Dear valued clients and friends,marketing.joneslanglasalle.com/PNW/Email_Campaigns/... · Seattle &...
Transcript of Dear valued clients and friends,marketing.joneslanglasalle.com/PNW/Email_Campaigns/... · Seattle &...
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 230 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $56.4 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
jll.com
Seattle & Portland 2015 Investment Overview 3
As we recap 2015 the strong performance of our market should be no surprise – it’s
clear why the Pacific Northwest continues to shine in the eyes of investors. Sustained
economic strength, strong employment and high quality of life serve as anchors for
companies that call Seattle or Portland home and act as magnets for those firms looking
to expand into new markets.
With one of the lowest unemployment rates of any major metro area, and job growth
of over 68,000 in 2015, Seattle was named the third best market in terms of investment
potential - surpassing San Francisco for the first time since 2010 to top the West Coast.
While our regional industrial and retail product remains strong, sales in both office and
multifamily sectors experienced record pricing.
Portland continued to see steady positive momentum and in 2015, experiencing the
highest job growth since the early 90’s. Access to outdoor recreation and the highly
popular Rose City “scene“ easily explains why the number of Bay Area residents
searching for homes in the area has increased by 420 percent. Office sales in Portland
surpassed $1 billion for the first time since 2007, with investors showing a particular
interest in the suburbs.
The strength of our region and increasing interest by investors led to the addition
of several new JLL team members and helped us deliver even more strategic and
specialized services to our clients.
We want to thank you for allowing us to represent you in 2015 and look forward to
identifying new opportunities together in 2016.
JLL Pacific Northwest Investment Team
Dear valued clients and friends,
CAPITAL MARKETS TEAM
Seattle Seattle Multifamily
David Young
Managing Director +1 206 607 1719 [email protected]
Stuart Williams
Managing Director +1 206 971 7008 [email protected]
Corey Marx
Managing Director +1 206 607 1726 [email protected]
Lori Hill
Managing Director +1 206 971 7006 [email protected]
Seth Heikkila
Senior Vice President +1 206 607 1732 [email protected]
David Otis
Vice President +1 206 971 7022 [email protected]
Matt Kemper
Vice President +1 206 607 1752 [email protected]
Mark Thygesen
Retail Associate +1 206 607 1737 [email protected]
Mark Jackson
Associate +1 206 607 1733 [email protected]
Seattle & Portland 2015 Investment Overview 7
JLL Capital Markets team
Portland Bellevue NW REIB
Buzz Ellis
Managing Director +1 503 972 8091 [email protected]
Ann Chamberlin
Managing Director +1 425 974 4022 [email protected]
John Lo
Managing Director +1 206 607 1753 [email protected]
Paige Morgan
Senior Vice President +1 503 972 8098 [email protected]
Adam Taylor
Associate +1 503 972 8607 [email protected]
Zach Goodwin
Associate +1 206 607 1791 [email protected]
8
JLL Capital Markets group
Leverage the expertise of a global leader
Devised from comprehensive research, pervasive market knowledge, ethical practice and superior professionalism, JLL Capital Markets team is focused on the unique requirements of our investor clients. Our in-depth local market and global investor knowledge delivers best-in-class solutions for clients—whether a sale, financing, repositioning, advisory or recapitalization execution.
With a diverse, unified platform of shared expertise through a single point-of-entry, we help you achieve your priority capital objectives:
Investment Sales
Benefit from sales advisory services grounded in solid market analysis, sophisticated portfolio structuring support, complex valuation, thorough underwriting capabilities, reliable investor intelligence and practical marketing expertise.
Real Estate Investment Banking
Gain direct, strategic access to global money centers and real estate investment banking professionals who manage debt and equity financing across all asset types and scenarios.
Corporate Finance and Net Lease
Access an unmatched combination of expertise in finance, lease accounting, tax and transaction structuring with global access to capital that helps real estate occupiers and net lease investors make the best financial decisions to optimize transaction economics and maximize asset value.
Special Asset Services
Obtain transaction execution, valuation and advisory services for non-performing and sub-performing real estate assets concerning financial institutions and special servicers.
We have a national reach but operate with a select group of experts to offer a personal transaction experience like you won’t find with other firms. Our philosophy is simple - transparency helps foster an environment of open communication, leading to an integrated effort that quickly and efficiently drives the best results.
Seattle & Portland 2015 Investment Overview 9
JLL Real Estate Investment Banking group
Navigate capital solutions
As a trusted business advisor, our Real Estate Investment Banking team helps you navigate the capital markets to obtain the best capital solutions for your particular requirements. With billions of dollars in debt and equity transaction experience and deep insights into capital flows and trends around the world, we are well-qualified to advise on creative structures and innovative solutions. Clients seeking direct access to global capital also benefit from our on-the-ground access and contacts in every money center around the world.
We provide access to the lowest cost of capital on the best terms via a competitive auction process and creative structuring. Through our broad array of relationships and a proprietary database that contains hundreds of lending and equity sources—both domestic and foreign— we provide a link between our clients and opportunity, finding appropriate, prequalified groups of capital providers and investors and creating a competitive market to get the best possible pricing and deal structure. Because we don’t align with any specific capital source, we deliver objective advice and focus exclusively on your needs. Your project receives senior-level attention—the top leaders of our group are always involved on a day-to-day basis.
Our Real Estate Investment Banking professionals devise capitalization strategies and manage debt and equity placements across all asset types.
• Acquisition and permanent financing
• Bridge and mezzanine financing
• Construction financing
• Performing note sales
• Recapitalization strategies
• Asset advisory
SEATTLE
SEATTLE
Market Overview
Seattle’s strategic location and thriving economy, driven primarily by a diversified base of high-tech companies ranging from gaming and software to biotechnology, manufacturing and aerospace, have made it the commercial force in the Pacific Northwest. In 2015 the economy continued to strengthen, and Seattle currently boasts one of the lowest unemployment rates of any major metro area. In July, unemployment in the Seattle-Bellevue-Everett area dropped to 3.6 percent, which marked the lowest figure the region had seen since mid-2007. While unemployment has increased in recent months to its current rate of 4.6 percent, the local rate remains 40 basis points below the national average. Over the past 12 months, a total of 68,000 jobs have been added in Washington, mostly in the retail trade, leisure and hospitality, government, professional and business services (this sector includes many jobs related to high-tech), and education and health services sectors. Local job growth looks to remain strong, with the most recent employment forecast from the Puget Sound Economic Forecaster calling for impressive growth of 2.3 percent in 2016. The Milken Institute recently released its 2015 Best-Performing Cities report, which measures economic vitality based on several criteria, including job creation and retention, and the quality of new jobs. According to the report, Seattle’s greatest assets are its well-educated and highly skilled workforce, as well as the fact that high wages in tech industries support consumption-related jobs throughout the rest of the local economy. Due to those and several other factors, Seattle was ranked as the seventh best-performing large city in the U.S., an improvement of four spots from last year’s report.
A total of $10.1 billion in office, industrial, retail, and multifamily investment transactions occurred in Puget Sound in 2015. Furthermore, two of these property types – office and multifamily – experienced record pricing, and the price for land has continued to inch towards $2,000 per square foot. In PWC and ULI’s Emerging Trends in Real Estate 2016 report, Seattle was ranked as the strongest West Coast real estate market and fourth strongest overall in the U.S., up four spots from last year’s eighth place ranking. Additionally, Seattle was
named the third best market in terms of investment potential and has surpassed San Francisco for the first time since 2010 to top the West Coast region. In regards to the future of Seattle, the report said, “The local outlook for the economy and investor demand could not be much stronger in Seattle. In fact, a lack of development opportunities and public and private investment is seen as the only potential problem from a local market perspective.”
Seattle’s population growth is far outpacing the national average, and due to the strong job market and high quality of living, it continues to attract millennials at a faster rate than nearly every other major U.S. city. In fact, for the first time in the city’s history it ranks among the top-10 most densely populated big cities in the nation. 2015 saw Bay Area companies and workers alike flock to Seattle. According to Redfin, in the past four years, the number of Bay Area residents searching for homes in Seattle has increased 325 percent. For Portland, the number has increased 420 percent. One out of every 13 Bay Area people searching for a home is now looking exclusively in the Pacific Northwest. For the first time ever, the median price for a Silicon Valley home has exceeded $1 million. That’s nearly double what it is in Seattle, and the pay difference is not nearly large enough to offset the cost of housing. With strong in-migration, as well as several of the West Coast’s top universities located in Puget Sound, including the University of Washington, companies in the region have excellent access to skilled workers. An impressive list of local companies have taken advantage of the talent pool, including Amazon, Microsoft, Boeing, Nordstrom, Starbucks, Costco, and the Bill & Melinda Gates Foundation. Companies that have grown their presence substantially in the market recently include Groupon, Uber and Snapchat. The strength of the local economy has caused demand and pricing to increase across all property types. However, despite strong rent growth for both commercial and residential space, Seattle remains a much more affordable place to live and conduct business than many other major markets.
OFFICEINDUSTRIALRETAILMULTIFAMILY
Seattle
Seattle & Portland 2015 Investment Overview 15
2015 Seattle office sales ($10M+) overview
As foreign investors flock to the market, sales volume nearly matches the combined total of 2013
and 2014
2015 was the sixth consecutive year that more than $1 billion in office assets traded hands in Puget Sound. In total, the market saw 48 transactions over $10 million close, which makes 2015 the most active year for office investment sales since 2007. The $4.5 billion total volume represents a 157.8 percent increase over 2014. Cap rates have remained relatively flat for the last three years, as the Puget Sound average dropped 20 basis points from 2014, to 6.0 percent. In addition to the impressive total sales volume, average pricing on a per-square-foot basis increased 23.2 percent year-over-year to $392. For the sixth consecutive year a new market-record for pricing was achieved; in the third quarter, American Realty Advisors purchased 2201 Westlake from Vulcan for $251.0 million, or $792 per square foot. Four sales closed in 2015 where pricing exceeded $700 per square foot, three of which surpassed the previous record set by the 401 Terry acquisition in 2014. With how pricing has grown in the last five years, it is not unrealistic to imagine a $900 per square foot office sale occurring in Seattle in the near future.
The most active submarkets for sales in 2015 were the Seattle CBD, Lake Union and Bellevue CBD, with total volumes of $1.3 billion, $908.5 million, and $766.2 million, respectively. Perhaps the most notable sale of the year occurred in August, when Gaw Capital Partners acquired the 76-story Columbia Center for $711.0 million. This was the largest real estate transaction in the region since Amazon purchased its headquarters in 2012, and provided clear evidence of foreign investors’ interest in Seattle. The two largest office sales in the region this year – Columbia Center and Amazon Phase VI – were purchased by foreign investors, so it
should come as no surprise that Seattle moved from eighth to fifth in terms of best U.S. cities for real estate investment in this year’s Association of Foreign Investors in Real Estate (AFIRE) Foreign Investment Survey. Foreign investors had increasingly been on bid lists for major assets in recent years, so 2015 was the natural progression of that trend, as efforts to enter the market became increasingly successful.
The year began with a boom, as six sales over $100M closed in the first quarter, for a total sales volume of $1.6 billion. While the last three quarters of 2015 couldn’t quite match that figure, demand remained sky high throughout the year, and two sales over $250M - Amazon Phase VI and 400 Fairview - closed in December. These transactions are prime examples of strong investor appetite in the market, as the two projects had barely delivered before trading for near market-record pricing. As the market moves into 2016, strong landlord sentiment and expectations for robust demand will continue to fuel investor appetite for Seattle’s office assets. Leasing market fundamentals will continue to improve with strong rent growth anticipated in the short and mid-term. Owners are in the enviable position of having the option to hold properties and collect increasing rents, or sell their assets for top dollar. Seattle has firmly cemented its place as a tier one market for institutional investors and 2016 figures to be another active year for office investment sales. While it may be hard to match 2015’s volume, we anticipate total office sales volume will exceed $3 billion and the market record for pricing per square foot will fall for the seventh consecutive year.
SEATTLE WAS NAMED THE THIRD BEST MARKET IN TERMS OF INVESTMENT POTENTIAL
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Seattle office leasing
16
Market momentum shows no signs of slowing down
Seven major office projects delivered this year, totaling more than 2.2 million square feet. This makes 2015 the most active year for development since prior to the recession. The largest project, 929 Office Tower, is the first office building to be delivered in downtown Bellevue since 2009. With more than 5.9 million square feet under construction, Seattle is the second most active market in the U.S. for development as a percentage of existing inventory, behind only Nashville. While this is a substantial amount of construction, concern locally about overbuilding remains fairly low, since demand is as high as it’s been in recent memory. We’re currently tracking more than 8.2 million square feet of tenant demand in the market. 14 of these companies are seeking space options of 100,000 square feet or larger, and there are just 10 existing blocks of space that can accommodate them. So the supply coming to market in the next 24 months, which is currently 38 percent preleased, is needed. In terms of location, the most active submarkets for development are the Seattle CBD, Lake Union, and Bellevue CBD, with a total of 5.0 million square feet being developed in the three areas. Not surprisingly, of the three major submarkets for development, Lake Union has experienced the most preleasing, with 78 percent of the space accounted for. Average asking rents for new construction space being marketed stand at $48.50 per square foot, full service, representing a 42.7 percent premium over the regional average.
For the third consecutive year net absorption surpassed 2.0 million square feet, as nearly 2.5 million square feet was taken down in 2015. More than 7.1 million square feet have been absorbed since the beginning of 2013. As in previous years, this robust demand is being driven primarily by the high-tech industry, which accounted for approximately 47.0 percent of all regional office leasing activity in 2015. Total vacancy in the Seattle metro area declined for the sixth consecutive year, dropping 50 basis points year-over-year to 10.2
percent, which is as low as the market has seen in the last 10 years. This occurred despite two projects – 1101 Westlake and 929 Office Tower – being delivered without significant preleasing. At 4.5 percentage points below the national average, the Seattle-Bellevue market is the sixth tightest office market in the country; behind Salt Lake City, Nashville, San Francisco, Portland and New York. Subsequently, average asking rents are up 7.5 percent year-over-year, and have hit a 10-year peak. Each of the four Puget Sound office clusters - Downtown Seattle, Eastside, Northend and Southend - experienced year-over-year rental rate growth in 2015. Seattle CBD Class A rents currently stand at $40.70 per square foot, up 10.9 percent year-over-year. Average Class A asking rents in Bellevue CBD stand at $42.04 per square foot, which represents an increase of 7.9 percent in the last 12 months. Notably in 2015, Lake Union surpassed Bellevue CBD to become the most expensive submarket in the region, with Class A rents standing at $47.74. This represents an impressive 28.0 percent increase year-over-year.
The wealth of young talent, quality real estate, and high quality of life in Puget Sound has made it one of the most desired locations in the country for high-tech companies of all sizes. Six of the ten largest office tenants in the metro area are in the high-tech industry. Several tech tenants have recently entered the market, including Palantir, Okta, Lyft, Snapchat, Uber, Interana and ClearSlide. With more than 8.2 million square feet of tenant demand currently in the market, vacancy as low as its been in a decade, and a lack of large blocks of available space, market fundamentals will continue shifting in favor of landlords, and strong rent growth should occur. As major developments deliver in the next 24 months, tenants looking to grow in Puget Sound will have access to much needed premier inventory in both CBD and non-CBD markets.
THE MARKET SAW 48 TRANSACTIONS OVER $10 MILLION CLOSE, WHICH MAKES 2015 THE MOST ACTIVE YEAR FOR OFFICE INVESTMENT SALES SINCE 2007.
