By Jack Stubbs
The office market on the Eastside has been active in recent months, and San Francisco-based Swift Real Estate Partners acquired two buildings in the Oakhurst Center in Bellevue—which comprises approximately 143,000 square feet of Class A office space—on Wednesday, May 30th for $45.4 million, according to public records filed with King County. Swift Real Estate, an investment firm that acquires and repositions office and industrial assets in select West Coast markets, acquired the property from Charlotte, North Carolina-based Barings, a global financial services company.
Barings is making a profit on the property, which it acquired for $38.5 million in 2008, according to public documents.
Newmark Knight Frank director Bill DeLacy, who listed the property for sale along with Kevin Shannon, Michael Moll and Nick Kucha from the company’s Portland office, declined to comment about the transaction.
Swift Real Estate purchased Buildings A and B of the Oakhurst Center, which was built in 1985 and is located at 14335 and 14475 NE 24th St. Building A totals 72,397 rentable square feet and building B totals 74,794 rentable square feet.
The two-building property, which is located less than a mile from Microsoft’s headquarters, also includes on-demand direct shuttle service to the campus, as well as covered and reserved parking. According to Kurt Nelson, vice president at Swift Real Estate Partners, most of the tenants in the building are Microsoft vendors. “The majority of tenants are vendors of Microsoft. The bigger tenants are Tata Consultancy, Services; Atomic Consulting is also a major tenant in there. There are also a few smaller tenants that are Microsoft vendors,” he said. “[These tenants] like the close proximity to Microsoft. This is one of two non-owned Microsoft buildings that has the Microsoft-operated shuttle service from the campus to this building.”
For Swift Real Estate, the acquisition of the property represented a unique opportunity that came at the right time. “[The building] was recently 100 percent leased, but the occupancy recently went down to 79 percent. So it really represents a rare opportunity for a lease-up play in an extremely tight market, not only on the Eastside but also within the 520 corridor,” Nelson said.
The property is adjacent to the Overlake Plaza and approximately four miles to the east of downtown Bellevue. The asset is also about three miles from access to the intersection of Interstate 405 and Washington State Route 520. And the asset’s location in the Overlake area of Bellevue is one of its defining features, according to Nelson. “The area is urbanizing with the light rail and multifamily investment that is happening [there]. We feel that the Overlake area is going to continue its urbanization to create a long-term live-work-play kind of environment,” he said.
Founded in 2010, Swift Real Estate Partners identifies unique opportunities and executes well-defined business plans while providing real-time, day-to-day oversight for each investment, and offers a variety of investment management services including acquisition, financing, leasing, disposition and construction management, according to the company’s web site.
The company has been active in Bellevue in recent months. On March 6th, Swift Real Estate sold the approximately 50,000 square foot Clover Building in Bellevue to AGM Inc. for $15.3 million. In late March, the company sold the Swift Gateway Office Building to Nicola Crosby for $25.5 million, or approximately $373 per square foot.
Founded in 1989, Barings is a $305-plus billion financial services firm that aims to meet the evolving investment and capital needs of its clients, according to the company’s web site. As of March 31st, 2018, the firm was comprised of over 1,800 professionals across offices in 16 countries. The firm managers a variety of mutual funds including the active short duration bond fund; the emerging markets debt blended total return fund; and the global credit income opportunities fund.
In March 2017, the company paid $6 million to acquire the land for a 195-unit Triangle apartment development project in Redmond, which is expected to be completed by third quarter 2018.
The Eastside office market is set for activity in the coming months. According to a first quarter 2018 office market report written by Kidder Mathews, the Eastside market inventory currently stands at just over 50.5 million square feet, a figure that accounts for roughly a quarter of the total regional office supply. The Eastside has the lowest office vacancy rate in the region, sitting at 5.7 percent as of first quarter 2018. The vacancy rate has steadily declined since 2010, according to the report, and is now at a ten-year low.
Most of the peripheral Eastside submarkets—with the exception of the I-90 corridor—also continue to perform well, with Kirkland and Redmond ending first quarter 2018 with vacancy rates of 3.2 percent and 4 percent, respectively, a decline from fourth quarter 2017. Finally, the current average asking rent for the Eastside market is $36.96 per square foot per year, a figure that is the second highest in the region after Seattle, according to the report.