By Jon Peterson
San Francisco-based Swift Real Estate Partners has sold the 72,218 square foot Bellevue Terrace office building in Bellevue located at 3633 136th Place SE to Redmond-based SMARTCAP. The sales price was $29.35 million, according to public records. This sale exceeded the pricing guidance when the asset was put up for sale in June, which was projected to be in the range of $26 million to $27 million.
Swift had hired Newmark to be the listing agent on the sale. Those working on the transaction included Kevin Shannon, co-head of US Capital Markets, and Nick Kucha, vice chairman, Pacific Northwest Capital Markets.
Swift was able to attract multiple offers for investors interested in the asset. This included both high net-worth individuals and institutional capital sources.
“Similar to our conviction six years ago, Swift believes in the Eastside’s potential for outsized growth. We will continue to actively pursue acquiring assets with unique opportunities to generate superior risk-adjusted returns,” said Kurt Nelson at Swift Real Estate Partners.
Swift had been the owner of the property for the past five years. It had paid $17.4 million for the building in 2016, according to public records. The real estate investment firm had acquired the property for its Swift Real Estate Fund II. The sale of the asset comes out to be $406 per square foot. This pricing still put the deal well below replacement cost, which is projected to be at $500 to $550 per square foot, according to sources familiar with the market.
The sale of the building yielded a cap rate of 4.1 percent, as stated by sources aware of the transaction. This return is based on the property’s in-place rents.
When the asset was put up for sale, it had an occupancy of 65 percent. There were a total of eight tenants in the property. The main tenants in the property are Market Leader and HD Fowler. During the time the asset was marketed for sale, Swift was able to sign a new 10,000 square foot lease with an unnamed tenant. This lease brought the property’s current occupancy to 78 percent. According to sources with knowledge of the building’s availability, there is room for one new tenant to occupy space in the property.
In June, the asset had existing leases with a 15 percent rollover in the first four years with the remaining leases averaging 5.1 years left over in their lease terms. The in-place rents were just over 15 percent below current market rents offering new ownership a mark-to-market opportunity to add value in the future.
Swift had invested around $3.2 million into the property for improvements since 2017. This included $2.4 million for tenant improvements, $330,000 for various lobby upgrades, $174,000 for market ready work, $113,000 for roof coating, $100,0000 for asphalt replacement, $42,000 for amenity area upgrades and $35,000 for HVAC updating.
“This sale is the result of the strength of the Bellevue office market and the successful execution of our business plan. We remain focused on continuing to drive value in our remaining Bellevue portfolio,” said Therin Heryford at Swift Real Estate Partners.
SMARTCAP is known as an investor in both office and industrial assets, as stated by the company on its website. The company typically focuses on assets that have a value-add component.