Spear Street Capital Buys Waterfront Place for $42M

SEATTLE-Spear Street Capital recently acquired the lower 10 floors of the 13-story Waterfront Place building overlooking the Puget Sound. The San Francisco based fund manager paid just under $42 million or about $235 per sf for the mixed use building on Western Avenue, between Madison and Spring streets.Built in the mid 1980s, Waterfront Place contains first floor retail, parking on floors 2-4, office space on floors 5-10 and residential condominium units above that. The seller was Falcon Real Estate Investment Company Ltd. According to public records, the New York City-based investment advisor and manager acquired the building 10 years ago at a foreclosure auction for $16.5 million. At the time of sale, the principal debt on the property was $23.7 million.The building’s office space totals 178,268 sf and is about 70% leased, with most of the vacant space on the eighth and ninth floors. Spear Street Capital president John Grassi tells GlobeSt.com the lobby and common areas are quite nice and need no renovations, but some of the vacant office space will have to be stripped back to shell condition in order for it to show well. “The prior owner didn’t want to invest in the building; it only wanted to do as-is deals with no tenant improvement allowance,” he says. “Some of the (vacant space) hasn’t been touched in three years.”With regard to views, Grassi says the elevated Alaskan Way Viaduct that runs immediately west of the building, between it and the waterfront, comes up to the building’s fourth floor, which means the views from the office floors are unobstructed. Including a healthy tenant improvement allowance, Grassi says he would hope to sign on tenants at a gross lease rate in the high $20s per sf per year.Spear Street Capital acquired Waterfront Place with equity from its inaugural fund, SSC I, which started out with about $150 million of equity in 2002. The fund is now over 80% invested, says Grassi.