Seattle & Portland 2015 Investment Overview 17
Seattle office sales & statistics
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of Sales 55 119 19 6 15 25 38 39 40 48
Price/SF Highest $574 $531 $425 $397 $548 $557 $642 $745 $755 $792
CAP Rate Average 6.1% 5.2% 6.2% 9.5% 7.2% 6.8% 5.5% 6.1% 6.2% 6.0%
Sales Volume $2.7B $9.6B $0.4B $0.4B $1.2B $1.7B $4.9B $2.8B $1.8B $4.5B
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF
Downtown Seattle 50,014,633 8.8% $37.42 2,384,411
Eastside 25,878,632 10.2% $35.85 28,756
Northend 7,634,787 14.2% $27.95 -134,368
Southend 8,302,240 15.4% $24.01 182,641
2015 Total Market 91,830,292 10.2% $33.98 2,461,440
2014 Total Market 88,445,215 10.7% $31.60 2,094,120
Sales matrix (over $10 million)
Office market statistics
Office market statistics include Class A and B office buildings over 30,000 sf, excluding owner-occupied, medical, and government-owned buildings.
1818
Seattle office sales ($10M+)
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Columbia Center
701 5th Ave Seattle, WA
8/7/15 1,552,714
1985-2005
$711,013,000
$458
5.0% Gaw Capital Partners
Beacon Capital Partners
• 91% leased at time of sale
• Buyer is based out of Hong Kong
• Previously acquired for $621M in April 2007
Amazon Phase VI
515 Westlake Ave N Seattle, WA
12/18/15 394,578
2014
299,000,000
$758
4.3% Metzler / Union Investment
Vulcan
• 100% leased to Amazon
The Summit I & II
320-355 110th Ave NE Bellevue, WA
3/4/15 524,130
2002-2005
$296,800,000
$566
5.5% Hines
Ivanhoe Cambridge
• 95% leased at time of sale
• Total sale price of $319.8M includes a development site for a 15-story 330,000 SF building (Summit III) - accounted for $23M of total sales price
Met Park East and West
1100 Olive Way, 1730 Minor Ave Seattle, WA
3/27/15 708,283
1981-2006
$272,800,000
$385
6.0% CBRE Global Investors
Brookfield
• 96% leased at time of sale
• Buildings were previously acquired for $210M in June 2012
400 Fairview
400 Fairview Ave N Seattle, WA
12/9/15 349,152
2015
$261,000,000
$748
3.5% / 4.8%
(stabilized)
TIAA-CREF
Skanska
• 71% leased at time of sale
• Partial interest sale - seller retained a 10% stake in the asset
2201 Westlake
2201 Westlake Ave Seattle, WA
7/21/15 317,102
2009
$251,000,000
$792
4.2% American Realty Advisors
Vulcan
• 100% leased at time of sale
• Major tenants are Amazon (57% of the property), and PATH (35% of the property)
• New market record for price per square foot
• Building has 135 luxury residential units that were not included in transaction
Seattle & Portland 2015 Investment Overview 19
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Amgen Helix Campus
1201 Amgen Ct W Seattle, WA
4/28/15 750,000
2004
$228,900,000
$305
N/A Expedia
Amgen
• Acquired for occupancy - Expedia will relocate from Bellevue to the 40-acre campus in 2018
• Major renovations will be made to the campus, which currently has a significant amount of lab space
Civica Office Commons
205-225 108th Ave NE Bellevue, WA
2/12/15 305,835
2001
$205,100,000
$671
5.3% Hines
Brickman
• 90% leased at time of sale
• Previously acquired for $176.8M in September 2005
2601 Elliott
2601 Elliot Ave Seattle, WA
3/27/15 339,799
1917-1998
$170,000,000
$500
6.0% JP Morgan Chase
Shorenstein / Wright Runstand & Co.
• 100% leased at time of sale
• Zulily occupies 89% of the property on a lease that expires in January 2024
• Buyer assumed existing loan
One Bellevue Center
411 108th Ave NE Bellevue, WA
4/27/15 368,685
1984-2014
$150,000,000
$407
6.5% LaSalle (CalSTRS)
Walton Street Capital
• 96% leased at time of sale
• Property is on a ground lease
Canyon Park Business Center & Woodlands Tech Campus
1909 214th St SE Bothell, WA
8/20/15 717,702
1985-2007
$130,600,000
$182
6.5% SteelWave
TIAA-CREF
• Canyon Park Business Center: 71% leased at time of sale
• Woodlands Tech Campus: 84% leased at time of sale
• 18 buildings situated on 58 acres
Sammamish Park Place
21925-22011 SE 51st St Issaquah, WA
1/22/15 586,823
1999-2001
$128,250,000
$219
9.6% Talon / Cerberus
Vulcan
• 100% leased at time of sale
• Major tenants are Microsoft and Costco, with short term leases expiring in 2016-2020
Blanchard Plaza
2201 6th Ave Seattle, WA
1/29/15 255,818
1983-2014
$125,000,000
$489
5.2% PNC (AFL-CIO)
Shorenstein
• 100% leased at time of sale to Amazon
20
Seattle office sales ($10M+)
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Dexter Horton Building
710 2nd Ave Seattle, WA
11/9/15 336,355
1924-2015
$124,400,000
$370
4.5% Pacific Eagle Holdings
Gerding Edlen
• 89% leased at time of sale
• Previously acquired for $76.6M in March 2013
SBRI Building
307 Westlake Ave N Seattle, WA
2/11/15 116,200
2004
$89,696,000
$780
6.6% BioMed Realty Trust
Vulcan / Seattle BioMed
• 99% leased at time of sale
• Partial sale leaseback
• Tenants are Seattle BioMed and Juno Therapeutics
Plaza East
11100 NE 8th St Bellevue, WA
4/28/15 156,000
1987-2007
$75,025,000
$481
5.6% Clarion Partners
Beacon Capital Partners
• 90% leased at time of sale
• Previously acquired as part of a portfolio for $49.1M in April 2007
Smith Tower
506 2nd Ave Seattle, WA
1/14/15 268,748
1914-2013
$73,730,000
$274
7.2% Unico
CBRE Global Investors
• 72% leased at time of sale
• Previously acquired for $36.8M in March 2012
1101 Westlake
1101 Westlake Ave N Seattle, WA
9/30/15 150,621
2015
$67,376,000
$447
N/A Invesco
Holland Partner Group
• Building was under construction when purchased, with no preleasing
• Delivered in December 2015
Macy’s
300 Pine St Seattle, WA
10/8/15 300,000
1929
$65,000,000
$217
N/A Starwood Capital Group
Macy’s
• Condo interest for top 4 floors of building
• Plans to convert the space into creative office
Overlake Office Center - Microsoft Building 110
15050 NE 36th St Redmond, WA
4/28/15 122,103
1998
$51,200,000
$419
6.0% Spear Street Capital
Kilroy
• 100% leased at time of sale
• Microsoft occupies the entire property on a lease that runs through 2021
• This is the only office building on Microsoft’s campus that it does not own
Seattle & Portland 2015 Investment Overview 21
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Seattle Tower
1218 3rd Ave Seattle, WA
10/14/15 169,952
1929-2008
$49,500,000
$291
4.7% Gaw Capital Partners
Invesco
• 88% leased at time of sale
SeaTac Office Center
17900-18000 Pacific Hwy S SeaTac, WA
10/31/15 532,430
1980-1997
$47,100,000
$88
7.1% Urban Renaissance Group / Iron Point Partners
Garrison Investment Group / ScanlanKemperBard
• 62% leased at time of sale
• Sale included two 12-story towers and a four story building
• Buyer plans to spend more than $10M in renovations
• Previously acquired for $79.3M in December 2007
• Ground lease
The Landmark
1601 E Valley Rd & 1600 Lind Ave SW Renton, WA
11/27/15 273,903
1987
$45,000,000
$164
8.4% Redwood-Kairos
Blackrock
• 100% leased multitenant building
• Two building portfolio sale
• FAA occupies 30% of the property and is vacating September 2017
• Previously acquired for $31.2M in February 2006
King Broadcasting
333 Dexter Ave N Seattle, WA
2/13/15 155,272
1947-1982
$42,558,000
$274
N/A Kilroy
Gannett
• 100% leased at time of sale to King 5
• Purchased for redevelopment along with three other properties
Rosen Building
960-964 Republican St Seattle, WA
8/28/15 60,375
1922-2001
$40,989,000
$679
5.3% Urban Renaissance Group
Vulcan
• 100% leased at time of sale to University of Washington
• Early 20th century warehouse that was converted into lab space
Bellevue Pacific Center
188 106th Ave NE Bellevue, WA
5/11/15 110,372
1995
$39,300,000
$356
6.9% PCCP / Align
LaSalle
• 93% leased at time of sale
• Sale represents the office portion of the building, which includes residential condominiums above the office portion
22
Seattle office sales ($10M+)
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Gateway One
11400 SE 8th St Bellevue, WA
8/19/15 108,065
1986
$38,750,000
$359
6.4% Talon
Walton Street Capital
• 92% leased at time of sale
• Weighted average remaining lease term of 4-5 years
Corporate Campus East
3025-3075 112th Ave NE Bellevue, WA
3/11/15 134,000
1982-1983
$37,750,000
$282
6.1% Kennedy Wilson
CBRE Global Investors
• 85% leased at time of sale
• Three building portfolio sale
Legacy Crown Pointe
4010-4040 Lake Washington Blvd NE Kirkland, WA
9/29/15 130,647
1986
$37,000,000
$283
6.4% TA Realty
Walton Street Capital
• 89% leased at time of sale
• Four building office campus
111 S Jackson
111 S Jackson St Seattle, WA
6/8/15 78,564
1904-2015
$34,000,000
$433
5.5% RREEF
Brickman
• 90% leased at time of sale
• 100% of office space leased to Galvanize for 10 years
• Previously acquired for $22.5M in December 2007
1300 Dexter Building
1300 Dexter Ave N Seattle, WA
2/19/15 79,877
1986
$31,550,000
$395
N/A Pemco Insurance
Holland Partners
• Acquired for occupancy - Pemco Insurance will be the lone tenant
Homeport Building and Marina
135 Lake St Kirkland, WA
9/4/15 35,447
1976
$28,000,000
$527
4.7% PMF Investments of Bellevue
Stabbert Maritime
• 100% leased at time of sale
• Includes a 118 slip marina on the Kirkland waterfront
• Existing office and retail rents are below market
• Price per square foot estimate based on 1/3 of income coming from marina
Seattle & Portland 2015 Investment Overview 23
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Antioch University
2326 6th Ave Seattle, WA
9/30/15 64,800
1950
$26,500,000
$409
N/A HB Management
Antioch University
• 100% leased at time of sale
• Redevelopment project
Olympic Block
101 Yesler Way Seattle, WA
11/16/15 70,796
1986
$22,410,000
$317
5.2% Brickman
KBS Realty Advisors
• 96% leased at time of sale
• Residential condominiums located on 7th, 8th, and 9th floors are not a part of this transaction
• Previously acquired for $14.6M in December 2005
Mountain Pacific
11808-11820 Northup Way Bellevue, WA
2/20/15 91,009
1983
$22,100,000
$243
7.0% Schnitzer West
Toctherman
• 84% leased at time of sale
Stack House
1265 Republican St Seattle, WA
2/13/15 36,600
1904-2013
$21,938,000
$599
N/A JP Morgan Chase
Vulcan
• 100% leased at time of sale
• Office portion of $148.7M total transaction which included a Class A apartment building
Pioneer Building
606 1st Ave Seattle, WA
12/22/15 72,000
1892-1974
$20,500,000
$285
N/A Level Office
Sun Capital Corporation
• 78% leased at time of sale
• Buyer plans to turn the building into a co-working facility
• Previously acquired for $12.3M in January 2014
CBIC Building
1213 Valley St Seattle, WA
2/20/15 35,351
1990
$20,500,000
$580
N/A Seattle Cancer Care Alliance
Donald Sirkin
• Acquired for occupancy - Seattle Cancer Care Alliance will be the lone tenant
East Campus Corporate Park I
32001 32nd Ave S Federal Way, WA
3/30/15 105,807
2001
$17,900,000
$169
7.8% Sterling Realty
Ilahie Holdings
• 98% leased at time of sale
24
Seattle office sales ($10M+)
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
701 Dexter Ave
701 Dexter Ave N Seattle, WA
11/25/15 61,528
1984
$17,700,000
$288
4.0% / 7.5%
(stabilized)
Unico
SEBCO, Inc.
• 94% leased at time of sale
Bel-Kirk 520
11120 NE 33rd Pl Bellevue, WA
1/16/15 93,064
1988-2005
$16,500,000
$177
7.0% Schnitzer West
Rosen-Harbottle
• 100% leased at time of sale
Waterworks Marina & Offices
1800-1836 Westlake Ave N Seattle, WA
3/11/15 47,911
1963-1972
$16,200,000
$338
5.8% Temperate Paradise Properties
Columbia West Properties
• 93% leased at time of sale
• One Class B building and two Class C buildings
Former Federal Reserve Bank SF
1015 2nd Ave Seattle, WA
3/31/15 99,148
1950
$16,000,000
$161
N/A Martin Selig Real Estate
GSA
• Historic site was acquired in an auction sale
• Class C building
• 0% leased at time of sale
Columbia Business Park
13429-13431 NE 20th St Bellevue, WA
6/26/15 67,523
1974-2000
$15,914,000
$236
5.0% Propet USA
Broderick Group
• 100% leased at time of sale
• Part of four building portfolio sale that included Retail and Flex properties
Willows Commerce Park II - Building C
9805 Willows Rd NE Bellevue, WA
5/12/15 80,705
1999
$14,990,000
$186
6.8% Menlo Equities
Wyndham Worldwide
• 100% leased at time of sale
• Sale leaseback to Wyndham Worldwide
NCR Building
15400 SE 30th Pl Bellevue, WA
6/24/15 47,572
1985
$13,825,000
$291
6.1% Eastgate Office Corporation
Keystone Development
• 91% leased at time of sale
Seattle & Portland 2015 Investment Overview 25
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Bridgeport Medical Center
7308 Bridgeport Way N Lakewood, WA
2/27/15 31,074
2005
$13,750,000
$442
6.9% Physicians Realty Trust
Gallashea Properties
• 100% leased at time of sale
• Sale leaseback
Southcenter Place
16400 Southcenter Pky Tukwila, WA
12/3/15 64,725
1979
$11,880,000
$184
7.1% JCR Development
Steelwave
• 85% leased at time of sale
OFFICEINDUSTRIALRETAILMULTIFAMILY
Seattle
Seattle & Portland 2015 Investment Overview 29
2015 Seattle industrial sales ($10M+) overview
Sales volume more than doubles, surpassing $1 billion
Seattle’s economy is prospering, largely due to the strength of industrial sector employment. The trade, transportation and utility sector, as well as the construction industry, have been two of the main drivers of job growth in Puget Sound within the past year. According to the Associated General Contractors of America, Washington state added 9,900 construction jobs last year, representing a 5.9 percent gain. With a flourishing housing market, an abundance of large infrastructure projects and pre-recession levels of commercial development, the near term outlook for construction looks positive. The aerospace, food/beverage and logistics industries have helped drive growth in the ports of Seattle and Tacoma. In response to fierce competition throughout North America, in August 2015, the two ports officially joined forces to create the Northwest Seaport Alliance. The alliance, which is the first of its kind in North America, unified management of the two ports’ marine cargo terminals and related functions. This helped the region handle more than 3.5 million TEUs in 2015, an increase of 4.0 percent over 2014, despite the Chinese economy slowing down. The NW Seaport Alliance is expecting to see an increase in cargo volumes and related jobs in the region in 2016.
Sales volume of Puget Sound industrial properties increased by an astonishing 161.5 percent year-over-year, with $1.1 billion in assets trading hands in 2015. Not only was total volume up, the frequency of trades increased, as 26 transactions over $10 million closed. This is the most industrial sales the market has seen in a year since 2007. Furthermore, average pricing on a per-square-foot basis increased 20.9 percent year-over-year to $110, and cap rates declined 70 basis points to an average of 5.7 percent. The cap rate compression in the market has been significant, as it’s currently 350 basis points below the high of 9.2 percent in 2009. While there were no $100-million-plus portfolio sales in 2014, two deals exceeded $200 million in 2015. The year ended on a high note, as the two largest deals both occurred in the fourth quarter. Global Logistics Properties purchased $4.6 billion in assets from
Industrial Income Trust, and several of these properties, totaling $225.5 million, were located in the Seattle metro area. Clarion Partners acquired the Segale Business Park located In Tukwila, from Segale Properties for $202.8 million. The twelve building portfolio includes a data center and three office buildings. Several buyers in the market this year participated in multiple transactions. CenterPoint Properties, Gramercy Property Trust, Industrial Property Trust, Terreno Realty, and the aforementioned Global Logistics Properties are groups that seem particularly bullish on the Seattle industrial market, given their recent acquisitions.
