By Jon Peterson
An institutional investor with deep roots in the Pacific Northwest is looking to test the market with an asset sale in Seattle. New York City-based Clarion Partners has decided to place on the market for sale The Meridian mixed-use asset it owns in the city, located at 614 Pike Street and 1506 6th Avenue, according to the property’s offering document. No pricing guidance was available for the property, which covers a total land area of 57,868 square feet, at this time.
Clarion Partners has owned the asset for several years for one of its separate account institutional clients. The company purchased the asset in January of 2014 for $113 million from an entity associated with Skokie, Illinois-based Miller Capital Advisory. Presently, King County assesses the value of the asset at roughly $89.6 million.
The real estate manager did not respond to emails seeking comment for this story.
The listing agent on the sale is CBRE, which has engaged its Pacific Northwest Capital Markets unit. The team marketing this asset includes Tom Pehl, Charles Safley, Jon Hallgrimson, Kyle Yamamoto and Dino Christophilis. CBRE declined to comment on the sale.
The property as it stands now has a mixture of office, retail and theatre space. Two of the property’s main tenants are located in the Meridian East portion of the property. They are Regal Cinemas, which leases 69,947 square feet, and Gameworks, which takes up another 27,400 square feet in the building. The leases with this part of the property expire in 2026.
Meridian West has a Niketown store totaling 24,716 square feet. There is also office space in this portion of the asset leased to Fidelity and BECU. All of the leases in these spaces run through 2028, but some of them do have options to renew the leased space. In all, the property is roughly 90 percent leased.
The asset also features on-site parking that can accommodate 694 cars. The parking is located in two separate structures with multiple points of access. This operation would provide the owner a reliable source of income in a parking-constrained market in downtown Seattle.
The Meridian is located in a section of Seattle that is zoned DOC-2. The flexible zoning standards allow for the redevelopment of up to three towers with flexible permitted uses that could include office, life science podium, for-rent and for-sale residential, hotel and retail. The size of the potential development could vary on the residential size from 738 to 1,366 units and on commercial from 593,950 to 1.1 million square feet.
The Meridian has a very strong location. The property is within walking distance to offices of major tenants such as Amazon, Apple, Google and Meta. It is also one block from light rail access to Northgate, Capitol Hill, University of Washington and SeaTac International Airport. It would take customers one minute to walk to over 40 restaurants, hotels and entertainment amenities, according to the property’s marketing documents.
This property will test the market’s interest in assets that have multiple tenants with relatively high occupancy. It will also test the interest for redevelopment opportunities, which may pose its own set of challenges. According to a recent, second quarter of 2022 Seattle Market Overview by brokerage Broderick Group, increased interest rates and inflationary pressures have not only impacted office valuations and dispositions but have impacted material and labor costs driving higher tenant improvement costs across new office leases. The properties that have held value typically include trophy buildings with long-term leases with well-capitalized tenants, Broderick Group states. This could be a challenge for a retail-based property in a downtown that has seen its own set of challenges associated with a downtown that is seeing nearly 14 percent direct vacancy.
What may be in the seller’s favor is that regional experts see Seattle’s growth reaching 2 times the national average over the next few years, according to Broderick. This could make Seattle among the first major markets to recover and realize pre-pandemic levels of growth, and this optimism will be tested as the year comes to an end.