By Jon Peterson
New York City-based Zurich Alternative Asset Management is set to acquire the 44,445 square foot Terry Thomas office building in Seattle for $52.1 million, according to sources the track the sale of office buildings in Seattle.
The price on a per square foot basis comes in at $1,173. This is a new record price on a per square foot basis for the sale of 100 percent interest in office buildings for Seattle. The previous record occurred in 2019 when Ponte Gadea paid $204.2 million or $1,093 per square foot to purchase the 192,700 square foot Arbor Blocks West asset.
The deal with Terry Thomas represents Zurich’s first office acquisition in Seattle. Zurich has had a couple of multifamily investments in the region previously.
“The asset is a well constructed property in a fantastic location with very good credit and we think will serve the investors well over the long term. We would like to invest more in Seattle in 2021,” says Sean Bannon, managing director and head of US Real Estate for Zurich.
The real estate investor made this acquisition for its core open-ended commingled fund that Zurich formed earlier in the year. The fund has an initial investing capacity of $425 million, and there are a total of two other assets in the fund at this time. It paid $30 million to acquire an industrial asset in Charlotte and $45 million to buy a retail property in Miami. Zurich plans to invest in core real estate assets, stated Bannon, which is a similar strategy it followed over the past several years.
The seller of the Weber Thompson-designed Terry Thomas property was a local partnership that includes developer Mike Hess and Mark Grey among other entities. It had placed the property up for sale in September of this year. It was projected that the pricing on the property could reach $50 million, according to industry sources. The listing agent on the sale was the CBRE office in Seattle. Those involved with the sale include Tom Pehl and Lou Senini, both senior vice presidents in the company’s office in Seattle. CBRE declined to comment when contacted for this story.
“This sale marks a new price-per-square-foot record for Seattle’s office market and is a testament to the uniqueness of what the ownership team created in this project. Terry Thomas combines award-winning sustainable architecture with long-term, high-credit tenancy and a location in Seattle’s best performing submarket,” said Pehl.
The office building is located at 225 Terry Avenue North. The property is now 100 percent occupied. Approximately 94 percent of the space is leased to Northeastern University, and the balance of the property has an established dental practice as a tenant. The school has a lease in the building that will last until February 2031.
Terry Thomas was first developed as an office building in 2008. This is the first time that the asset has been placed on the market for sale. The property is a four-story building that was constructed prior to an upzone in South Lake Union, and the new zoning allows for 175-foot office towers and 280-foot mixed-use towers. The new owner of the property would have the possibility to redevelop the asset achieving significantly greater density.
The office building is considered to be a core asset. It does have a parking garage amenity with room for a total of 67 stalls. The asset is a LEED Gold Certified building, since it consumes 56 percent less energy than a typical Class A office building with eco-friendly design strategies. These include efficient hydronic heating, passive cooling, ample daylighting, operable windows, automated louvers and a central courtyard which acts a thermal chimney sending warm air skyward.
Founded in 2006, Zurich Alternative Asset Management (ZAAM) is Zurich Insurance Group’s dedicated alternative asset management platform. ZAAM’s strategy for U.S. Real Estate is consistent with Investment Management’s global strategy for Real Estate investments, according to the company’s web site. Totaling over 200 properties in 30 states, ZAAM’s U.S. real estate portfolio aggregates over 20 million square feet of commercial space. ZAAM targets investment opportunities in a number of West Coast markets including Seattle, Portland, San Francisco and Los Angeles.