Seattle's 1201 Third tower goes on market
Owners of 1201 Third, once called Washington Mutual Tower, hope to cash in on rising prices
Seattle Times business reporter
One of downtown Seattle's tallest and best-known skyscrapers is for sale.
The 55-story 1201 Third Avenue building -- known for most of its history as the Washington Mutual Tower -- could fetch more than $500 million, according to one real-estate industry newsletter.
The tower joins a growing collection of buildings listed for sale over the past year by owners seeking to cash in on institutional investors' recent willingness to pay high prices for prime Seattle office properties.
Among them: 42-story Russell Investments Center, sold earlier this year for $480 million, and the recently listed 11-building Amazon.com complex in South Lake Union, which could go for more than $1 billion.
At 772 feet, 1201 Third is Seattle's second-tallest building. It's owned by a partnership of three companies: Seattle developer Wright Runstad, which built the tower in 1988; Shorenstein Properties of San Francisco; and Beacon Capital Partners of Boston.
Beacon, which holds the majority interest, also recently put up for sale three midrise office buildings it owns in downtown Bellevue.
Wright Runstad wants to keep managing 1201 Third for at least three years and hopes to retain a "small minority interest" in the building, according to an offering memorandum circulated by brokerage Eastdil Secured.
Wright Runstad and Beacon declined to comment Wednesday, and an Eastdil broker did not return a call or email.
The 1.1 million-square-foot tower is a prominent part of downtown Seattle's skyline. It was Washington Mutual's headquarters until the ill-fated thrift built its own tower a block away in 2006.
An appraiser valued 1201 Third at $379 million in 2007, when Beacon bought its stake. Real Estate Alert, an industry newsletter that reported the listing earlier this summer, estimated the building's value at $540 million.
That breaks down to about $491 per square foot, around 10 percent less than the Russell Investments Center and several other prime downtown-office towers have fetched over the past year.
But 1201 is older than those buildings and has more vacant space.
The tower is 89 percent occupied, according to the offering memorandum, but it is effectively only 82 percent leased because law firm Perkins Coie soon will vacate 75,000 square feet it has been occupying short-term while its long-term space in the building is redone.
Eastdil's offering memorandum says the higher vacancy rate means 1201 is downtown's only "trophy" office tower with significant space available to capitalize on surging tenant demand.
The building's biggest tenants now all are law firms -- Perkins Coie, Davis Wright Tremaine, Karr Tuttle Campbell and Keller Rohrback.
Beacon Capital took out a five-year, interest-only loan of $2.7 billion in 2007 to buy 1201 Third and 20 other office buildings in Seattle, Bellevue and the Washington, D.C. area.
The recession hit the portfolio hard, however, and two years ago Beacon's lenders agreed to extend and modify the loan.
As part of that workout, the lenders required Beacon to sell buildings to pay down principal and pay back deferred interest, according to servicer reports.
It's unclear whether that requirement was a factor in the decision to sell 1201 Third.
The three downtown Bellevue buildings that Beacon is now marketing for sale also were purchased in 2007, for a total of $205 million, according to county records.
They are 10-story U.S. Bank Plaza and 16-story Plaza Center, both on Northeast Eighth Street between 108th and 110th Avenue Northeast; and nine-story Plaza East, at the corner of Eighth and 112th Avenue Northeast.
Together the buildings have about 650,000 square feet of office space. About 20 percent of that is vacant or otherwise available, according to commercial real-estate database Officespace.com.
Real Estate Alert recently estimated their value at $250 million.
Beacon once was downtown Bellevue's biggest landlord, but it has sold most of its other properties -- 27-story City Center Bellevue, 26-story City Center Plaza, 24-story Skyline Tower and 23-story Key Center -- since 2010.
The company still owns property across Northeast Eighth from Plaza Center, and Bellevue planners have approved a 32-story office tower there. Beacon has not said when that project might break ground.
Eric Pryne: email@example.com or 206-464-2231