In the last few weeks, Zones Inc., an Auburn, WA-based catalog reseller of computers and accessories, inked a 22,550-sf, 10-year lease for the sixth floor of the massive nine-story building and World Travel Inc., expanded from 10,000 sf to 17,000 sf. Earlier in the fourth quarter, Freightliner renewed its lease for 111,000 sf, Wells Fargo renewed its 128,000-sf lease, UPS signed on for 38,000 sf and Schnitzer Steel signed on for 10,000 sf. The rapid recovery allowed the property owners to close on a $65-million refinancing at the end of November.
"I have no doubt that it will be well north of 90% occupied within the next 60 days," says Ed Gambee, the GMAC Commercial Mortgage broker who arranged the 10-year, 75% (loan-to-value) financing, which has a 30-year amortization schedule and an interest rate in the mid-5% range. "They've got some significant momentum going over there."
Montgomery Park, located at Northwest 27th Avenue and Vaughn Street, is the largest building in the Naito family's 1.2-million-sf, 17-building portfolio. The portfolio was previously held by H. Naito Corp., which included various members of the Naito family, but a falling out prompted litigation that resulted in January 2005 settlement agreement that divided H. Naito Corp. assets between two shareholder groups. Sam Naito and his son Verne got the H. Naito Corp. name and the family's Made in Oregon chain of retail stores. All but two of the real estate assets went to the children of the late Bill Naito (Sam's brother) and Sam's two oldest sons (Ron and Larry), who sided with Bill's children in the dispute. They formed Bill Naito Co. to own the assets.
In May, locally based Elliott Associates was selected to manage the real estate assets after Bill Naito Co.'s board of directors--all family members at the time--inked a shareholder agreement that calls for an independent third party provider to manage the assets and oversee day-to-day property management. In turn, Elliott Associates, selected CB Richard Ellis brokers Trevor Kafoury, Tom Fellman and Josh Schweitz to handle the lease up.
Kafoury tells GlobeSt.com that several additional lease deals are being negotiated that could drop vacancy down near 5% by the end of the first quarter. The full-service asking rate for space in the building is $19.50 per sf per year. Due at least in part to heavy competition from the suburbs, negotiated leases have come in below that rate and included concessions such as free rent, local industry sources tell GlobeSt.com.
Zones Inc. was represented in its lease negotiations by Steve Marcy of locally based Integrated Corporate Properties Services/Corfac International and Mike Hemphill of the Tukwila, WA-based Andover Co. Marcy declined to discuss the negotiated rate on his deal. "They made us a nice, package deal," he says.
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