237,000-SF Blanchard Plaza Sells for $33M

SEATTLE-An ownership group that includes the principals of locally based Meriwether Partners and Fred Hines of PCF Management has paid $33 million for Blanchard Plaza, a 237,000-sf office building here that is 86% leased, with the federal government occupying about 60% of the space.The two-tower building rises 15 stories at Sixth Avenue and Blanchard Street, just north of Downtown’s shopping district and near where the new federal courthouse is being constructed. Completed in 1982, the building has 126 parking slips on five subterranean floors. The seller was New York-based Devon Properties Inc., which paid about $26 million for the office building in 1996. Meriwether principal Robert Briscoe tells GlobeSt.com that the $139-per-sf purchase price was in part due to a 107,000-sf, 10-year lease with the federal government that was signed last year and became effective in April at below market rate. Another 32,000 sf in the building is leased to the federal government through 2010, says Briscoe.About half of the available space in the building is on the building’s vacant top floor, which has attractive views. Briscoe says that when they are able to raise occupancy to about 95%, the capitalization rate on the investment will be about 9.5%.The full-service asking rate range for the top floor is $26-$28 per sf per year and the asking rate for other available space in the building is $23-$25 per sf per year. There does appear to be room for movement, however, as Briscoe says the new ownership will be able to be “a lot more competitive” than the previous owners. In-place effective lease rates are believed to be in the low $20s per sf save for the large government lease, which is believed to be in the high teens.In addition to Hines and the partners of Meriwether, investors in Blanchard Plaza include high-net-worth-family money and trusts. “We have leveraged a lot of relationships,” says Briscoe. “There’s a lot of Seattle money as well as some from the Midwest.” He was able to lock in debt for the purchase a little over four weeks ago, when the 10-year treasury was at 3.76%.