The increase in sales volume should not come as a surprise, as investor interest has been high for several years, there was simply more product available in 2015. The rampant sales activity does not appear to slow down in the near future, as Seattle was ranked as the number one most desirable market in the U.S. for investment in the industrial sector, according to PWC and ULI’s Emerging Trends in Real Estate 2016 report. 64 percent of respondents to the Emerging Trends in Real Estate 2016 survey recommended buying industrial property in Seattle. Additionally, 27 percent of respondents placed a “hold” rating on industrial product, while the remaining 9 percent minority recommended selling. Institutional investors have clearly taken notice of the strong market fundamentals over the last three years and have been aggressive in acquiring both existing product, typically through unsolicited offers, as well as land in order to develop new product in the near-mid-term. These forward commitments for product demonstrate pent up demand for well-located industrial assets and this type of pre-commitment buying has only returned to the Puget Sound market in recent years. With the local economy continuing to strengthen, the outlook for the Puget Sound industrial market is positive. Moving into 2016, we expect the industrial market to continue to perform well, both in terms of demand from tenants and interest from institutional investors.
30
Seattle industrial leasing
2015 MARKED THE STRONGEST YEAR FOR THE PUGET SOUND INDUSTRIAL MARKET IN RECENT HISTORY.
2015 was a banner year for the industrial market
2015 marked the strongest year for the Puget Sound industrial market in recent history. Market vacancy in the region dropped 80 basis points year-over-year to its current rate of 3.6 percent, which is the lowest rate in more than 10 years. Every cluster in the region – Seattle, Kent Valley, Pierce County, Eastside, and Northend – has seen vacancy drop in the last 12 months. Vacancy in the Seattle cluster dropped 30 basis points in the fourth quarter, to an astounding 1.6 percent. The Eastside market has the highest vacancy rate at 5.6 percent, which represents a decline of 100 basis points year-over-year and still places it firmly in landlords’ favor. There were a total of 28 leases signed in 2015 that exceeded 100,000 square feet. All but two of these major leases took place in the Southend. Pent-up demand from large users has been building for quite some time. Most large users have had very few options in the market and have had to look at new development in order to meet their needs.
Currently, there is 11.5 million square feet of gross demand in the market. Thirty-four tenants with requirements exceeding 100,000 square feet account for roughly 8.7 million square feet of that demand. Owners are seeking to address this demand, and there has been a construction boom in Puget Sound over the last three years. More than 9.2 million square feet has been added to the market since the beginning of 2013, 4.1 million of which was added in 2015. An additional 2.6 million square feet are currently under construction. The overwhelming majority of development
projects are speculative, with approximately 30 percent of the inventory currently preleased. New development in the Kent Valley and Pierce County markets has been outpaced by leasing activity, which has helped to keep vacancy low. At this point, projected new supply is not close to servicing the tenant demand in the market.
For the fifth consecutive year net absorption surpassed 3.0 million square feet. Net absorption exceeded 1.0 million square feet each of the last three quarters in 2015, and ended the year at 6.2 million square feet. This is the most absorption the market has seen in any year since 2007. Furthermore, a staggering 15.5 million square feet of space has been taken down in the last three years. As a result of this strong leasing activity, rental rates continue to increase significantly, and are expected to rise through 2016. We haven’t seen a market so weighted in the landlord’s favor in many years. It is putting tremendous pressure on tenant’s approaching renewals, which are seeing their proposed rents increasing by 20-30 percent. When they are forced into the market to tour, they are finding few options that will work for them without sacrificing their desired location and/or building quality. It is expected that the conditions in the Puget Sound industrial market will remain in favor of landlords in the near future.
Seattle & Portland 2015 Investment Overview 31
Seattle industrial sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF
Seattle 47,085,219 1.6% $0.85 453,097
Eastside 32,045,652 5.6% $1.08 280,493
Northend 28,085,558 5.0% $0.57 551,700
Kent Valley 109,536,466 2.9% $0.57 1,809,604
Pierce County 60,561,421 4.8% $0.56 3,114,494
2015 Total Market 277,314,316 3.6% $0.71 6,209,388
2014 Total Market 273,193,567 4.4% $0.69 4,936,285
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of Sales 14 35 19 9 11 14 20 25 24 26
Price/SF Highest (ind) $140 $164 $151 $100 $115 $187 $125 $288 $198 $194
CAP Rate Average 6.8% 5.9% 6.6% 9.2% 7.4% 7.2% 6.5% 6.3% 6.4% 5.7%
Price/SF Highest (flex) $206 $237 $199 $207 $156 $257 $180 $190 $122 $171
Sales Volume $0.6B $0.7B $0.4B $0.2B $0.2B $0.3B $0.7B $0.8B $0.4B $1.1B
Industrial market statistics
Sales matrix (over $10 million)
Industrial market statistics include industrial and flex inventory over 10,000 sf, single-tenant, multi-tenant and owner-occupied.
3232
Port of Seattle and Port of Tacoma historical total TEU’s
2015 TEU container volume
4,500,000
2,500,000
4,000,000
2,000,000
3,500,000
1,500,000
2007 2008
Seattle*
Tota
l TEU
’s
Tacoma* * In 2014 Port of Seattle and Port of Tacoma began combining their statistics
2009 2010 2011 2012 2013 2014* 2015
500,000
3,000,000
1,000,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015
Seattle 1,973,504 1,704,492 1,584,596 2,153,685 2,049,733 1,885,680 1,592,753 * *
Tacoma 1,924,929 1,861,358 1,545,853 1,412,869 1,443,550 1,678,778 1,863,408 * *
Total TEU’s 3,898,433 3,565,850 3,130,449 3,566,554 3,493,283 3,564,458 3,456,161 3,393,522 3,529,446
Seattle & Portland 2015 Investment Overview 33
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
IIT Portfolio
Multiple
11/4/15 1,938,562
Various
$225,536,000
$116
5.6% Global Logictics Properties
Industrial Income Trust
• Washington portion of $4.6B portfolio sale
Segale Business Park
1800-18349 Andover Park W Tukwila, WA
12/1/15 1,213,009
1979
$202,800,000
$167
4.5% Clarion Partners
Segale Properties
• 99% of warehouse space leased at time of sale
• $125/SF is the estimated allocation of the industrial portion
• Twelve building portfolio sale includes a data center and three office buildings, which total approx. 110,000 SF and are 75% leased
Seattle Logistics Center
4201-4601 6th Ave S Seattle, WA
4/10/15 360,058
1971-1991
$63,250,000
$176
N/A Prologis
Alaska Distributors
• Short-term leaseback by K2
• 231,000 SF now available for lease
• Two property portfolio sale
Portfolio Sale
Woodinville Corporate Center
17627 128th Pl NE Woodinville, WA
2/27/15 893,000
1988 / 1995
$60,437,000
$68
N/A GIC / Global Logistics Properties
Blackstone
• Part of $8.1B portfolio sale
Tukwila Commerce Center
800-820 Industry Dr Tukwila, WA
2/27/15 475,414
1976 / 1990
$52,866,000
$111
N/A GIC / Global Logistics Properties
Blackstone
• Part of $8.1B portfolio sale
• Includes Flex and Manufacturing buildings
Southcenter West Business Park
1185 Andover Park W Tukwila, WA
2/27/15 299,280
1972 / 1985
$30,211,000
$101
N/A GIC / Global Logistics Properties
Blackstone
• Part of $8.1B portfolio sale
Mill Creek Distribution Center
21804 76th Ave S Kent, WA
2/27/15 220,899
1988 / 1995
$23,854,000
$108
N/A GIC / Global Logistics Properties
Blackstone
• Part of $8.1B portfolio sale
Seattle industrial-flex sales ($10M+)
34
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
West Valley Business Center
22405-22473 72nd Ave S Kent, WA
2/27/15 152,420
1981 / 1995
$15,007,000
$98
N/A GIC / Global Logistics Properties
Blackstone
• Part of $8.1B portfolio sale
Valley Freeway Business Center
25612-25802 74th Ave S Kent, WA
2/27/15 132,125
1990 / 1995
$13,242,000
$100
N/A GIC / Global Logistics Properties
Blackstone
• Part of $8.1B portfolio sale
Port Commerce Center
2309 Milwaukee Way Tacoma, WA
4/17/15 1,027,356
1990-2008
$57,200,000
$56
5.9% Principal Real Estate Investors
Northwest Building LLC
• 100% leased at time of sale
• Four building portfolio sale
• Ground lease with the Port of Tacoma
West Willows Tech Center
8705-8809 148th Ave NE Redmond, WA
3/31/15 166,833
1984-1985
$28,500,000
$171
6.8% Burnstead
ScanlanKemperBard / HighBrook
• 90% leased at time of sale
• Five building portfolio sale
Algona II Distribution Center
701-851 Milwaukee Ave N Algona, WA
1/16/15 263,291
1990
$28,254,000
$107
N/A Precision CastParts Corp.
Clarion Partners
• 100% leased at time of sale
• Buyer will be owner-user
Intracorp Industrial Center
3011 70th Ave E Fife, WA
3/31/15 324,220
1994
$26,354,000
$81
6.3% CenterPoint Properties
Gibraltar Industries
• 100% leased at time of sale
• Sale leaseback for a term of 5 years
Medline Building - Valley Distribution Center
4800 E Valley Hwy Sumner, WA
9/30/15 227,964
2004
$20,800,000
$91
N/A Exeter Property Group
Medline Industries
• 100% leased at time of sale
• Part of multi-market portfolio sale
• 2-year leaseback to Medline
West Valley Business Park
6520 S 190th St Kent, WA
3/5/15 214,970
1989
$18,500,000
$86
6.0% Gramercy Property Trust
LBA Realty
• 100% leased at time of sale
• Part of a three building West Coast portfolio
Seattle industrial-flex sales ($10M+)
Seattle & Portland 2015 Investment Overview 35
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
West Waterway - Building 7-C
3546 W Marginal Way SW Seattle, WA
4/6/15 170,633
1975
$18,250,000
$107
5.5% CenterPoint Properties
ITB Holding Company
• 100% leased at time of sale
• Sale leaseback
Propet USA
2415 W Valley Hwy N Auburn, WA
6/11/15 162,100
1991
$17,015,000
$105
5.3% Industrial Property Trust
Propet USA
• 100% leased at time of sale
• Off-market transaction
• Sale leaseback
Boise Cascade Building
20280 84th Ave S Kent, WA
12/14/15 158,168
1981
$14,875,000
$94
6.0% Terreno Realty
OfficeMax
• 100% leased at time of sale
• Short term leaseback
• Building now available for lease
Tamarack Building
1607 136th Ave E Sumner, WA
9/21/15 159,250
2015
$14,333,000
$90
N/A Design Imports India
Panattoni
• Owner-user sale
• Off-market transaction
Overlake Business Park
2801-2899 152nd Ave NE Redmond, WA
2/27/15 94,211
1979
$13,900,000
$148
N/A Sound Transit
PS Business Parks
• 100% leased at time of sale
• Buyer plans to demolish buildings
Ryerson Building
2306 B St NW Auburn, WA
5/8/15 109,585
1999
$13,000,000
$119
6.4% Gramercy Property Trust
Eric B Benson Trust
• 100% leased at time of sale
• Part of three building portfolio sale that included properties in California
Harbour Reach Business Park
4640 Campus Pl Mukilteo, WA
7/1/15 100,160
2001
$12,900,000
$129
6.0% TA Realty
Otto Development
• 100% leased at time of sale
Wulff Industrial Park
301 30th St NE Auburn, WA
5/28/15 104,600
2000
$12,500,000
$120
5.0% Northwest Building LLC
Stockbridge
• 98% leased at time of sale
• Buyer was coming out of a 1031 Exchange
36
Seattle industrial-flex sales ($10M+)
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Larsen Building
14513 32nd St Sumner, WA
12/23/15 98,203
2015
$12,400,000
$126
5.6% Bixby Land Company
Panattoni
• 100% leased at time of sale
• Two property portfolio sale
Kent Corporate Park
22422-22430 72nd Ave S Kent, WA
7/2/15 136,014
1979-1982
$12,250,000
$90
6.2% Terreno Realty
Erlinda Patridge
• 94% leased at time of sale
• In-place rents are below market and property has significant deferred maintenance
WTM Building
13203 NE 16th St Bellevue, WA
4/3/15 60,900
1972
$11,820,000
$194
6.0% Flatiron Properties
Dino Simone
• 100% leased at time of sale
Northwest Center Building
7272 W Marginal Way S Seattle, WA
10/16/15 98,028
1989
$11,500,000
$117
N/A LBA RV-Company
Northwest Center
• Seller to lease back 14,500 SF of 2nd floor office
• Balance of the building was vacant at time of sale
West Valley Distribution Center
19030 W Valley Hwy Kent, WA
4/27/15 138,296
1978
$11,200,000
$81
5.1% Industrial Property Trust
ScanlanKemperBard / Oaktree
• 80% leased at time of sale
Lincoln Storage Building
8420 S 190th St Kent, WA
4/16/15 115,322
1992
$11,150,000
$97
5.7% Terreno Realty
Lincoln Corporate Logistics
• 100% leased at time of sale
• Tenants are Lincoln Moving & Storage and Intellectual Ventures
Former Sparklett’s Building
401 Lund Rd Auburn, WA
11/3/15 64,858
1988
$11,100,000
$171
5.3% Industrial Property Trust
Columbia Pacific Advisors
• 100% leased at time of sale
• 10-year lease in place with Ferguson
• Building is on 4+ acres
North Kent Industrial Center
7820-7828 S 200th St Kent, WA
8/10/15 101,686
1981-1982
$10,358,000
$102
5.8% Industrial Property Trust
Daniel McCabe
• 100% leased at time of sale
• Two building portfolio sale
Seattle & Portland 2015 Investment Overview 37
OFFICEINDUSTRIALRETAILMULTIFAMILY
Seattle
40
2015 Seattle retail sales ($10M+) overview
Market sees the most trades in any single year since 2006, but volume declines
With 27 transactions over $10 million, 2015 was the most active year for retail investment sales since 2006. However, despite increased activity, total sales volume decreased by 22.9 percent year-over-year, with $645.7 million in assets trading hands. 2015 lacked the jaw-dropping deals we have seen in previous years, as there were no sales of over $100 million. Contrast that with 2013 when five such deals occurred, and 2014 when two massive sales transacted, and it’s easy to see why volume was down in 2015. The largest transaction of the year occurred in the first quarter, when Donahue Schriber purchased Lakeland Town Center in an off market transaction from Loja Real Estate for $51.2 million, or $409 per square foot. The Auburn strip center, home to tenants such as Haggen, Starbucks and McDonald’s, was 100 percent leased at time of sale and traded at a cap rate of 4.9 percent, one of the lowest of the year. Average cap rates as a whole ended the year at 6.3 percent, up 30 basis points year-over-year. Despite increasing slightly, cap rates remain significantly below the 10-year historical average and 250 basis points lower than the high of 8.8 percent recorded in 2009.
