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Originally published Friday, June 10, 2011 at 11:56 AM

Touchstone buys South Lake Union block from Seattle Times

Seattle developer Touchstone has acquired the Troy Laundry block in South Lake Union from The Seattle Times Co.

Seattle Times business reporter

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Touchstone, one of the Seattle area's busiest developers, has acquired another South Lake Union block that is ripe for redevelopment.

The company paid The Seattle Times Co. $18.4 million for the 2.5-acre Troy Laundry block, which is just across the street from Amazon.com's burgeoning new headquarters complex.

The block, bounded by Fairview Avenue North, Thomas Street, Boren Avenue North and Harrison Street, is just north of The Times' headquarters. It is dominated by the Troy Laundry building, a former commercial laundry built in 1927 and used mostly for storage since The Times bought it in 1985.

The building's brick and terra-cotta façade is a historic landmark and must be integrated into any new development.

Touchstone has no immediate plans for the property. "We're still exploring the feasible development options," principal Douglas Howe said.

The acquisition is the second for Touchstone in South Lake Union in the past year. Last August it purchased most of the block just southeast of the Troy block from Cascade Natural Gas. Touchstone recently put the eastern half of that block up for sale, marketing it as an apartment-development opportunity.

Once-neglected South Lake Union is Seattle's fastest-changing neighborhood. More than 4 million square feet of office space and 2,300 apartments and condos have been built there since 2000, and another 1,000 apartments are in the pipeline.

Zoning now limits any new development on the Troy block to 65 feet in height. But city officials are considering rezoning the neighborhood to permit higher-density development; under one option, buildings on the Troy property could rise to 300 feet.

In addition, The Times recently asked the City Council to rezone the block to permit residential use. Howe declined to comment on whether Touchstone will continue to pursue the rezone.

The Times has been trying to sell the Troy block for nearly three years. In recent months the company had been asking $20 million for the property. It is assessed for tax purposes at $13.7 million.

Proceeds from the sale will be used to pay down debt and meet pension obligations, said a prepared statement from The Times.

Earlier this year The Times sold another South Lake Union property, the eight-story 1000 Denny office building, to California investors for $36 million, and said it would become the building's prime tenant, vacating its headquarters of 81 years.

The company intends to eventually redevelop the headquarters block and the block to the south, at Fairview and Denny Way, that now is mostly a parking lot.

Touchstone has been developing property in the Seattle area for 20 years. Last year Howe said the private company hoped to break ground in 2012 on a 15-story office, hotel and retail project in downtown Bellevue.

He also said Touchstone was working to assemble several blocks for eventual redevelopment in Seattle's Denny Triangle neighborhood around Boren Avenue and Stewart Street, where the company has acquired two parcels in recent years.

Touchstone projects further down the pipeline include redevelopment and expansion of Kirkland's Parkplace shopping center and a five-story, 228,000-square-foot office or biotech project just north of Gas Works Park in Seattle.

In 2010 the company completed West 8th, a 28-story office tower in the Denny Triangle that is about one-third leased.

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

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