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Originally published June 19, 2012 at 4:38 PM | Page modified June 19, 2012 at 8:46 PM

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Wright Runstad misses payment on PacMed Center

Seattle developer Wright Runstad has missed the June payment on its 99-year lease on the Beacon Hill landmark popularly known as the PacMed Center, raising the possibility it may walk away from the mostly empty tower.

Seattle Times business reporter

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Seattle developer Wright Runstad has missed the June payment on its 99-year lease on the Beacon Hill landmark popularly known as the PacMed Center, raising the possibility it may walk away from the mostly empty tower.

Wright Runstad subleased most of the building to Amazon.com for 12 years. But the giant online retailer departed for South Lake Union 13 months ago, leaving Wright Runstad with no revenue to pay either its landlord or the lender who provided $23 million in 2000 to transform the former hospital into an office building.

Wright Runstad defaulted on the loan last August. But, until this month, it continued to make its $143,000 monthly lease payments, said Rosemary Aragon, executive director of the Pacific Hospital Preservation & Development Authority (PDA), the quasi-public agency that owns the 16-story tower.

The missed payment was due June 5. Under terms of the lease, Wright Runstad or its lender has about three months to pay up, Aragon said.

If that doesn't happen, she said, the PDA will take the property back from Wright Runstad and lease it to someone else.

Wright Runstad wouldn't say much Tuesday. "We are in ongoing discussions with both the Pacific Hospital PDA and our lender," spokesman Roger Nyhus said. "We have no additional information to share right now."

The PDA, a nonprofit, uses lease revenues to fund access to health care for the uninsured and underinsured. Board Chairman Kevin Fox said the agency built up a nest egg in anticipation of the financial problems it's now encountering with Wright Runstad. "At this time we don't anticipate any impact," he said.

That could change if the tower brings in no lease income for an extended period, Fox acknowledged. But he also said that, if the lease with Wright Runstad is terminated, the agency could have greater success finding a new tenant itself because it could charge lower rents.

Wright Runstad must charge enough to cover not only its payments to the PDA, but also its payments to its lender, Fox said.

The PDA, in contrast, "doesn't have to service $20 million of debt ... .

"I would presume we will have more revenue," Fox said. "I am very optimistic that we're going to be better off."

The brick, Art Deco PacMed Center, built in 1932, sits at the north end of Beacon Hill, above Interstates 5 and 90.

When the Wright Runstad/Amazon deal was announced in 1998, backers said it would provide the PDA with a stable source of revenue to fund its health-care work.

Wright Runstad started marketing the tower to prospective tenants long before Amazon moved out. A proposal to relocate King County's juvenile court and jail there fell through last year.

Wright Runstad still owed $20.6 million on its 2000 loan when it stopped making the $181,000 monthly payments last August. After initially indicating it would foreclose, loan servicer LNR Partners of Miami instead put the note up for bids — online — in April.

LNR indicated it would accept as little as $2 million, less than 10 cents on the dollar, but got no offers. The mortgage is secured not by the building itself, but by Wright Runstad's leasehold interest.

Now it's listed for sale on Auction.com again. This time LNR is willing to take as little as $100,000 — and pay a finder's fee to anyone who brings in a buyer, said Eric Paulsen, co-CEO of Auction.com Commercial.

The auction is set to open July 16 and close July 18.

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

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