The first sale of the year closed in early-January, when Eliat Management purchased 6th Avenue Plaza from Rosen-Harbottle for $17.2 million, or $124 per square foot. The Tacoma community center was 92 percent leased at time of sale with tenants such as Goodwill, Sears Outlet, Artco Crafts and Harbor Freight Tools. In addition to kicking off the year, this transaction was noteworthy because the sales price was 16.6 percent higher than the original listing
price, when the property came on the market in the second quarter of 2014. The high water mark for pricing in 2015 was achieved in February, when K & H Sutter Company purchased a Walgreens in the Tacoma Suburban submarket from Columbia Retail Group for $10.0 million, or $701 per square foot. This is the third highest priced retail transaction in the last ten years, behind only Pacific Place and Meridian Center, both of which closed in 2014. More than half of the total volume in 2014 came from building sales in the city of Seattle. 2015 saw just two retail properties trade in Seattle, for a total of $67.5 million.
Seattle was ranked as the 20th most desirable market in the U.S. for investment in the retail sector, down eight spots from last year, according to PWC and ULI’s Emerging Trends in Real Estate 2016 report. 32 percent of respondents to the Emerging Trends in Real Estate 2016 survey placed a “buy” rating on retail property in Seattle. The largest segment of respondents, 49 percent, recommended holding retail product, while the remaining 19 percent minority recommended selling. Demand for the Puget Sound retail market remains high, as evidenced by the fact that the frequency of trades has increased for five consecutive years. Whereas 2013 sales volume was driven primarily by the transactions of high profile malls, 2015 was similar to 2014, in that shopping centers drove volume. With many owners opting to hold, competition should be very high amongst investors for the prime retail properties that are made available in 2016.
THE HIGH WATER MARK FOR PRICING IN 2015 WAS $701 PER SQUARE FOOT
Seattle & Portland 2015 Investment Overview 41
Seattle retail leasing
With desirable demographics, market fundamentals continue to strengthen
2015 was a positive year for the Puget Sound retail market, as strong leasing activity pushed vacancy down 60 basis points to its current rate of 4.3 percent, which represents the lowest level since 2007. According to the Downtown Seattle Association, more than 42 new retail stores opened downtown in the first six months of last year. Seattle is not the only segment of the market that is experiencing strong demand, however, as net absorption in every cluster in the Puget Sound market - Downtown Seattle, Eastside, Northend, Southend and Tacoma - was overwhelmingly positive. A total of more than 1.4 million square feet of space was taken down in 2015, with the Northend accounting for nearly half of all regional absorption. Tacoma, which has struggled with elevated vacancy in recent years, saw the second most absorption in Puget Sound, as more than 220,000 square feet of space was taken down, dropping overall vacancy to 6.4 percent. Downtown Seattle remains the tightest market, as vacancy dropped 50 basis points year-over-year to just 2.2 percent. Subsequently, rental rates in Downtown Seattle increased 4.4 percent, to an average of $24.90 per square foot. Overall asking rental rates for the region increased just 0.2 percent year-over-year, as growth was minimal in the four non-Seattle clusters. Rents remain very reasonable when compared to major retail destinations in the U.S. This may not be the case for long, however, as tenant demand continues to outpace supply, particularly for core urban product. 500,000 square feet of inventory was delivered to the market in 2015, and just 162,000 square feet of product is currently under construction.
Several interesting stories came out in regards to the Puget Sound retail market in 2015. Amazon opened a bookstore in University Village and launched AmazonNow, which provides one hour shipping on select items, Target announced a partnership with InstaCart to provide grocery delivery, and Uber launched the restaurant delivery service UberEats. Perhaps no single story
gained more national attention than REI’s #OptOutside campaign. While most retailers expand hours to include all or part of Thanksgiving and open early on Black Friday, the Seattle-based outdoor retailer went to the other end of the spectrum, opting to close on Thanksgiving and Black Friday in order to give their employees and customers the day off. For REI the added publicity appears to have paid off, as online traffic increased 10 percent on Thanksgiving and 26 percent on Black Friday when compared with last year, according to SimilarWeb.
Employment growth in Seattle continues to outpace the national average, and the retail trade sector was one of the strongest performers in 2015. Seattle has started to phase in the $15 minimum wage law; the first mandatory increase took effect, raising the minimum wage to $11 an hour on April 1st. Although it is only the first increase we are already beginning to see some unintended consequences. Despite a five-year period of steady job growth in the restaurant industry, 700 jobs (0.5 percent) were lost in the Seattle area between January and September, according to AEI. Restaurant jobs in the rest of the state have increased by 5,800 (6.6 percent) over the same time period. Considering an additional $4 will be added in the near future, it will be interesting to see if this trend continues and if so, what the impact will be on other retail sectors. The ongoing residential construction boom should continue boosting local retail sales. The glut of well-paid, younger residents in the market is resulting in an increase in demand for groceries and luxury goods. While retail construction has started to come back, the inventory growth is occurring very gradually.
42
Seattle retail sales & statistics
Submarket Size (RSF) VacancyAvg. Rental Rate
(NNN)Net Absorption RSF
Downtown Seattle 26,210,599 2.2% $24.90 168,485
Eastside 27,778,460 3.3% $22.79 193,595
Northend 46,544,914 4.0% $16.85 677,037
Southend 31,309,288 4.7% $16.36 178,712
Tacoma 41,331,235 6.4% $15.10 227,825
2015 Total Market 173,174,496 4.3% $17.56 1,445,654
2014 Total Market 172,010,039 4.9% $17.53 1,885,341
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of Sales 28 19 4 8 7 15 16 18 22 27
Price/SF Highest $518 $467 $380 $404 $305 $387 $512 $509 $849 $701
CAP Rate Average 6.4% 5.9% 7.2% 8.8% N/A 7.0% 6.4% 6.4% 6.0% 6.3%
Sales Volume $0.5B $0.4B $0.1B $0.1B $0.1B $0.4B $0.9B $1.1B $0.8B $0.6B
Retail market statistics
Sales matrix (over $10 million)
Seattle & Portland 2015 Investment Overview 43
Seattle retail sales ($10M+)
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Lakeland Town Center
1400-1418 Lake Tapps Pky E Auburn, WA
3/13/15 125,142
2002
$51,200,000
$409
4.9% Donahue Schriber
Loja Real Estate
• 100% leased at time of sale
• Tenants include Haggen, Starbucks, McDonald’s, Subway, and Verizon
• Off-market transaction
Sternco Center
14509-14747 NE 20th St Bellevue, WA
12/10/15 113,223
1987-1990
$49,000,000
$433
4.9% ROIC
Allan L. Sternoff
• 100% leased at time of sale
• Major tenants include Goodwill, Seattle Lighting, and Asian Food Center
Interbay Urban Center
1819-1827 15th Ave W Seattle, WA
4/22/15 80,560
2008
$47,818,000
$594
4.7% Donahue Schriber
TRF Pacific
• 100% leased at time of sale
• Major tenants include Whole Foods and Petco
• Off-market transaction
Four Corner Square
23800 SE Kent Kangley Rd Maple Valley WA
12/16/15 119,579
1985
$41,500,000
$347
5.6% ROIC
Kite Realty Group
• 96% leased at time of sale
• Major tenants include Johnsons Home & Garden Improvement Center, Walgreens, and Grocery Outlet
Green Firs Towne Center
3800-3902 Bridgeport Way W University Place, WA
9/28/15 144,943
1977-201
$36,000,000
$248
5.6% Principal Financial
PMF Investments
• 97% leased at time of sale
• Major tenants include Safeway, Big Lots, Rite Aid, and Trader Joe’s
Totem Lake Malls
12500-12632 120th Ave NE Kirkland, WA
4/22/15 287,827
1972-1974
$35,500,000
$123
N/A CenterCal Properties / PCCP
Coventry Realty Advisors
• 88% leased at time of sale
• Planned redevelopment to include retail, office, and apartments
• Off-market transaction
Woodinville Plaza
14001-14235 NE Woodinville Duvall Rd Woodinville, WA
6/10/15 174,548
1981-2003
$35,263,000
$202
5.1% Retail Properties of America
AFL-CIO
• 91% leased at time of sale
• Major tenants include Albertsons, TJ Maxx, OfficeMax, Dollar Tree, and Rite Aid
44
Seattle retail sales ($10M+)
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Home Depot
4602 Center St Tacoma, WA
6/30/15 137,024
2000
$32,655,000
$238
6.1% Inland Group
ARCP
• 100% leased at time of sale
Ballinger Village
20120-20336 Ballinger Way NE Shoreline WA
12/22/15 113,315
1960-1987
$23,750,000
$210
6.6% Merlone Geier Partners
Pacific Coast Development
• 92% leased at time of sale
• Off-market transaction
Lynnwood Square
19800 44th Ave W Lynnwood, WA
2/9/15 148,772
1969-2001
$23,000,000
$155
6.9% Merlone Geier Partners
Burkheimer Management / American National Insurance
• 77% leased at time of sale
• Anchor tenants are Grocery Outlet and Sports Authority
• Off-market transaction
Everett Village Center
1124 SE Everett Mall Way Everett, WA
8/31/15 122,375
1979-2007
$22,500,000
$184
7.8% Stockbridge
Mano Realty Investments
• 100% leased at time of sale
• Major tenants include Best Buy, Bed Bath & Beyond, Bank of America, Sleep Country, and PetsMart
Renton Highlands Safeway Plaza
4250-4300 NE 4th St Renton, WA
3/10/15 64,288
1996
$21,914,000
$341
7.5% Spirit Realty Capital
Safeway
• 100% leased at time of sale
• Sale leaseback
• Off-market transaction
Snoqualmie Ridge Town Center
7708-7802 Center Blvd SE Snoqualmie, WA
4/8/15 61,591
2003-2007
$20,098,000
$326
6.3% David Ta-Wel Kao
Northwest Capital Corp (Mark McDonald)
• 98% leased at time of sale
• Tenants include Snoqualmie Ridge Supermarket, Snoqualmie Ridge Medical Center, Infusion Bar & Grill, and Starbucks
Ge orgetown Center
5963 Corson Ave S Seattle, WA
7/27/15 74,178
1986
$19,662,000
$265
9.3% Spire General Partner
GRP Inc.
• 96% leased at time of sale
• Part of a portfolio sale that included a Class B warehouse building
Seattle & Portland 2015 Investment Overview 45
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Surprise Lake Square
900 Meridian Ave E Milton, WA
8/24/15 91,958
1983-2007
$19,500,000
$212
6.5% Tourmaline Capital
Washington Capital Management
• 65% leased at time of sale
• Major tenants include Dollar Tree and Rite Aid
Coal Creek Marketplace
6920-6950 Coal Creek Pky SE Newcastle, WA
8/27/15 52,145
1991
$17,600,000
$338
5.4% Retail Properties of America
Joshua Green Corporation
• 100% leased at time of sale
• QFC is the anchor tenant
Mill Creek Crossing
18001 Bothell Everett Hwy Bothell, WA
8/14/15 50,549
1985-2009
$17,454,000
$345
N/A Lakha Investments
The Echelbarger Company
• 97% leased at time of sale
6th Avenue Plaza
5401 6th Ave Tacoma, WA
1/9/15 139,107
1986
$17,200,000
$124
7.3% Eliat Management
Rosen-Harbottle
• 92% leased at time of sale
• Major tenants include Goodwill, Sears Outlet, Artco Crafts, and Harbor Freight Tools
• Property originally went on the market in Q2 2014 with a listing price of $14.75M
Whole Foods Market
3515 Bridgeport Way W University Place, WA
5/15/15 37,595
2015
$15,500,000
$412
5.4% Kenneth Kim
Versus Partners
• 100% leased at time of sale
Village Square
16150 NE 85th St Redmond, WA
8/24/15 43,915
1983
$14,800,000
$337
5.5% Alaskan Copper & Brass Company
Washington Capital Management
• 85% leased at time of sale
46
Seattle retail sales ($10M+)
Property Closing Date
Total SF Year Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Panther Lake
20662 108th Ave SE Kent, WA
12/7/15 69,090
1985-2004
$14,680,000
$212
6.4% US Realty
Kimco
• 89% leased at time of sale
• Major tenants include Rite Aid and Dollar Tree
• Buyer also acquired adjacent vacant Albertsons property
Center Plaza
2006 S 320th St Federal Way, WA
7/17/15 73,978
1979
$14,270,000
$193
7.0% Northwest Capital Corporation
Cratsenberg Properties
• 90% leased at time of sale
LA Fitness
27417 Pacific Hwy S Federal Way, WA
10/15/15 45,000
2007
$12,200,000
$271
7.1% Realty Income Properties
Ashton Capital Corporation
• 100% leased at time of sale
Sawyer Village
27203 216th Ave SE Maple Valley, WA
12/15/15 29,315
2008
$11,850,000
$404
6.5% Robert Chapman
CLCH Integrity Land
• 95% leased at time of sale
Haggen
15332 Aurora Ave N Shoreline, WA
6/29/15 52,276
1967-1990
$10,697,000
$205
6.3% Sound Northwest Properties
Garrison Investment Group
• 100% leased at time of sale
• Business operated as a Safeway until February 2015
Renton Honda
200 SW Grady Way Renton, WA
6/26/15 37,535
1990
$10,075,000
$268
N/A Robert D Lamphere
Robert F. Greenwell Co.
• 100% leased at time of sale
• Property was purchased by the tenant
Walgreens
2024 6th Ave Tacoma, WA
2/9/15 14,330
2011
$10,052,000
$701
5.6% K & H Sutter Company (David Gronowski)
Columbia Retail Group
• 100% leased at time of sale
Seattle & Portland 2015 Investment Overview 47
OFFICEINDUSTRIALRETAILMULTIFAMILY
Seattle
Seattle & Portland 2015 Investment Overview 51
2015 Seattle multifamily sales (10M+) overview
Driven by all-time peaks in employment and high wage earners flooding the marketplace, the Seattle
area is experiencing a seemingly insatiable demand for apartments
The Seattle metro rose to new heights in 2015. Driven by all-time peaks in employment and high wage earners flooding the marketplace, the area is experiencing a seemingly insatiable demand for apartments.
Seattle’s reputation as Cloud City and the Silicon Valley of the Northwest, coupled with a well-educated workforce, is attracting more and more firms to the market. Recent success is pushing others to increase their already strong presence within the region. Companies such as Amazon, Facebook and Expedia are expanding rapidly; Amazon growing its office footprint large enough to accommodate up to 70,000 employees; Facebook quadrupling its local headcount; and Expedia announcing plans to relocate to a waterfront campus with space for at least 3,000 employees. And this is just the beginning. Other traditional namesakes including Microsoft and Boeing continue to prosper, offering local job multipliers of 6.8 and 3.5, respectively. Nearly 100,000 people from out of state were issued drivers licenses in King, Snohomish and Pierce Counties in 2015, further illustrating the attraction of the Seattle MSA.
As population and job counts rise, the need for housing grows. An already restrictive “for sale” residential market puts extensive strain on the existing supply of apartment units. While the development pipeline may appear robust, it is still unlikely to meet projected demands in the near-term. Surging demand is also pushing rents up at a rate of 10.5 percent year-over-year, as compared to 6.4 percent nationally. Higher incomes, especially in the specialized fields of high-tech and bio-tech, are allowing landlords to adjust premiums upward during unit turns. New construction rents are also reaching new levels as they are still perceived as relatively inexpensive by out-of-state transplants.
The flight to affordability and early stages of the Millennial migration are also driving increased interest in Seattle’s suburban markets. This includes the Northend areas of Lynnwood, Bothell and Everett; the Eastside cities of Bellevue, Kirkland, Issaquah and Redmond; and Southend municipalities such as Renton, Kent, Federal Way and Tacoma.
Multifamily sales in the region were notable with $3.9 billion in closed deals during 2015 (for $10M assets and larger). The Premiere on Pine highrise apartments achieved the largest overall price, selling for $243,350,000. It also recorded the highest price per square foot at $784. The largest suburban trade was the Avana in Bothell. The transaction was completed for $143,327,000. New construction, mid-rise sales reestablished benchmarks during 2015 with Sunset Electric earning $650 a square foot in Seattle and The Luke reaching $507 a square foot on the Eastside. Cap rates remained relatively stable throughout the year, averaging close to 4 percent for Class A core assets. The overall market averaged cap rates of 4.5 percent to 5 percent.
