New York-based Teachers Insurance and Annuity Association (TIAA) acquired its sixth multifamily development in the Puget Sound region last Thursday. TIAA confirmed its purchase of Central 77, located in upscale Mercer Island, from Renton-based SECO Development, Inc. for $97 million, or $567,251 per unit.
Seattle has been a target for TIAA based on strong fundamentals that it has seen in the regional market, such as employment, population and wage growth. “These factors are driven by the increase in the tech industry, from companies such as Amazon, Facebook, Expedia and Google as they expand in the area,” said Mark Washington, a director of real estate acquisitions in the Western region for TIAA. “Seattle will very much remain a target for our company.”
“It’s a very strategic asset to have in our portfolio.”
Although TIAA owns other properties throughout the Puget Sound region, this asset was its first on Mercer Island. “We love this location, it has a relative connection to both downtown Seattle, downtown Bellevue and Redmond,” said Washington. “It will allow easy access to both the east and west side from Mercer Island. In addition, the asset itself is very well-located in proximity to the future light rail station.”
Situated on a predominantly residential island between Seattle and Bellevue, Central 77 is a 171-unit luxury apartment complex with 16,815 square feet of retail space. Amenities include a barbecue terrace, outdoor spa, professional business center, residents club with catering kitchen, billiards parlor, solar shade window coverings and art glass lighting. Rent ranges from $1,485 for a 553 square foot studio to $4,633 for a 1,854 square foot three-bedroom.
Built in 2009 by SECO, Central 77 won the BuiltGreen Green Hammer Award, the highest award for multifamily housing communities of five stories and larger. It was also a finalist in the National Association of Home Builders Multifamily Pillars of the Industry Award in the Best Mid-Rise Apartment category.
According to Washington, Central 77 is a long-term investment. “It’s a well-constructed building and has great tenancy already,” said Washington. “It’s a very strategic asset to have in our portfolio.”
TIAA has $861 billion in assets under management as of the end of March 2016, and it is a leading provider of retirement services in the academic, research, medical and cultural fields. With 7.7 million square feet of office, retail and industrial space, and over 1,250 units in six multifamily projects, it has over ten years of experience in the Seattle area. Other recent multifamily acquisitions include Union SLU, located at 905 Dexter Avenue in the South Lake Union neighborhood of Seattle.
“TIAA is a respected buyer, my parents’ pension is with them,” said SECO’s CEO Michael Christ. “The sale allows us to develop a few new projects, as I had quite a bit of capital in 77. It was built during the economic meltdown, which was accompanied by extremely conservative underwriting with banks.”
On Mercer Island, SECO also developed Island Square, which was a redevelopment of the existing Island Market Square Shopping Center that was originally built in the 1950’s. Island Square consists of five buildings totaling 300,000 square feet over a two level parking structure with approximately 500 parking stalls. The community hosts 235 luxury apartments as well as 40,000 square feet of retail.
Benefiting from the economic strength of the greater Seattle region, Mercer Island saw the median sale price of $1,765,342 for single-family homes in the first quarter of 2016, according to Polaris Pacific, a condominium brokerage and advisory firm. This is up from $1,381,058 in the first quarter of 2015.
According to Kidder Mathews’ 2015 Fourth Quarter Seattle Apartment Report, the primary underpinning of the demand forecast is job growth, which is already a derivative of the overall regional economic trends. Even modest changes in the overall economic forecasts would have a significant effect on future demand projections. “Out of all the local submarkets, we’ve seen a transformation within Seattle most prominently around South Lake Union, which has an influx of migration and employment growth driven by tech tenants,” said Washington.