreed. "The location is a big advantage," he said. "We heard brokers marveling at its prominence."

Eric Pryne: 206-464-2231 or epryne@seattletimes.com