With underlying fundamentals running strong, the outlook for 2016 and beyond remains exceptionally positive. The economic engines driving the Seattle metro continue to fire on all cylinders, and meaningful advancements on the job-front are announced on a regular basis with no signs of slowing down. This plays well for the multifamily market, where investors will reap the gains of a well-paid and renter-centric residential base.
52
Seattle multifamily sales & statistics
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of Sales 121 93 57 15 36 45 17 49 84 91
Highest Price/Unit $285,965 $407,083 $417,391 $211,957 $321,078 $350,000 $509,800 $690,583 $606,383 $636,192
CAP Rate Average 5.4% 5.1% 5.8% 6.4% 6.4% 5.8% 5.5% 5.1% 5.2% 4.9%
Sales Volume $2.0B $2.9B $1.6B $0.4B $0.9B $1.5B $2.7B $2.0B $2.8B $3.9B
Sales matrix (10M+)
SURGING DEMAND IS PUSHING RENTS UP AT A RATE OF 10.5 PERCENT YEAR-OVER-YEAR, COMPARED TO 6.4 PERCENT NATIONALLY
Seattle & Portland 2015 Investment Overview 53
Seattle multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Premiere on Pine
1525 9th Ave Seattle, WA
7/9/15 $243,350,000
$625,103
$784
386
2014
3.8% Heitman
Holland Partners
The Stack House
1280 Harrison St Seattle, WA
2/13/15 $150,500,000
$465,783
$607
278
2013
4.2% JP Morgan Asset Management
Vulcan
Dimension by Alta
225 Cedar St Seattle, WA
9/21/15 $144,000,000
$483,221
$749
298
2014
4.0% Heitman
Wood Partners
Avana 522
18101 126th Ave NE Bothell, WA
12/14/15 $143,327,000
$256,858
$292
558
1997
5.0% Blackstone Group
Greystar
Rollin Street Flats
120 Westlake Ave N Seattle, WA
2/9/15 $138,203,000
$636,192
$592
208
2009
4.2% Stockbridge Capital Group
Vulcan
Viktoria
1915 2nd Ave Seattle, WA
5/14/15 $130,000,000
$514,185
$720
249
2014
4.0% Benedict Canyon Equities
Goodman Real Estate
Resort at Forbes Creek
11110 Forbes Creek Dr Kirkland, WA
5/29/15 $128,000,000
$258,065
$314
496
1988
4.7% Greystar
Interland Corporation
Union: South Lake Union
905 Dexter Ave N Seattle, WA
6/22/15 $111,000,000
$382,447
$540
284
2013
4.0% TIAA-CREF
Holland Partners
5454
Seattle multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
One Thousand 8th Avenue
1000 8th Ave Seattle, WA
6/30/15 $93,000,000
$264,957
$435
351
1950
4.4% Sequoia Equities
Acacia Capital
Fairways
4901 Fairwood Blvd NE Tacoma, WA
10/30/15 $81,000,000
$148,624
$159
545
1989
5.4% Benedict Canyon Equities
Fairfield Residential
Taluswood
4208 236th St SW Mountlake Terrace, WA
8/31/15 $80,465,000
$157,158
$197
512
1986
5.2% Waterton Residential
Holland Partners
Verve
2720 4th Ave Seattle, WA
10/1/15 $78,000,000
$464,161
$685
161
2014
4.0% Clarion Partners
Columbia Pacific Advisors
Fulton’s Crossing and Landing
120 SE Everett Mall Way Everett, WA
10/8/15 $74,000,000
$146,825
$185
504
1989
5.2% Strata Equity
Archon Group
The Luke
8280 164th Ave NE Redmond, WA
10/28/15 $73,750,000
$354,567
$507
208
2015
4.4% Benedict Canyon Equities
Resmark
Firdale Village
9501 244th St SW Edmonds, WA
6/4/15 $69,100,000
$179,016
$218
386
1987
5.1% Intercontinental Real Estate
Eaton Vance Investment Mangement
Velo Fremont
3635 Woodland Park Ave N Seattle, WA
9/15/15 $65,075,000
$380,556
$612
171
2014
4.2% Greystar
Mack Urban
55Seattle & Portland 2014 Investment Overview 55
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Six Oaks
18333 Bothell Way NE Bothell, WA
10/15/15 $63,000,000
$293,126
$358
203
2014
4.6% Belkorp
MainStreet Property Group
Alley 24
241 Yale Ave N Seattle, WA
2/20/15 $58,200,000
$323,752
$450
172
2006
4.2% Greystar
Vulcan
Ray
3636 Stone Way N Seattle, WA
9/15/15 $54,450,000
$384,380
$593
137
2015
4.3% Greystar
Mack Urban
Old Town Lofts
16175 Cleveland St Redmond, WA
10/20/15 $52,697,000
$331,988
$464
149
2014
4.7% Equity Residential
WhiteCo Residential
Summit at Lake Union
1735 Dexter Ave N Seattle, WA
10/15/15 $48,500,000
$323,333
$430
150
1995
4.0% The Ezralow Company
Equity Residential
REO Flats
1525 14th Ave Seattle, WA
2/26/15 $47,100,000
$405,940
$642
108
2014
4.3% ASB Real Estate Investments
Madrona Real Estate
Olde Redmond Place
7001 Old Redmond Rd Redmond, WA
1/15/15 $47,000,000
$244,792
$293
192
1986
4.8% Gerson Bakar & Associates
Equity Residential
Berkshire
1300 Eagle Ridge Dr S Renton, WA
12/23/2015 $46,600,000
$170,073
$238
274
1979
5.1% MIG Real Estate
Holland Partners
56
Seattle multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Walden Pond
9900 12th Ave W Everett, WA
7/23/15 $46,500,000
$147,152
$152
316
1990
5.1% Starwood Capital Group
Holland Partners
Gates of Redmond
15325 NE Redmond Way Redmond, WA
1/15/15 $45,250,000
$251,389
$296
180
1984
4.9% Gerson Bakar & Associates
Equity Residential
Pine+Minor
1551 Minor Ave Seattle, WA
2/26/15 $43,000,000
$345,850
$599
120
2013
4.4% PrivatePortfolio Group
Gerding Edlen
Barclay / Broadway
412 Broadway Ave Seattle, WA
4/7/15 $42,000,000
$332,464
$519
118
2012
4.3% CalFox Real Estate Investments
Gerding Edlen
Sunset Electric
1111 E Pine St Seattle, WA
3/31/15 $41,750,000
$425,083
$650
92
2014
4.2% ASB Real Estate
The Wolff Company
Oakwood Seattle South Lake Union
717 Dexter Ave N Seattle, WA
7/29/15 $41,000,000
$404,000
$599
100
2013
4.0% Oakwood Worldwide
Mesirow Financial
Vue Kirkland
11733 NE 131st Pl Kirkland, WA
10/29/15 $40,975,000
$204,875
$346
200
1978
4.8% Acacia Capital
Pacific Urban Residential
Renton Woods
12000 SE Petrovitsky Rd Renton, WA
12/1/15 $40,500,000
$155,769
$177
260
1989
5.3% Abacus Capital Group
PASSCO Real Estate
Seattle & Portland 2015 Investment Overview 57
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Lenora
211 Lenora St Seattle, WA
6/16/15 $40,400,000
$348,843
$545
107
1999
* no cap rate - sold vacant
CWS Capital Partners
Unico
Somerset
25220 109th Ct SE Kent, WA
6/4/15 $40,350,000
$122,644
$152
329
1986
5.4% TruAmerica Multifamily
Fowler Property Acquisitions
Aperture on Fifth
206 5th Ave N Seattle, WA
7/15/15 $40,226,000
$379,491
$595
106
2014
4.1% PrivatePortfolio Group
L & P Partners
Waters Edge
6305 S 238th Pl Kent, WA
2/10/15 $40,200,000
$132,237
$150
304
1986
5.2% Security Properties
Holland Partners
Somerset Green
4249 129th Pl SE Bellevue, WA
11/30/15 $40,200,000
$398,020
$213
101
1986
4.9% Grosvenor
Carmel Partners
Seasons
3711 164th St SW Lynnwood, WA
1/14/15 $39,800,000
$174,561
$194
228
1988
4.9% The Guardian Life Insurance Company of America
Fairfield Residential
Vue
3261 SW Avalon Way Seattle, WA
12/1/15 $38,000,000
$342,342
$466
111
2014
4.6% CWS Capital Partners
Paragon Real Estate Advisors
Lakeside Landing
1414 S Mildred St Tacoma, WA
7/15/15 $37,700,000
$83,778
$107
450
1970
5.6% Hamilton Zanze & Company
Bianco Properties
58
Seattle multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Windsor
4415 NE 5th St Renton, WA
9/4/15 $36,750,000
$181,931
$188
202
1988
5.0% TruAmerica Multifamily
Fowler Property Acquisitions
Commons at Federal Way
190 S 334th St Federal Way, WA
12/11/15 $34,000,000
$130,769
$173
260
1980
5.4% TruAmerica Multifamily
Fowler Property Acquisitions
Green Leaf Skyline
3322 S 222nd Pl Kent, WA
9/16/15 $34,000,000
$177,083
$169
195
1984
5.0% Green Leaf Partners
Carmel Partners
Pearl
1500 E Madison St Seattle, WA
12/21/15 $33,500,000
$367,259
$550
80
2008
4.5% Equity Residential
Barrientos
Woodcreek
14611 Admiralty Way Lynvwood, WA
11/16/15 $33,100,000
$201,829
$199
164
2000
4.7% Rise Properties
Mosaic Homes
Deer Creek
6115 111th St E Puyallup, WA
10/14/15 $32,500,000
$126,953
$142
256
2000
5.7% Lowe Enterprises
Matteson Companies
Griffis Seattle South at Brookside
28700 34th Ave S Auburn, WA
7/22/15 $32,300,000
$182,486
$173
177
2004
5.6% Griffis Residential
Carmel Partners
Cypress Cove
1202 N Pearl St Tacoma, WA
12/30/15 $30,500,000
$92,424
$115
330
1987
5.8% ConAm
Then-Kui Liew
Seattle & Portland 2015 Investment Overview 59
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Madison at Alderwood Park
18031 36th Ave W Lynnwood, WA
9/29/15 $30,350,000
$161,436
$217
188
1982
5.0% TruAmerica Multifamily
Equus Capital Partners
Park Metro
11101 NE 12th St Bellevue, WA
2/2/15 $29,095,000
$352,500
$410
78
2014
4.5% Wilsey Management
Evergreen Point Development
Nickel Creek
3702 204th St SW Lynnwood, WA
10/8/15 $29,000,000
$151,042
$175
192
1986
5.3% Strata Equity Group
Archon Group
Waterbrook
10615 SE 250th Pl Kent, WA
9/22/15 $27,000,000
$142,857
$133
189
1981
5.3% Susan Lew
Security Properties
Brisa
12402 Admiralty Way Everett, WA
9/30/15 $26,365,000
$133,157
$161
198
1987
5.2% Thayer Manca Residential
Security Properties
Park 120
120 W Casion Rd Everett, WA
12/14/15 $25,500,000
$102,410
$130
249
1968
5.4% TruAmerica Multifamily
Fowler Property Acquisitions
19th & Mercer
526 19th Ave E Seattle, WA
12/16/15 $25,150,000
$430,855
$583
50
2014
4.6% Joe Mayer
Meriwether Partners
Row
25426 98th Ave S Kent, WA
8/13/15 $24,650,000
$99,798
$132
247
1981
5.5% Fowler Property Acquisitions
Sheng Real Estate Investments
60
Seattle multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Westwater
221 1st St Kirkland, WA
12/1/15 $24,600,000
$356,522
$351
62
2001
4.5% Security Properties
William A. Petter
Union
2111 SW 352nd St Federal Way, WA
8/13/15 $21,800,000
$89,344
$147
244
1985
5.3% Fowler Property Acquisitions
Sheng Real Estate Investments
Madison at Ridgegate
24808 100th Pl SE Kent, WA
9/24/15 $21,600,000
$141,176
$162
153
1990
5.3% TruAmerica Multifamily
Equus Capital Partners
Sheridan
2011 5th Ave Seattle, WA
1/16/15 $20,700,000
$363,158
$824
57
1914
N/A Chainqui Development of Taiwan
Aram Properties
Village at Lake Meridian
10925 SE 259th St Kent, WA
7/16/15 $19,000,000
$107,345
$133
177
1980
5.5% TruAmerica Multifamily
Fowler Property Acquisition
Eagle’s Landing
2201 104th St S Tacoma, WA
3/2/15 $18,500,000
$80,435
$88
230
1989
5.5% Goodman Real Estate
Michael J. Wensman
Avia
4702 176th St SW Lynnwood, WA
9/30/15 $18,250,000
$152,083
$175
120
1969
5.2% Green Leaf Partners
Carmel Partners
Emerald Place
3117 S 192nd St SeaTac, WA
11/18/15 $18,100,000
$115,287
$135
157
1967
5.5% Fowler Property Acquisitions
Olympic Investors
Seattle & Portland 2015 Investment Overview 61
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Cascadia Pointe
8710 5th Ave W Everett, WA
10/8/15 $18,000,000
$148,760
$157
121
1990
5.3% Strata Equity Group
Archon Group
Foster Creek
15110 McAdam Rd S Tukwila, WA
7/13/15 $17,700,000
$98,883
$129
179
1978
5.8% Investors Management Group
David M. Dufenhorst
Constellation
1455 S Puget Dr Renton, WA
12/11/15 $17,000,000
$128,788
$183
132
1985
5.4% TruAmerica Multifamily
Fowler Property Acquisitions
Maple Glen
5424 212th St SW Mountlake Terrace, WA
5/15/15 $17,000,000
$160,377
$201
106
1986
5.3% Hamilton Zanze & Company
Fairfield Residential
Mirabella
805 112th St SE Everett, WA
10/8/15 $16,500,000
$141,026
$133
117
1991
5.3% Strata Equity Group
Archon Group
Saratoga
11812 E Gibson Rd Everett, WA
10/8/15 $16,000,000
$149,533
$160
107
1989
5.1% Strata Equity Group
Archon Group
N-Habit Belltown
2217 3rd Ave Seattle, WA
9/30/15 $16,100,000
$304,174
$481
49
2014
4.5% Sares-Regis Group of Nor Cal
Daly Partners
Village at Juanita Beach (Starboard Apartments)
9311 NE 118th Ln Kirkland, WA
2/4/15 $15,650,000
$195,625
$208
80
1986
4.8% Mosaic Homes
George M. Glass
62
Seattle multifamily sales (10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Woodside (The Argyle)
2517 S 316th Ln Federal Way, WA
6/9/15 $15,500,000
$96,875
$125
159
1984
5.3% Fowler Property Acquisitions
William Y. Kwan
Luna Sol
11415 Slater Ave NE Kirkland, WA
10/23/15 $14,430,000
$277,500
$334
52
2010
4.6% Sidhu Enterprises
Eric Campbell
Cedardale
2501 SW 336th St Federal Way, WA
5/22/15 $13,675,000
$108,532
$145
126
1982
5.3% Pathfinder Partners
Bianco Properties
Latitude
12907 E Gibson Rd Everett, WA
1/20/15 $13,550,000
$125,463
$168
108
1986
5.4% Friedkin Realty Group
Security Properties
Midtown Lofts
1142 Fawcett Ave Tacoma, WA
9/3/15 $13,500,000
$259,615
$237
50
2011
5.2% John Evilsizor Realty
O’Connor & Associates
Aravia
2300 Brookdale Rd E Tacoma, WA
5/14/15 $13,200,000
$114,783
$106
115
2001
5.6% Hamilton Zanze & Company
Envizage Development Group
BLVD
2136 S 272nd St Kent, WA
8/13/15 $12,950,000
$95,926
$132
135
1986
5.2% Fowler Property Acquisitions
Sheng Real Estate Investments
Steeplechase
8311 83rd Ave Ct SW Lakewood, WA
7/30/15 $12,230,000
$90,593
$108
135
1992
5.8% Fowler Property Acquisitions
Spinnaker Management
Seattle & Portland 2015 Investment Overview 63
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Lighthouse
10710 SE 256th St Kent, WA
7/16/15 $11,500,000
$151,316
$164
76
2002
5.2% TruAmerica Multifamily
Fowler Property Acquisitions
Pointe East
2524 62nd Ave E Fife, WA
2/11/15 $11,400,000
$91,935
$108
124
1986
5.6% Hamilton Zanze & Company
John M. Miller
1800 Eastlake
1800 Eastlake Ave E Seattle, WA
3/31/15 $11,000,000
$314,286
$456
30
1999
4.4% Luke K. Snyder
Su Development
Pinewood Village
33311 18th Ln S Federal Way, WA
3/16/15 $10,800,000
$104,854
$113
103
1989
5.4% Carl D. Barnes
John Chan
Evergreen
1111 47th St SE Everett, WA
4/20/15 $10,700,000
$89,167
$127
120
1990
5.6% Abacus Capital Group
Williams Investment
Mariner Court
133 124th St SE Everett, WA
4/30/15 $10,600,000
$113,978
$136
93
2000
5.5% Sidhu Enterprises
Inland Group
Madison Court
1922 42nd Ave E Seattle, WA
10/16/15 $10,500,000
$375,000
$449
28
1988
3.3% Derby Holding
Madison Court
Amara
124 N 103rd St Seattle, WA
12/21/15 $10,300,000
$183,929
$258
47
1990
3.8% Weidner Apartment Homes
Civetta Properties
64
Seattle multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Rivergrove (The Retreat)
7413 142nd Ave E Sumner, WA
1/9/15 $10,250,000
$77,652
$92
132
1976
5.8% Goodman Real Estate
James K. Pease
Puget Vista
411 W Republican St Seattle, WA
3/31/15 $10,150,000
$298,529
$360
34
1967
4.7% Tierra Group
The Stratford Company
Corinthian
3039 S 154th St SeaTac, WA
6/30/15 $10,120,000
$106,526
$146
95
1968
5.5% Housing Authority of King County
Kauri Investments
PORTLAND
PORTLAND
Market Overview
Continued economic growth and overall strengthening market fundamentals continue to solidify Portland as a market with yield and value for institutional investors. Employment in the metro area grew by 41,600 new positions in 2015, representing robust growth of 3.7 percent and the largest annual growth since the early 90’s. Economic expansion has been diverse with both office and industrial using firms. Portland continues to garner outsized attention from national media outlets touting the amazing quality of life, foodie scene and relatively affordable cost of living. The reality of what Portland has to offer is finally soaking in and businesses and real estate investors around the country are reacting.
