By Jon Peterson
Honolulu-based The Shidler Group has put up for sale the ground lease that goes along with the 600,000 square-foot Advanta Office Commons office asset in Bellevue. The potential price point on the sale could be around $210 million, according to sources that track the sale of major office assets in Seattle.
The listing agent on the sale is the West Coast office of Newmark Knight Frank. Newmark declined to comment when contacted for this story.
As The Registry reported at the time, Shidler purchased the asset in March of 2018 for $224.85 million from JP Morgan, which took a bit of a hit on the property—it had acquired the property for $240 million from Bellevue-based Schnizter West in 2010. Shidler’s purchase also included an adjacent 8-story parking garage built in 2007 containing 1,158 stalls.
The sale of the ground lease is not an unusual move for Shidler. One of the primary focuses of the company is to invest in land on which commercial buildings with long-term ground leases sit, and this was the case with the acquisition of the Advanta Office Commons as well: of the total $224.85 million transaction price, Shidler paid $200 million for the three seven-story buildings and $24.85 million for the land on which the structures sit.
The expectation is that this transaction will likely be a core plus investment, but could produce a value-add type of return, as stated by industry sources. The asset has no vacancies as it’s fully leased to Microsoft. The current lease in the property is now 50 percent below market and will last until 2023.
The CollinsWoerman-desinged Advanta Office Commons property, located at 3005 160th Ave. S.E., contains three seven-story office buildings built in 2008 that total approximately 600,000 square feet as well as an adjacent 8-story parking garage.
According to the property listing on Schnitzer West’s web site, the three-building office property offers easy access to Interstate-90 and Interstate-405. The energy-efficient campus also includes a landscaped outdoor plaza as well as an on-site conference and training center, fitness facility and media center.
The entire Eastside office market includes roughly 35.6 million square feet, with Class A buildings accounting for 17.4 million square feet of inventory. Vacancy for all properties sat at 6.45 percent, down from 7.1 percent in 2018, 9.5 percent in 2017 and 12.5 percent in 2016, according to a recent report from The Broderick Group. Vacancy for Class A properties hit one its lowest points over the last two decades: At the conclusion of 2019, the Class A vacancy on the Eastside hovered at around 4.6 percent, the lowest vacancy rate since the Dot-Com era of 2000.
Founded in 1972, and headquartered in Honolulu, The Shidler Group is a commercial real estate investment organization. The Shidler Group, its managing partners and the Shidler Family Trust invest directly for their own accounts in addition to providing equity and debt capital to third-party owners of institutional-grade commercial properties and portfolios, according to the company’s web site.
Since its founding, the company has made debt and/or equity investments in over 2,000 properties located across the country comprising over 150 million leasable square feet through its affiliates.
The company has other investments in the Puget Sound region. In August 2016, Shidler Group acquired two parcels of land on ground leases located beneath the University of Washington School of Medicine research facilities for $133.6 million from Vulcan Real Estate. The two-parcel asset, located in South Lake Union, represents a 2.4-acre, full-block site with three laboratory and office buildings totaling 361,000 square feet: Shidler paid $98.9 million for the property at 850 Republican and $34.7 million for 815 Mercer.
Terra Funding Trust, an affiliate of the Shidler Group, invests in the land underlying significant commercial buildings for the benefit of the Shidler Family Foundation and various educational institutions that it supports, according to the company’s web site, donating specific interests in properties that it acquires to support public university-level education. Beneficiaries include the University of Washington School of Law and the University of Washington School of Medicine.