Home Commercial Swift Pays $18.25MM for Office Building in Bellevue

Swift Pays $18.25MM for Office Building in Bellevue

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Gateway Two BellevueBy Jon Peterson

San Francisco-based Swift Real Estate Partners has purchased the 68,000 Gateway Two office building in Bellevue for $18.25 million or $267 per square foot.

“We view this property as a very strong leasing opportunity,” says Kelsey Schultes, senior associate at Swift. She worked on this investment for the company and is on the acquisition team for Swift in the Pacific Northwest covering both Seattle and Portland. The property is currently 50 percent occupied.

Swift considers Gateway Two to be a Class B office asset. “This segment of the office market in Bellevue has a current occupancy of over 90 percent. The reason for the vacancy in our property is that one tenant recently moved out,” said Schultes. She declined to name the tenant that has left the property.

Swift acquired the property with a mixture of cash and debt. The buyer did arrange new financing from Wells Fargo that covered 62 percent of the acquisition cost of the property. Given the amount of vacancy in the property, this was not a cap rate kind of deal. The property was first developed in the late 1980s.

The seller of the property was Chicago-based Walton Street Capital. Gateway Two was an asset that the seller had bought as part of the Arden portfolio. The original intent was to sell the whole portfolio, but Walton Street was not able to do that. The portfolio was then taken off the market and the assets have been sold one at a time. The deal with Swift was made off-market.

There is a significant difference in rents between downtown and the suburbs in Bellevue. “Current downtown Bellevue asking rents for space being brought to the marketplace is in the range of $40 to $45 per square foot. This compares to $32 to $34 per square for asking rents in the suburbs. Tenants are starting to look at space in the suburbs to find lower occupancy costs,” said Joe Lynch, a senior vice president and partner with Kidder Mathews. He was one of the listing agents involved in the sale.

Swift acquired Gateway Two as an investment for the manager’s newest commingled fund, Swift Real Estate Partners Fund II. The company is in the process of raising $400 million of capital for this fund. Swift plans to quickly re-brand the asset and launch a targeted marketing strategy, beginning with changing the properties’ name to Swift Gateway, which represents both the Swift brand and the ease of access to freeways and Downtown Bellevue that the property provides.

Swift is in the market to buy more assets throughout Seattle. “We are looking to acquire more value-add office and flex buildings in several Seattle markets. These would include places like Seattle, Bellevue, Redmond and Kirkland,” said Schultes.