In migration of the sought-after young and highly educated to Portland is driving job growth in the high tech sector as employers increasingly follow the talent. While pricing is escalating across all property types, Portland remains a relative bargain compared to its West Coast neighbors, both in terms of cost of living and in terms of cost of doing business. Perhaps growth in the Portland market can best be explained by one of the CEO’s of a tech firm that has recently elected to expand its Portland area presence; “We hired people from all over the country and gave them the choice between living in San Francisco or Portland. 100% chose Portland.”
OFFICEINDUSTRIALRETAILMULTIFAMILY
Portland
Title right
68
Seattle & Portland 2015 Investment Overview 69
2015 Portland office sales ($10M+) overview
Strong sales volume surpasses all years except 2007
The year 2015 saw total office sales surpass $1 billion for the first time since 2007, with institutional investors playing an increasingly active role. The market saw 21 transactions over $10 million take place during the year for a total of $1.077 billion in investment activity, an increase of 69 percent over 2014. Over the year investors pursued core assets in the CBD and core plus and value add assets in both the CBD and suburban submarkets. Institutional investment continues to look for opportunities in Portland as the city’s strong fundamentals and somewhat higher cap rates move the city from being a place of interest to a destination for institutional investors.
Enticed by the CBD’s solid market fundamentals, investors were highly motivated as trophy downtown assets came to market. In the largest single building sale ever recorded in Portland, LaSalle Investment/Unico sold the US Bancorp Tower to UBS/Unico in the third quarter. The sale set the year’s high mark for both single asset price and total square footage at $372.5 million and 1,100,707 square feet, respectively. The sale posted a strong cap rate of 4.9 percent. Also in the third quarter, Starwood and Kaufman Jacobs sold Block 300 to Prudential for $155 million with a cap rate of 4.4 percent on 87 percent occupancy at the time of sale. The building had recently undergone a significant lobby remodel repositioning to capture tech tenants. Additionally, Block 300 benefitted from significant government leasing with long term leases at very healthy rents. Also downtown, Overton Pearl sold to Empire Square Group with backing from Middle-East investment funds, setting the market’s high water mark for price per square foot at $499. WDC Properties sold the building for a total of $30.9 million with a 6.0 percent cap rate.
While the fundamentals of Portland’s rising real estate market brought value to well performing assets, these same fundamentals pushed investors to the city’s numerous value-add assets. CH2M
Center sold late in the second quarter with an occupancy rate of 79 percent. In 2012, the asset was fully leased when it was purchased by SKB and Wayzata Investment Partners for $38.7 million with a cap rate of 8.8 percent. This most recent transaction saw Wayzata/SKB sell the asset to Goldman Sachs/SKB for $55 million with a cap rate of 4.9 percent as SKB recapitalized. The comparatively low occupancy level holds value-add potential for the new owner, allowing them to capture rising market rents and demand for urban office space. KOIN Center sold early in 2015 for $88 million. The asset was purchased by SKB/Prudential from APIC with an 84 percent occupancy rate and a 4.4 percent cap rate. The asset last sold in 2012, when APIC purchased it from New York Life for $57 million with a 6.7 cap rate and 79 percent occupancy rate. The new owners have initiated plans to renovate the lobby and reposition the building to capture creative tenant demand in the area. Finally, One Pacific Square sold early in the year with an occupancy rate of 92 percent. The deal saw new market entrant, Menlo Equities purchase the asset for $48.5 million, representing a 13 percent increase over the 2006 purchase by Ashforth/GE Capital.
Of the year’s 21 transactions, nearly half (nine) took place in the suburbs. Early in the year, Blackstone purchased $3.3 billion in US real estate assets from GE Capital which included two properties in the Portland metro area. Rock Creek Corporate Center traded at an allocated $23 million and $160 per square foot and Sunset Corporate Park traded for $22 million and $165 per square foot. The most intriguing suburban deal in 2015 saw Zurich Alternative Asset Management purchase the fully stabilized Summit Building for $13.2 million with a cap rate of 6.8 percent from Prudential, demonstrating the increasing interest in stabilized suburban assets. Several other suburban assets came to market in 2015 but will close in the first quarter of 2016, adding to the activity in the suburbs.
70
Robust demand propels market to top of national heap
Portland’s office market saw 783,626 square feet of net demand in 2015, close to 20 percent higher than the 10-year historical average for net absorption, pushing market vacancy to a new historical low. Portland has seen five consecutive years of above average demand, while construction deliveries have been significantly below average until this year. This office market momentum has pushed vacancy to the new low of 8.9 percent. Portland now boasts the third lowest metro area vacancy of all major markets tracked by JLL, behind Salt Lake City, Nashville, and San Francisco. Demand for office space in Portland continues to be driven by technology firms, with more than 22 percent of all leasing activity attributed to high-technology and information. Market improvement was diverse, and the suburban areas demonstrated solid demand accounting for 33 percent there. Large spaces remained scarce and the scarcity drove users to protect their positions by renewing early and signing leases in office space to be delivered over the next 18 months.
Rents in the Portland market have increased notably over the past year, with overall metro area rents jumping 9.3 percent in 2015, compared to an average annual rent growth of 3.2 percent over the past 10 years. Market-wide Class A rents increased 6.6 percent year-over-year, with CBD Class A rents easily surpassing the $30 mark and now standing at $31.26, the highest level ever seen in the area. Class B rents in the CBD are also showing increasing momentum, with year-over-year rent growth of 15.4 percent for 2015. Strong demand from creative users is instrumental in driving this rental rate growth. Building class has become increasingly irrelevant and secondary to the amenities and finishes sought-sought after by creative users. Creative users have therefore had a significant impact on how owners are repositioning their buildings and driving a strong shift in office market preferences for amenities. Those amenities must now include a fitness center with shower facilities, bike storage/spa with repair facilities, conferencing, curated retail, community spaces and outdoor spaces.
The construction pipeline has filled considerably in the past year with 1.5 million square feet of office product currently under construction (with all but one of the projects being speculative and in the Central City). The market had 887,648 square feet in the pipeline at the end of 2014. Deliveries are up as well with 477,490 square feet delivering in 2015, compared with just 123,050 in 2014. A large amount of development is in the form of redevelopment, as developers look to capitalize on well-located, but functionally obsolete buildings which appeal to the growing number of expanding creative and high-tech firms in Portland. Large projects including Park Avenue West, Pearl West, and The Oregonian are expected to deliver in early 2016, which will add substantial supply to the CBD inventory. However, almost 50 percent of the product delivering in the CBD is already committed to tenants.
The Westside suburbs have been in growth mode for the past three years and vacancy has improved dramatically. With Westside suburban vacancy now sitting at 11.3 percent, the market has seen a strong recovery, dropping 60 basis points in the past year and 200 basis points since 2013. This has led to Class A rental rate increases of 4.2 percent year-over-year, with Sunset Corridor Class A up 5.3 percent over the same timeframe. Rents are far from justifying any new construction in the suburbs, so expect rents to jump considerably before any suburban speculative construction is contemplated.
Driven by the high price of new construction, expect rental rates to continue their ascent as properties deliver to the market. Vacancy will likely bump up slightly when deliveries hit the market, but is not expected to rise beyond 9.3 percent for the metro area, with the CBD likely seeing vacancy modestly higher. Institutional investment in the market will continue to drive the trend of re-positioning buildings; particularly for Class A buildings with vacant space, as new owners try to capture creative demand. This will further push rental rate growth in the market.
Portland office leasing
Seattle & Portland 2015 Investment Overview 71
Portland office sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF
Central City 25,179,658 6.7% $29.60 368,265
Eastside 6,267,741 7.7% $20.98 159,494
Westside 20,912,731 11.3% $23.14 135,713
Vancouver Suburbs 6,339,404 10.4% $19.87 120,154
2015 Total Market 58,699,534 8.9% $24.59 783,626
2014 Total Market 59,281,808 9.5% $22.22 1,373,669
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of Sales 14 28 9 5 5 5 9 14 18 21
Price/SF Highest $275 $442 $271 $159 $197 $356 $443 $399 $460 $496
CAP Rate Average 7.1% 6.7% 7.1% 7.6% 8.4% 7.4% 8.3% 7.3% 7.2% 5.6%
Sales Volume $702M $1.8B $518M $180M $200M $282M $247M $437M $638M $1.0B
Office market statistics
Sales matrix (over $10 million)
72
Portland office sales ($10M+)
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
US Bancorp Tower
111 SW 5th Ave Portland, OR
8/26/15 1,100,707
1983
$372,500,000
$338
4.9% TPF Equity REIT (UBS)
LaSalle Investment Mgmt/Unico
• CBD Core asset
• Partial Interest Sale – Unico is maintaining 2-3% share
• 94% leased at time of sale
• Major tenants include US Bank, WebTrends, New Relic, Survey Monkey
Block 300
308 SW 2nd Ave Portland, OR
8/4/15 365,560
1991
$155,252,000
$424
4.4% Prudential
Starwood/
Kaufman Jacobs
• CBD Core asset
• 6.3% cap on year 3 stabilized
• 87% leased at time of sale
• Major Tenants include Aruba, Army Corps of Engineers & Puppet Labs
KOIN
222 SW Columbia St Portland, OR
1/23/15 355,705
1984
$88,000,000
$247
4.8% SKB/Prudential
American Pacific International Capital
• Off Market Deal
• CBD Core asset
• Cap based on in-place income
• 83% leased at time of sale
• New owners plan to invest in lobby upgrades and reposition building
CH2M Center
2020 SW 4th Ave Portland, OR
5/5/15 221,037
1982
$55,000,000
$248
4.5% Goldman Sachs/SKB
SKB/Wayzata Capital
• 78% leased at time of sale
• Asset located on fringe of CBD
• Major Tenants, CH2M Hill & LifeWise Health Plan of Oregon
• Off market transaction
One Pacific Square
220 NW 2nd Ave Portland, OR
1/20/15 240,338
1983
$48,500,000
$202
6.9% Menlo Equities
Ashforth/GE Capital
• 92.3% leased at time of sale
• Menlo plans to invest capital to upgrade lobby and capture rent growth
• NW Natural Gas occupies 71% of building with expiration in 5/20
Seattle & Portland 2015 Investment Overview 73
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
The Everett Bldg
121 NW Everett St Portland, OR
9/30/15 107,000
1999
$47,300,000
$442
6.2% NWEA
Washington RE Holdings
• Cap rate is an estimate
• Owner/User purchased building
• 100% occupied at time of sale by NWEA
• Property included above market parking of 1.8/1000 & 193 stalls
White Stag Block
24 NW First Ave Portland, OR
11/1/15 137,559
2008
$42,600,000
$310
N/A University of Oregon Foundation
Venerable Properties
• Owner/User purchased building
• University of Oregon occupied 67% of building at time of sale
2100 River Parkway
2100 SW River Pky Portland, OR
1/30/15 96,266
1995
$35,350,000
$367
6.6% BDC Advisors
CalSTERS/Clarion
• 100% leased at time of sale
• Off market transaction
Overton Pearl
1455 NW Overton St Portland, OR
1/23/15 62,300
2011
$30,890,000
$495
6.0% Empire Square Group
WDC Properties
• 100% leased at time of sale
• Major tenant is GSA - leasing 62% with 10+ years remaining on term
• LEED Platinum Certified
GE Portfolio Sale
Sunset Corporate Park
22823 NW Bennett St Hillsboro, OR
Rock Creek Corp Ctr
3400 NW John Olsen Pl Hillsboro, OR
7/15/15 133,221
1998
144,031
1999
$22,000,000
$165
$23,000,000
$160
6.4%
7.0%
Blackstone
GE Capital
• Part of $3.3B portfolio sale that totaled 181 buildings
• OR portion consisted of 2 parks with 6 buildings totaling 277,252 SF
• Cap rates are estimates
74
Portland office sales ($10M+)
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
West End Building
4101 SW Kruse Way Lake Oswego, OR
7/15/15 88,872
1980/2003
$20,100,000
$226
N/A Yakima
City of Lake Oswego
• Owner/User purchased building
• Yakima will remodel building and will occupy 65,000 SF initially with plans to grow into balance
Riverview Tower
900 Washington St Vancouver, WA
8/31/15 163,853
1991
$18,750,000
$114
N/A Al Angelo Co
Cana Realty Group
• 97% leased at time of sale
• No major tenants in building
• Seller was distressed at time of sale
• Pre-negotiated sale price
New Market Theatre Block
115 SW Ash St Portland, OR
7/1/15 86,254
1871/1984
$15,500,000
$179
5.5% Swift Real Estate Partners
Beardsley
• 70% leased at time of sale
• Historic, Class C building
• Buyer plans on major renovations and potential future development on site
OGI Campus
2000 NW Walker Rd Hillsboro, OR
4/30/15 270,000
1987
$15,100,000
$56
N/A Southwest Value Partners
Criteria Properties
• Sale includes 40-acre campus with 15 buildings and 270,000 SF of office and lab space
• Included Bronson Creek office building (85,000 SF)
Mason Ehrman Building
222-234 NW 5th Ave Portland, OR
1/8/15 90,000
1940/2001
$14,500,000
$161
N/A GAW Capital/Downtown Properties
Kalberer
• Two buildings - 80,000 SF office and 30,000 SF warehouse (included 20,000 SF of basement)
• PDC is major tenant (60,000 SF) with 10+ years remaining
• Bought for redevelopment potential of warehouse
Seattle & Portland 2015 Investment Overview 75
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate
BuyerSeller
Comments
Tidewater Cove Offices
5101-5721 SE Columbia Way Vancouver, WA
10/15/15 66,000
2004
$14,300,000
$216
6.9% Beardsley Development
Linda Hickey
• 100% leased at time of sale
• 1031 exchange
The Summit Building
1260 NW Waterhouse Ave Hillsboro, OR
6/8/15 72,109
1995
$13,200,000
$183
6.8% Zurich Alternative Asset Management
Prudential
• 100% leased at time of sale
• Major tenant is Columbia Sportswear
Block 90
322 NW 14th Ave Portland, OR
5/12/15 48,058
1939/2007
$12,900,000
$268
6.5% HP Investors
Vallaster
• 100% leased at time of sale
• Sale includes office and retail portion, not residential condos
4550 Macadam Bldg
4550 SW Macadam Ave Portland, OR
9/29/15 54,616
1956/1993
$12,250,000
$224
6.0% Kensington Management
Macadam Partners
• 100% leased at time of sale
• Off market transaction
Under Armour
2815-2831 SW Barbur Blvd Portland, OR
4/21/15 68,698
1977
$10,000,000
$145
N/A Rob Brewster
Watumull/Winkler
• Former All Star Fitness being re-developed into office for Under Armour
• Vacant at time of sale
Durham Plaza
16650 SW Upper Boones Ferry Rd Portland, OR
5/15/15 41,821
1962/1980
$10,000,000
$239
6.2% Kalberer Co.
