By Jon Peterson
A local partnership that includes developer Mike Hess has placed on the market for sale the Terry Thomas 44,445 square foot office building in South Lake Union located at 225 Terry Avenue North in Seattle. The pricing on the sale could reach $50 million, or over $1,100 per square foot, according to sources that track the sale of office buildings in Seattle.
The seller of the Weber Thompson-designed property has hired the CBRE office in Seattle to be the listing agent on the sale. The team working on the deal includes Tom Pehl and Lou Senini, both senior vice presidents at the firm. CBRE declined to comment when contacted for this story.
Terry Thomas is a boutique office building. The sale of the property would potentially allow a capital source to enter the South Lake Union region at a much lower deal size than what the region is known for. Core trades in the area for the last three years have averaged over $270 million per transaction.
The property is currently 100 percent occupied. 94 percent of the space is leased to Boston, Mass.-based Northeastern University with the balance of the property leased to an established dental practice. The university provides a number of masters’ and doctorate degrees at the campus, and it has a lease that does not expire until February 2031.
Properties, such as this one, that have most of its space leased to a single credit tenant have been attracting strong investor interest even during the market uncertainty with COVID-19. This should continue to be the case with Terry Thomas, according to the sources.
This property was first developed in 2008, and it is the first time it has been placed on the market for sale. The property is a four-story building that was constructed prior to an upzone regulation that is now in place in South Lake Union, and the new zoning allows for 175’ office towers and 280’ mixed-use towers. The new owner of the property would have the possibility to redevelop the asset achieving significantly greater density.
The office asset is considered a core property, and that should yield institutional interest in the sale from both a domestic and foreign investors. The property does have a parking garage amenity with room for 67 stalls. It is a LEED Gold Certified building, and it consumes 56 percent less energy than a typical class A office building through its eco-friendly design strategies. These include efficient hydronic heating, passive cooling, ample daylighting, operable windows, automated louvers and a central courtyard that acts as a thermal chimney sending warm air skyward.
The South Lake Union office sub-market remains very tight—through the second quarter of this year, it had a 2.3 percent vacancy rate. Also, 92 percent of the office absorption in the downtown Seattle market in the last four quarters has been in South Lake Union.