The 720,000-square-foot complex on the southern edge of Lake Washington in Renton is in the process of getting turned over to its lender, Miami-based Starwood Capital Group, according to two sources with knowledge of the transaction details. The latest opens a new chapter in the project’s relatively short history, which has been marked by difficult leasing and finally impacted by the after-effects of the global COVID-19 pandemic and the changing nature of how office space will be utilized in the future.
It has been nearly eight years since the first public announcements were made about the property. In September of 2015, Hyatt announced a hotel development as part of the project, and in February of 2016, SECO Development 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 in construction financing through Cushman & Wakefield, and in January of 2020, Christ purchased additional land adjacent to the property, now totaling 30 acres. In January of 2021, the construction loan was converted to permanent financing totaling roughly $328 million, which was provided by Starwood Capital Group.
During this time, leasing activity at the campus continued and a few leases have been announced over the years, but no takers for the remainder of the project so far.
In early 2021, SECO’s CEO, Michael Christ announced that the property had a decent amount of activity and that the physical attributes of the building were a draw for would-be tenants. “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,” he said in an interview with The Registry at the time.
Challenges began to mount for the developer who, in June of 2021, placed on the market The Bristol at Southport, a 383-unit apartment project that is part of the mixed-use urban campus. By October of that year, Kennedy Wilson paid $191 million, or nearly $500,000 per unit, to acquire the property at a time when multifamily projects were receiving top-dollar offers from investors.
Rumors also swirled about the office property hitting the market, which Christ disputed, although he acknowledged that if presented with an offer, he would consider it.
Yet, the interest in the office component never arrived, and Starwood had to make a move after providing several extensions to SECO, according to one source. The public documents do not yet list specifics about the foreclosure, but a number of companies have filed liens against the development over the last few days.
Exxel Pacific filed a lien earlier this month for $786,000. It started in the document that the last work performed at the site was on March 20th of this year. As a subcontractor working with Exxel, Appian Construction also has a lien for roughly $130,000. Blue Star Welding is claiming $38,000 and MacDonald Miller Facility Services around $9,000. West Coast Painting is looking to recoup $17,000, Smith Fire Systems another $31,000, Schaefer Construction nearly $21,000 and Wayne’s Roofing just over $60,000.