Durham Plaza, LLC
• Major Tenant: Lanier Worldwide
• 97% leased at time of sale
OFFICEINDUSTRIALRETAILMULTIFAMILY
Portland
78
2015 Portland industrial sales ($10M+) overview
Sales volume up, deliveries in mid stride
Sales volume for industrial product jumped to over $730 million in 2015, more than double the volume sold in 2014 and more than 600 percent of the volume the market has averaged during the previous seven years. Of the sales in 2015, $627 million in 8 transactions were institutional investments while the remaining transactions were owner/user or local acquisitions. Deliveries are beginning to surge, particularly in the NE Columbia Corridor, and owners are seeing this as a sign of a peak in asset value, leading to an increase in properties hitting the market.
Strong demand from institutional investors has led to cap rate compression, particularly for premium assets. While the average cap rate for trades in 2014 was 7.1 percent, the number dropped to 6.2 percent in 2015. Though 2014 brought the first transaction with a sub 6.0 percent cap rate in recent history, 2015 saw all but two of the institutional transactions include a sub 6.0 percent cap rate. The third quarter acquisition of Kelley Point Distribution Center by Industrial Property Trust for $73.5 million from Bentall Kennedy included the year’s lowest cap rate of 5.4 percent. Rents are rising quickly in Portland which is leading to cap rate compression. Portland saw two substantial portfolio sales take place; IndCor Properties portfolio, consisting of 2.9 million square feet in 44 buildings and, the Industrial Income Trust portfolio consisting of over 1 million square feet in eight properties. The IndCor Properties portfolio had the year’s highest price tag at $253.3 million (allocated) and was purchased by GIC/Global Logistics Properties with a 6.0 percent cap rate. The Industrial Income Trust portfolio sold for $110.6 million in the fourth quarter to Global Logistics Properties with a 5.6 percent cap rate.
The strong demand from institutional investors seems to have priced owner/users out of the market and limited the number of assets captured by local investors. While 2014 saw 35 percent of sales volume go to owner/users, that activity was severely reduced in 2015 with only one property over $10 million going to an owner/user, representing less than 3 percent of sales volume for the year. Local investors also remained active in the Portland market, but were limited in their ability to capture assets, with just two sales going to local and regional groups. Harsch Investment Properties expanded their local holdings by over 700,000 square feet with the purchase of the Parkside Business Center for $73.5 million from Deutsche Bank. The transaction included 33 buildings and 7 storage structures, and had an occupancy rate of 93 percent. The 101,578 square foot Milwaukie Business Park was sold by PS Business Parks to Pacific NW Properties for $10.9 in the first quarter. The flex park had an occupancy rate of 97 percent.
Leading up to 2015, Portland had seen a limited number of quality assets come to market. As market fundamentals strengthened during the year, however, multiple large transactions took place. The area’s economy is forecast to maintain its strength over the next several years and new developments are stabilizing quickly in Portland’s heated industrial market; as such, expect continued heightened interest by local and institutional investors alike, as the potential for future value remains strong.
SALES VOLUME JUMPED TO OVER $730 MILLION IN 2015, MORE THAN DOUBLE THE VOLUME SOLD IN 2014 AND MORE THAN 600 PERCENT OF THE VOLUME THE MARKET HAS AVERAGED DURING THE PREVIOUS SEVEN YEARS.
Seattle & Portland 2015 Investment Overview 79
Portland industrial leasing
Construction volumes up to meet strong demand
Portland’s traded-sector economy supports a strong and vibrant industrial market and includes traded sector clusters such as active apparel companies, electronics manufacturers, food and beverage, and “clean” technology companies. A “traded-sector” economy is defined as one where goods and services are used outside the region. Area manufacturers contribute significantly to Portland’s traded sector economy and computer and electronic manufacturing dominate the area. The industrial supersectors which include trade, transportation & utilities, manufacturing and construction, are all performing strongly with each sector showing employment growth in the range of 3 percent. This strong industrial employment growth has been driving demand for-and construction of-new industrial product.
Metro area net absorption has historically averaged 2.2 million square feet on an annual basis with construction averaging 2.0 million square feet. 2015 saw the market absorb 4.3 million square feet with 2.9 million square feet delivering, far surpassing 2014 numbers and historic averages. Metro area vacancy dropped to its lowest level in over 30 years, now sitting at 3.8 percent. Industrial leasing volume was strong during the year and market activity sustained the growth seen in the second half of 2014. Growth has been driven by a wide range of industries, as the market has started to diversify its industrial base. In addition to
computer and electronics manufacturing and distribution, the area saw robust demand from food and beverage distribution companies as well as auto and auto-related firms. The area has also seen a surge in activity from third party logistics providers driven by strong millennial population growth as Portland continues to be a favorite destination of in migrating young and educated workers.
The market is seeing significant new construction break ground. 2014 saw 2.2 million square feet of deliveries; 2015 saw 2.9 million square feet deliver; and there are currently 2.0 million square feet of warehouse/distribution and manufacturing space under construction. There are also many known projects set to begin in the first quarter of 2016. 2015 saw many prominent developments deliver, including Specht’s Interstate Crossroads at 492,544 square feet and Holland Partner Group’s Cameron Distribution Center at 320,795 square feet. This new development activity demonstrates confidence in demand in the NE/Columbia Corridor. Shovel-ready industrial land is in very limited supply within Portland’s urban growth boundary, and this barrier to entry should continue to keep new supply in check. While average asking rents ended 2015 down imperceptibly from 2014, asking rents for new product has bumped up considerably, driven by new institutional owners and new construction pricing.
2015 SAW 2.9 MILLION SQUARE FEET DELIVER; AND THERE ARE CURRENTLY 2.0 MILLION SQUARE FEET OF WAREHOUSE/DISTRIBUTION AND MANUFACTURING SPACE UNDER CONSTRUCTION
80
Portland industrial sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption (RSF)
Eastside 90,930,627 3.7% $0.48 2,426,025
Westside 60,347,184 3.5% $0.54 1,766,365
Clark County 16,213,468 4.0% $0.52 146,870
2015 Total Market 167,491,279 3.8% $0.50 4,339,260
2014 Total Market 164,980,769 4.8% $0.51 2,699,116
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of Sales 13 17 5 1 1 2 5 5 15 11
Price/SF Highest $207 $156 $112 $52 $59 $44 $63 $95 $133 $153
CAP Rate Average 7.8% 6.9% 7.0% 9.5% 9.2% N/A 7.4% 7.4% 7.1% 6.2%
Sales Volume $454M $377M $84M $40M $28M $32M $173M $103M $320M $732M
Industrial market statistics
Sales matrix (over $10 million)
Seattle & Portland 2015 Investment Overview 81
Portland industrial sales ($10M+)
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate BuyerSeller
Comments
IndCor Portfolio
(11 parks)
158th Com Ctr
15929 Cameron Blvd
Park 217 Business Ctr
11950 SW Garden Pl
Yeon Business Ctr
3315 NW 26th Ave
Airport Business Ctr
7002 NE 79th Ct
Airport Way Com Park
14105 NE Airport Way
Argyle Industrial Park
2321 NE Argyle St
Cascade Business Ctr
10575 SW Cascade Blvd
Nelson Business Ctr
14344 SW 72nd Ave
Swan Island Indust Ctr
3002 N Wygant
Southwest Com Ctr
7500 SW Tech Ctr Dr
Wilsonville Dist Ctr
29555 SW Boones Ferry Rd Portland, OR
2/27/15 2,904,178
Various
380,930
256,530
218,976
230,248
205,000
104,160
159,411
402,410
85,840
93,750
766,923
$253,300,000
$87
$33,700,000
$36,800,000
$15,400,000
$25,300,000
$20,600,000
$19,000,000
$9,200,000
$32,900,000
$7,100,000
$8,500,000
$44,800,000
6.1% GIC (Govt of Singapore) / GLP (Global Logistics Properties)
IndCor Properties
• Part of a larger, national $8.1 billion portfolio
• Pricing is based on allocation
82
Portland industrial sales ($10M+)
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate BuyerSeller
Comments
Global Logistics Portfolio
(3 parks)
Northgate Industrial Ctr
5409 N Marine Dr
Foster 205 Com Ctr
11411 SE Foster Rd
Southshore Com Ctr
4122 NE 185th Dr Potland, OR
11/15/15 1,131,878
Various
131,500
272,146
728,232
$110,600,000
$98
$13,100,000
$26,900,000
$70,600,000
5.6% GLP (Global Logistics Properties)
Industrial Income Trust
• 100% leased at time of sale
• Part of a 295 property national transaction
Parkside Business Center
7721-8360 SW Nimbus Beaverton, OR
3/31/15 735,073
1981
$73,550,000
$100
6.8% Harsch Investment Properties
RREEF
• 33 buildings and 7 storage structures
• 93% leased at time of sale
Kelley Point Distribution Center
15925 N Lombard St Portland, OR
9/1/15 1,034,500
2000
$73,500,000
$71
5.4% Industrial Property Trust
Bentall Kennedy
• 95.1% leased at time of sale
Northwest Corporate Pk
3571-3599 NW Yeon Ave Portland, OR
9/17/15 678,026
1970-1975
$58,200,000
$86
6.9% Prologis
CalSTRS
• 10 building industrial park
• 97% leased at time of sale
• Off market transaction
Tualatin Corporate Center
19701 SW 95th Pl Tualatin, OR
4/1/15 401,688
1990-1996
$36,100,000
$91
5.6% Stockbridge
Crow Holdings
• 94% leased at time of sale
• 7-building Class A quality park on 25.6 acres
Seattle & Portland 2015 Investment Overview 83
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate BuyerSeller
Comments
Parkway Woods Business Park
26600 SW Parkway Ave Wilsonville, OR
12/2/15 581,513
1975
$32,700,000
$56
7.5% SKB
Xerox Corporation
• 53% vacant at time of sale
• 3 Buildings
• Xerox leased back 184,000 square feet
Birtcher Center @ Townsend Way
22637-23070 NE Townsend Way Fairview, OR
7/15/15 397,934
2007
$34,500,000
$87
5.7% Invesco
Cornerstone RE Advisors
• 3 building park
• 88% leased at time of sale
FedEx
6447 N Cutter Cir Portland, OR
12/16/15 212,015
2015
$32,417,015
$153
5.8% Cordia Capital Mgmt
Setzer Properties
• Sale Lease Back
• 100% leased at time of sale
• Off market transaction
Ogden Business Center
2200 NE 65th Ave Vancouver, WA
9/1/15 214,427
1975
$18,050,000
$84
N/A Educational Service District
Christensen Group
• 5 buildings
• 100% leased at time of sale
• Owner/user transaction
• Educational Service District occupies 3 of 5 buildings
Milwaukie Business Park
4020-4160 SE International Way Milwaukie, OR
2/13/15 101,578
1982
$10,900,000
$107
8.2% Pacific NW Properties
PS Business Park
• 97% leased at time of sale
• Incubator/flex park
Seattle & Portland 2015 Investment Overview 85
Portland
OFFICEINDUSTRIALRETAILMULTIFAMILY
86
2015 Portland retail sales ($10M+) overview
Investment sales surge as cap rates decline
Institutional interest in Portland area retail properties remained strong in 2015, driven by solid population and economic growth and favorable regional demographics. While institutional interest had been growing over the previous two years, 2015 set a new benchmark with institutional investment, helping push total retail real estate sales over $1 billion for the first time in Portland’s history. The year’s total volume represents a 57 percent increase over 2014 with neighborhood centers being the most sought-after property type. Super regional malls saw significant activity during the year with both the Washington Square Mall and Wesfield Vancouver Mall changing hands. In the fourth quarter, GIC Real Estate purchased Washington Square Mall from The Macerich Company for $485.2 million. Also in the fourth quarter, USAA Real Estate/Blum Capital/Centennial Real Estate Company purchased the Westfield Mall in Vancouver for $169.8 million from the Westfield Group. Both super regional malls had strong occupancy at the time of sale and were part of much larger multi-state portfolio transactions. Overall pricing has escalated, with the average price per square foot jumping to $282, up 10.8 percent year-over-year but not yet back to the market peak of 2006 when average pricing was $311 per square foot. Cap rates have compressed again this year, dropping to 6.6 percent, their lowest level since 2008 and down from 7.3 percent in 2014.
Grocery-anchored shopping centers dominated investor activity as the Haggen bankruptcy led to numerous transactions with Albertsons, Safeway and Haggen’s. The deal had a per-square foot basis of $223 and a 7.5 percent cap rate. Other active buyers included Retail Opportunity Investments Corp, who purchased the Johnson Creek Shopping Center, Tigard Promenade, Sunnyside Village and the Tigard Safeway, and Seritage Growth Properties, who bought Sears at Washington Square Mall and Clackamas Town Center as part of a much larger portfolio sale. Early in the third quarter, Spirit Realty Capital purchased three Albertson stores directly from the operator for $26.8 million. Albertsons will lease the stores back from Spirit.
2015 SET A NEW BENCHMARK WITH INSTITUTIONAL INVESTMENT, HELPING PUSH TOTAL RETAIL REAL ESTATE SALES OVER $1 BILLION FOR THE FIRST TIME IN PORTLAND’S HISTORY.
Seattle & Portland 2015 Investment Overview 87
Portland retail leasing
Strong demographics propel retail market
Portland remains a destination for the young and educated as millennials continue to move to the area in search of quality of life and affordability. A recent national retail study ranked Portland area retail sales up the most of all major metro areas in the US, up 9.2 percent, while US average sales were up just 1.8 percent. These sales have been driven by Portland’s above-average population growth and outstanding job growth. The market’s reputation as a tech-center continues to be a draw, Oregon was the number one destination for US migration again this year, with the highest number of new residents coming from California. Further proof of Portland’s economic prowess came in its number eight ranking of best performing large metro’s from the Milken Institute’s 2015 release. The report calls out Portland’s solid job and wage growth as well as its strong concentration in the high tech sector. While this growth has been a boon to the local economy in the form of increased retail sales, it has also had a significant impact on the area’s affordability with housing prices up more than 14 percent in 2015.
The strong growth of the millennial cohort has had a significant impact on the Portland retail market as this demographic has a demonstrated preference for urban living, and retail is following
rooftops. As multifamily construction has exploded in Portland’s urban neighborhoods, so has the street level retail that is being built with these projects. The move toward urbanization is leading people to move back into cities in search of a shorter commute, walkable communities, and a live-play-work environment. This is also leading to significantly more mixed-use urban residential development with storefront/urban retail space designed to meet the needs of these residents.
