Schnitzer Sells Two Office Buildings in Seattle for Total of $480 Million

Schnitzer West LLC, a Seattle-based real estate developer, sold two office buildings in the city for $480 million. The buyer was J.P. Morgan Asset Management, according to a person with knowledge of the transaction.

The deal, completed yesterday, was the biggest office transaction on the West Coast this year. The properties, at 1918 Eighth Ave. and 818 Stewart St., are located on the same block at the north end of downtown Seattle, within the triangle formed by Westlake Avenue, Stewart Street and Denny Way.

The 1918 Eighth Ave. building, with 36 stories and 668,000 square feet (62,000 square meters), sold for $350.5 million, or $525 per square foot, Mike Nelson, senior investment director and partner at Schnitzer, said in a telephone interview yesterday. The 818 Stewart building, at 14 stories and 232,000 square feet, went for $129.5 million, or $558 per foot, he said.

Schnitzer executives declined to name the buyer. The person with knowledge of the deal asked not to be identified because the information is private. Kristen Chambers, a spokeswoman for JPMorgan Chase & Co. (JPM), declined to comment on the sale. J.P. Morgan Asset Management, a unit of JPMorgan Chase, has about $1.3 trillion under management.

The transaction was reported yesterday by the Real Estate Alert newsletter.

The sale is a sign of demand for top-tier, income-producing commercial real estate with interest rates at near-record lows. Office vacancies have been falling and rents rising in such cities as Seattle, which have relatively strong employment and favorable demographics.

‘Flight to Quality’

“There’s a flight to quality going on,” Dan Ivanoff, managing investment partner at closely held Schnitzer West, said in a telephone interview. “The world right now isn’t sure what to invest in.”

Eighty entities registered to bid on the office towers in the sale, brokered by CB Richard Ellis Group Inc. (CBG), Ivanoff said.

“That was three times what we had” when two other properties were sold last year, Ivanoff said. “There is a huge amount of all-cash buyers out there.”

Schnitzer West in August 2010 sold Advanta Office Commons in Bellevue, Washington, and the following month sold two office towers and the parking garage at The Bravern luxury complex, also in Bellevue, according to the company’s website.

J.P. Morgan Asset Management, on behalf of institutional investors, bought Advanta for $240 million along with a Seattle apartment complex for $66 million, according to a statement from Schnitzer at the time.

Amazon.com’s Lease

Amazon.com Inc. (AMZN) leased most of 1918 Eighth Ave. in March, removing one of the last big blocks of empty office space in downtown Seattle. Schnitzer West built the tower in 2009. The 818 Stewart St. building was finished in 2008.

Before yesterday’s deal, the largest office transaction on the West Coast this year was the June sale of Parsons Corp. campus in Pasadena, California, for $325 million, according to property research firm Real Capital Analytics Inc. The buyers were Morgan Stanley Real Estate Investing and Dallas-based Lincoln Property Co., according to a July 1 Morgan Stanley statement.

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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