By Jon Peterson
An entity associated with Seattle-based Stephen Grey & Associates has decided to place on the market for sale the 75,267 square foot office building in Seattle located at 425 Pontius Ave. N. The potential price point on the property is expected to be in the range of $45 million, or nearly $600 per square foot, according to sources familiar with the property.
The seller has selected the CBRE office to oversee the marketing process. The people working on this transaction include Tom Pehl, who is an executive vice president at the firm, along with Lou Senini and Charles Safley, both senior vice presidents. CBRE declined to comment when contacted for this story.
The property has the potential to attract both value-add or core plus type of capital. Presently, the building is around 70 percent occupied, which would allow new owners to add value to the asset by leasing it up to current market rates. At the same time, the in-place rents are roughly 30 percent below market with a weighted remaining lease term around 2.5 years. This scenario would likely attract a core plus investor who would have a strong marked-to-market opportunity in the property.
There are four top tenants in the property at this time. The most significant of the tenants is the Fred Hutch Cancer Research Center. It has a lease for 17,318 square feet, or roughly a quarter of the building. The research center has a lease that does not expire until September 2025. The next largest tenant is EMulate Therapeutics, which occupies 8,767 square feet on a lease that runs out in December of this year. The other two main tenants are Yates, Wood & MacDonald and ALSAC/St. Jude.
425 Pontius was first developed in 1982. The four-story property had been renovated three years ago. The building also provides a total of 169 parking stalls, which is broken up between 152 garage spaces and 17 surface parking spots.
Should the price point on the sale be reached, it will allow the new owner to acquire a property in South Lake Union at a lower total price that many of the assets that have sold in the sub-market recently. The office sub-market remains very tight with the current vacancy in the South Lake Union hovering around 7.3 percent at the end of the third quarter, according to data compiled by CBRE.