By Jack Stubbs
On Tuesday, August 14th, Dallas-based developer and property management company Lincoln Property Company acquired the five-building South Seattle Business Park in Seattle’s Georgetown neighborhood for $17.5 million, or approximately $179 per square foot, according to public records filed with King County. Lincoln Property purchased the property from SMARTCAP Inc., a commercial real estate investment company based in Redmond that focuses on value-add retail and office properties throughout the Western U.S.
The buyer and seller were represented by Leroy Lutu at Marcus & Millichap’s Seattle office.
For Lincoln Property Company, the acquisition represents the company’s continued expansion in the Puget Sound region, according to J.P. Harlow, senior vice president at the company, who also thinks that the property’s location makes it a particularly attractive investment. “We’re excited to continue our expansion in the Puget Sound with the purchase of South Seattle Business Park. Lincoln Property Company and its capital partner, Admiral Capital Group, plan to undergo a value-add strategy to reposition the property through an exterior and interior renovation that compliments the surrounding area,” Harlow said. “We believe the Georgetown area is a dynamic market with an expanding amenity base including restaurants and breweries and new housing located within 2 miles of the Seattle CBD that will continue to perform.”
For the seller—who purchased the property in 2016 for $9.5 million—the recent disposition of the business park came at the right time after SMARTCap Inc. had resolved a number of previous issues with the property, according to CEO Tim Shoultz. “When we acquired the asset, there was significant rent roll risk that we had to work through,” he said. “We went into this asset with a solid plan and implemented solutions to help solve numerous issues we perceived with the property; our primary focus during our ownership was to solve the occupancy issues and increase rental rates in the office portion of the property.”
While SmartCap did not initially have plans to sell, Shoultz is optimistic about Lincoln Property’s plans for the asset. “Though we had no plans to sell, Lincoln Property Company wrote an off-market offer that was attractive enough for us to take the future risk off the table,” he said. “We are excited to see the continued renovations and improvements Lincoln plans to make at the property and wish them as much success as we have seen with this asset.”
The South Seattle Business Park, located at 4634 East Marginal Way in the SoDo/Georgetown neighborhood of South Seattle, is an office/warehouse property that totals 97,653 square feet (51,554 square feet of office and 46,109 square feet of lite industrial), according to the property listing on SMARTCAP’s web site. The five-building property, originally built in 1947 and renovated in 1983, is currently 85 percent leased to 14 different tenants. Some of these include Uber, Arena Sports, ABC Imagery, Pioneer Human Services and Seattle Therapy Network.
The asset, which sits on 2.74 acres, represents an attractive investments for tenants due to its strategic location and close proximity to downtown Seattle via Highway 99. The hope is that by increasing parking ratios, the asset will become a premier office complex for technology businesses looking to locate in South Seattle, according to the web site. The asset is approximately three miles south of downtown Seattle, two miles north of Georgetown and less than half a mile from access to Interstate-5.
The South Seattle/SoDO office market, which begins just south of Pioneer Square and North of Tukwila, has evolved from an industrial area to an up-and-coming office market with various office projects and high-profile companies including Sur La Table, Alaska Airlines, Boeing Commercial Airplanes, Oculus VR, Facebook, among other technology and industrial users. The web site highlights how the South Seattle office market appeals to tenants looking for financial savings, with the average cost of office space priced 20 percent below Bellevue and Seattle full-service rents in addition to free parking. The market vacancy for the SoDO office market hovers around 12 percent, with expected net absorption to increase with no new office deliveries over the next two years.
Lincoln Property Company was founded in 1965 as a developer and manager of high-quality residential communities and has since expanded into the commercial real estate market, according to the company’s web site. Lincoln Property Company provides a wide range of services to its clients including development, construction and property management, advisory services and investments and acquisitions. The company’s commercial portfolio includes properties in Washington D.C., Austin, Atlanta, Orange County, and Brooklyn New York, among other locations.
The company’s capture of the South Seattle Business Park comes relatively soon after another high-profile office property acquisition in Seattle. On August 2nd, the company purchased the 103,494 square foot 501 Eastlake Building in South Lake Union for $58.75 million, or approximately $567 per square foot, from LBA Realty.
SMARTCAP Inc. manages over 545,000 square feet of commercial real estate investments, with a primary focus on value-add office buildings, industrial parks and retail centers in Washington State, Colorado and Oregon, according to the company’s web site. The company has managed a variety of past and current properties throughout the Puget Sound region. Some of these include the 180th Street Industrial Park in Arlington, a 95,000 square foot project slated for completion in early 2019; the Quadrant I-5 Building, a 74,974 square foot office property in North Lynnwood; and the Richland State Professional Building, a 57,934 square foot development in Richland.