Perhaps it is the unconventional way with which Michael Christ does everything that one would assume his willingness to consider purchase offers for his 720,000 square foot complex on the southern edge of Lake Washington means the property is for sale. In fact, the Seattle-based developer is actively leasing the property and should an offer from an end user or anyone else come, he’ll certainly consider it, but no one is marketing the asset.
It has been nearly six years since the first public announcements were made by the property. In September of 2015, Hyatt announced the hotel development, and in February of 2016, SECO broke ground on the office complex behind the hotel. The full Southport campus comprises 17 acres of waterfront property that along with the 347-room Hyatt Regency Lake Washington also includes three 9-story office buildings that total roughly 720,000 square feet of Class A office space and the 383-unit Bristol Residences.
By July of 2017, the hotel was completed, and in May of 2018 SECO celebrated the topping off of the first two office towers. That year the company arranged $265 million construction financing through Cushman & Wakefield, and in January of 2020, Christ purchased additional land adjacent to the property now totaling 30 acres.
During this time, activity at the campus continued, but no takers so far, although, according the Michael Christ, the leasing activity, which is led by CBRE, has been picking up. “We have had more activity at the site probably in the last 90 days than we had all of last year,” he said. “Why? I think there is a change that is going on that is meaningful. Health and wellness is a big factor, because a lot of the old buildings don’t have those characteristics with circulated air, and that’s a little bit spooky to people.”
SECO, under Christ’s direction, has taken extra care to create a setting that in today’s environment seems perfectly suited to tackle the new norms of social distancing. The development has 23 destination dispatch elevators and numerous one-way staircases. By comparison, a normal office tower might have only a handful of elevators to accommodate a similar amount of space. Southport also has 1,267 operable windows throughout the buildings, as well as dedicated outdoor air systems—meaning no shared or commingled air. The features were added as part of lessons learned from the operation of the Hyatt Regency Lake Washington.
“I paid a lot of attention to what Amazon did, and I watched them put operable windows everywhere, so we just did it,” Christ added. “And it was a big bill on this, because we have so much glass, but I was also able to do it to look cool, and that all ties to the health and wellness.”
The development also features a connected parking structure with direct access to individual office levels from the parking garage. Employees are able to simply park and walk into their office, without having to walk through a central lobby, and without having to share an elevator with others making their way to the office.
Activity seems to be picking up, according to Christ, and it may result in a sale, but this is not the primary goal for SECO.
“The project right now is not up for sale. It could be up for sale later this year in the summer or fall,” said Kevin Shannon, co-head of US capital markets for Newmark, who has previewed the project in one of his company’s flyers earlier this year. Shannon works out of the firm’s Los Angeles office and is an active investment sales broker in the Puget Sound region.
“My goal is really simple,” said Christ. “I’m trying to make a cool home for people, that’s it. And if you need to buy this in order to rationalize it, I’ll do that, I’m not going to stand in the way. I’m not out to sell real estate, but I will look at offers. Some people will not sell, and I’m flexible, I want this to work for [them].”
He also brushed off earlier reports stating the contrary. “For me it was good advertising! You can get space down here on the water for $20 less than Bellevue. That’s not hurt my feelings,” said Christ. “There’s tons of money in the capital markets right now, but I’m not going to sell an empty building. That’s not in the cards. It’s filling this building and doing it smart.”
SECO was able to recapitalize the construction loan, and the company secured a $328 million loan in the last few months from an affiliate of Starwood Capital Group, according to SECO. This provides an opportunity for the developer to also kick off construction on the Park Avenue access road, which will enhance the access points into the development. Christ anticipates construction on that may happen as soon as a couple of months from now.
Yet, the focus continues to be on leasing. “We’re working on leases, that’s what we’re doing. We’re trading paper,” confirmed Christ. “There was a tour [last week], we had a good tour [the week before]. Last year it was pulling teeth with COVID. When you had a meeting, more than half the time it got canceled. But it’s interesting, and I’m starting to see just the tip of the iceberg, because the giants are going to start to come back to work.”