Portland’s retail market saw solid improvement in 2015 with strong net absorption coming in at over 700,000 square feet, pushing vacancy to 4.6 percent, down 40 basis points from 2014. While average asking rents fell 15 percent during Portland’s downturn, they have been rebounding for the past three years, regaining 3.3 percent during 2015. Construction remains minimal, with just over 800,000 square feet delivering to the market during the year. This could present a challenge for expanding retailers, since vacancy is already at pre-recession levels.
A RECENT NATIONAL RETAIL STUDY RANKED PORTLAND AREA RETAIL SALES UP THE MOST OF ALL MAJOR METRO AREAS IN THE US, UP 9.2 PERCENT WHILE US AVERAGE SALES WERE UP JUST 1.8 PERCENT.
88
Portland retail sales & statistics
Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF
CBD 4,773,902 4.3% $19.69 -57,365
Clark County 18,447,034 6.7% $16.90 342,672
I-5 Corridor 10,895,411 4.0% $21.61 121,787
Lloyd District 5,437,468 6.1% $15.76 -124,225
Northeast 20,421,444 4.4% $17.35 119,777
Northwest 1,833,949 3.6% $21.45 122,920
Southeast 22,339,792 3.9% $15.86 134,674
Southwest 13,601,139 3.8% $18.16 74,252
Westside 9,568,828 3.7% $18.30 -28,780
2015 Total Market 107,318,284 4.6% $17.42 705,712
2014 Total Market 105,945,347 4.8% $16.86 1,081,265
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of Sales 13 14 6 4 9 4 5 9 13 20
Price/SF Highest $393 $633 $636 $173 $328 $209 $533 $405 $564 $643
CAP Rate Average 6.8% 6.5% 6.6% 8.5% 7.9% 9.7% 6.4% 7.4% 7.3% 6.6%
Sales Volume $322M $383M $93M $89M $311M $70M $151M $677M $668M $1.0B
Retail market statistics
Sales matrix (over $10 million)
Seattle & Portland 2015 Investment Overview 89
Portland retail sales ($10M+)
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate BuyerSeller
Comments
Washington Square Mall
9301 SW Washington Square Rd Tigard, OR
11/2/15 1,443,000
1974/2005
$485,206,752
$336
N/A GIC Real Estate
The Macerich Company
• Part of $1.2B portfolio sale
• 97% leased at time of sale
• Major tenants Nordstrom, Macys, and Dick’s Sporting Goods
• Price is allocated
• Partial interest sale
Westfield Vancouver Mall
8700 NE Vancouver Mall Dr Vancouver, WA
12/15/15 637,289
1977/2004
$169,800,000
$266
N/A USAA Real Estate / Blum Capital / Centennial Real Estate Company
Westfield
• Part of $1.1B portfolio sale
• Super regional mall
• 92% leased at time of sale
• Major tenants JCPenney, Sears, Macy’s, Cinetopia, Gold’s Gym, Old Navy
Sears at Washington Square Mall
9800 SW Washington Square Rd Tigard, OR
11/2/15 228,537
1973
$76,845,250
$336
N/A GIC Real Estate
The Macerich Company
• Part of $1.2B portfolio sale
• 100% leased at time of sale
• Partial interest sale
• Single tenant Sears
Johnson Creek Shopping Center
9159 SE 82nd Ave Portland, OR
11/9/15 109,209
2005
$32,100,000
$294
5.6% Retail Opportunity Investments Corp
NewQuest Properties/Walton Street Capital
• 91% leased at time of sale
• Neighborhood center
• Major tenants include: Trader Joe’s, Lamps Plus, Walgreens
The Pointe at Bridgeport
7174 SW Hazelfern Rd Portland, OR
12/15/15 48,478
2007
$31,150,277
$643
N/A Crow Holdings
KemperCo
• 100% leased at time of sale
• 4 buildings across from lifestyle center
• Major tenants include Key Bank, Starbucks, Verizon, Jimmy John’s, Qdoba
90
Portland retail sales ($10M+)
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate BuyerSeller
Comments
Sears at Washington Square Mall
9800 SW Washington Square Rd Tigard, OR
4/30/15 228,537
1973
$27,400,000
$120
4.9% The Macerich Company
Sears Holding Corporation
• 100% leased at time of sale
• Sale leaseback
• Partial interest
Portfolio Sale
Albertson’s
14300 SW Barrows Rd Tigard, OR
16199 SW Boones Ferry Rd Lake Oswego, OR
16200 SW Pacific Hwy Tigard, OR
6/12/15 120,139
1980
1965
1988
$26,826,611
$223
7.5% Spirit Realty Capital
Albertsons
• Part of 20 property multi-state portfolio
• 100% leased at time of sale
• Sale leaseback
Tigard Promenade
15532 SW Pacific Hwy Tigard, OR
7/29/15 88,199
1996
$24,825,930
$281
5.9% Retail Opportunity Investments Corporation
Terrama Retail Centers
• Part of 2 property portfolio (sold with Sunnyside Village)
• 4 building Neighborhood center
• 94% occupied at time of sale
• Major tenants include Safeway, Supercuts, Petco
Trails End Marketplace
19721 Hwy 213 Oregon City, Oregon
7/10/15 102,395
2000
$20,100,000
$196
10.0% Loja Trails End
Trails End Oregon Investors
• 83% leased at time of sale
• Major tenants include Haggen, Carls Jr, Texaco
Orchard Supply
4030 NE Halsey St Portland, OR
2/20/15 42,404
1963/2015
$20,000,000
$471
N/A Dunn Property Group
Oppidan Investment
• Former bowling alley
• 100% leased at time of sale
• Redeveloped into Orchard Supply Hardware and sold to current owner
Seattle & Portland 2015 Investment Overview 91
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate BuyerSeller
Comments
Canyon Town Center
11959 SW Canyon Rd Beaverton, OR
10/15/15 51,600
1989
$17,475,000
$339
6.7% Rasoul Oskouy
William C Floberg
• 100% leased at time of sale
• Major tenants include Home Goods, Big 5, Sleep Train
Sears at Washington Square Mall
9800 SW Washington Square Rd Tigard, OR
7/6/15 228,537
1973
$16,518,044
$72
4.9% Seritage Growth Properties
Sears Holding Corporation
• 100% leased at time of sale
• 2 buildings included
• Sale represents 50% interest
New Seasons
4500 SE Woodstock Blvd Portland, OR
10/19/15 25,000
2015
$15,680,000
$627
N/A Robinson Partners
First Western Development
• Recently re-developed into New Seasons Market
• 100% leased at time of sale
Safeway
15570 SW Pacific Hwy Tigard, OR
7/29/15 54,142
1995
$15,239,691
$281
5.9% Retail Opportunity Investments Corporation
Terramar Retail Centers
• 100% leased at time of sale
• Part of a regional portfolio sale of 8 properties
San Rafael Shopping Center
1950 NE 122nd Ave Portland, OR
9/15/15 105,000
1989
$15,000,000
$143
N/A Winco Foods
Harsch
• 81% leased at time of sale
• Free standing retail
92
Portland retail sales ($10M+)
Property Closing Date
Total SFYear Built
Sale Price$ Per SF
Cap rate BuyerSeller
Comments
Sunnyside Village Square
14600 SE Sunnyside Rd Clackamas, OR
7/29/15 89,506
1997
$13,674,071
$153
5.9% Retail Opportunity Investments Corporation
Terrama Retail Centers
• Part of 2 property portfolio (sold with Tigard Promenade)
• 4 building Neighborhood center
• 100% leased at time of sale
• Major tenants include Haggen, Safeway, Starbucks, Ace Hardware
Evo
200 SE Martin Luther King Jr Blvd Portland, OR
11/15/15 25,430
1893
$10,709,203
$421
N/A Levan Boise Real Estate Holdings
First Western Development
• 100% occupied at time of sale
• Tenant is Evo
• Urban retail storefront
Albertsons
1855 Blankenship Rd West Linn, OR
3/25/15 47,451
1997
$10,100,000
$213
N/A Walt & Carol Ordermann
Garrison Investment Group
• Part of a portfolio sale of 14 properties in several states
• Property will be converted into Haggen
• 100% occupied at time of sale
Sears at Clackamas Town Center
11800 SE 82nd Ave Portland, OR
7/7/15 144,321
1980
$10,100,000
$70
6.7% Seritage Growth Properties
Sears Holdings Corporation
• Part of a portfolio sale of 292 properties
• 100% occupied at time of sale
Safeway
13719 SE Mill Plain Blvd Vancouver, WA
11/10/15 68,164
1994
$10,000,000
$147
7.0% Beardsley Development
Barclay’s Realty
• 100% occupied at time of sale
• Safeway is tenant
Seattle & Portland 2015 Investment Overview 93
Title right
94
OFFICEINDUSTRIALRETAILMULTIFAMILY
Portland
Seattle & Portland 2015 Investment Overview
2015 Portland multifamily sales ($10M+) overview
97
Multifamily sales volume hits all time record
In 2015, the Portland multifamily investment market continued to gain momentum. The greater Portland metro area led the nation in rent growth with reported gains of 14.8 percent over the past year. Vacancy rates also reached a record low of 2.9 percent in this continuously supply-constrained market. New construction lags behind current demand and this shortage is expected to stay pronounced as job opportunities and in-migration remain high.
Overall market rents are averaging just over $1.30 per square foot. Downtown Portland is leading the way at $2.15 per square foot. The majority of new multifamily developments have occurred in the downtown and close in urban areas. Although these assets command greater rent premiums, swift absorption underscores the pent up desire for modern, urban living. It is expected that the greater Portland area will experience an influx of up to 30,000 residents each year for the next four to five years. With less than 9,000 units under construction, however, there is not nearly enough new rental product in the pipeline to keep pace with the expanding renter pool. This combination of factors will keep upward pressure on rents and hold vacancy down.
The influx of renters is spurred in large part by the thriving economy and high prospects for employment. The metro area has experienced job growth of 3.7 percent year-over-year, a statistic that places Portland among the top performing major cities in the country. Incomes are also top-tier as recent research shows roughly 35 percent of new jobs earn workers six digit salaries. With a relatively low cost of living compared to other key metros on the West Coast such as Seattle, San Francisco and Los Angeles, Portland offers exceptional potential for continued rent growth.
Investors are capitalizing on the strength of the Portland market, trading assets worth more than $1.7 billion last year – a new record for the metro region. Cap rates are dropping overall, with typical deals averaging between 5 and 5.5 percent. For new construction at the institutional-level (50 or more units), median prices are at their highest in recent memory, earning $525 per square foot and $330,000 per unit, respectively. Top deals for 2015 included Mint Urban Riverplace, which sold for $97.2 million. The Janey also transacted at $45 million, establishing a new benchmark for institutional new construction at $648 per square foot.
Looking forward, expectations remain high for a landlord-favorable environment. Portland is expected to stay ahead of much of the country in many drivers influential to the multifamily market. Absorption and rent premiums will keep trending upward as more high-paying jobs bring new talent to the market, with a particular emphasis on tech-based work and the millennial generation. Additional evidence of Portland’s multifamily market strength can be found in the office market, which saw a banner year in 2015, further adding to the demands of the apartment market. Proposed multifamily developments further out in the pipeline will not be able to keep pace with the ongoing needs of the rental population, even if all 20,000+ proposed units are delivered. This will keep occupancy near historic highs, affording investors the opportunity to achieve strong returns and optimize operating income.
98
Portland multifamily sales & statistics
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total # of sales 25 27 21 8 16 21 20 20 37 49
Highest price per unit $146,610 $294,077 $455,340 $184,659 $285,149 $395,000 $267,241 $343,017 $456,710 425,000
Cap rate average 6.1 5.2 5.4 7.2 5.9 5.7 5.7 5.6 5.6 5.3
Total sales volume $458M $845M $725M $167M $463M $760M $725M $702M $1.2B $1.7B
Sales matrix (over $10 million)
INVESTORS ARE CAPITALIZING ON THE STRENGTH OF THE PORTLAND MARKET, TRADING ASSETS WORTH MORE THAN $1.7 BILLION LAST YEAR – A NEW RECORD FOR THE METRO REGION.
Seattle & Portland 2015 Investment Overview 99
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Mint Urban Riverplace
2083 SW River Dr Portland, OR
9/18/15 $97,200,000
$335,172
$311
290
1991
5.3% NFN Investments
Cardinal Group Investments
Village at Main Street
30050 Town Center Lp W Wilsonville, OR
12/15/15 $95,000,000
$204,741
$195
464
1998/2005
5.6% Vams Sterling Pointe Commercial
Marathon RE Services
Sterling Pointe
14437 SW Teal Blvd Beaverton, OR
9/4/15 $91,080,000
$144,571
$159
630
1988
6.0% Prime Group
DHIJ Management
Wyndham Park Apartments
14700 SW Scholls Ferry Rd Beaverton, OR
6/10/15 $63,900,000
$151,064
$191
423
1985
5.8% Holland Partners
Kunz Investments
The Parker
1447 NW 12th Ave Portland, OR
3/17/15 $63,500,000
$358,757
$535
177
2014
4.4% Invesco Real Estate
Astor Pacific
The Terrene at the Grove
8890 SW Ash Meadows Cir Wilsonville, OR
8/31/15 $59,500,000
$206,597
$204
288
2014
5.6% Jackson Square Properties
Holland Partners
Museum Place
1010 SW Jefferson St Portland, OR
6/19/15 $59,500,000
$290,385
$388
140
2004
4.9% Zurich Alternative Asset Management
AEW Capital Management
Jory Trail at the Grove
8520-8750 SW Ash Meadows Blvd Wilsonville, OR
1/27/15 $59,000,000
$182,099
$187
324
2012
5.7% M&C Properties
Holland Partners
100
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Greenleaf at River Pointe
3708 NE 109th Ave Vancouver, WA
12/16/15 $55,000,000
$141,753
$161
388
1994
5.8% Green Leaf Partners
Kennedy Wilson
Waterhouse Place
600 NW 158th St Beaverton, OR
9/24/15 $54,550,000
$195,520
$212
279
1999
5.7% Sequoia Equities
Holland Partners
Canyon Creek Apartment Villages
26310 SW Canyon Creek Rd Wilsonville, OR
4/30/15 $49,500,000
$132,353
$136
374
2000
6.1% Aukum Management
Eastern Western Corporation
Redwood Creek Apartments
12015 SW Walden Ln Beaverton, OR
4/6/15 $48,750,000
$120,074
$142
406
1980
6.2% Tandem Property Management
Abacus Capital Group
Domaine at Villebois
28900 SW Villebois Dr Wilsonville, OR
6/26/15 $48,030,000
$175,274
$182
274
2007
5.7% Principal Global Investors
The Carlyle Group
The Cordelia
808 NW 19th Ave Portland, OR
7/14/15 $47,800,000
$354,074
$531
135
2014
4.4% TIAA-CREF
Mill Creek Residential Trust
206 Apartments
2499 NW 206th Ave Hillsboro, OR
6/29/15 $47,340,000
$233,207
$271
203
2014
5.3% Praedium Group
Arbor Custom Homes
Bridge Creek
29925 SW Rose Ln Wilsonville, OR
9/15/15 $46,750,000
$148,413
$171
315
1981
5.8% TruAmerica Multifamily
Equus Capital Partners
Seattle & Portland 2015 Investment Overview 101
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Andover Park
15282 SW Teal Blvd Beaverton, OR
6/30/15 $45,250,000
$188,542
$194
240
1989
5.8% DiNapoli Capital Partners
UDR
The Janey
1155 NW Everett St Portland, OR
12/16/15 $45,000,000
$368,709
$595
112
2012
4.2% Oakwood Worldwide
Columbia Investments
Boulder Creek
28740 SW Ashland Loop Wilsonville, OR
9/15/15 $44,739,438
$151,147
$169
296
1990
5.8% TruAmerica Multifamily
Equus Capital Partners
Burnside 26
2625 E Burnside St Portland, OR
8/4/15 $41,500,000
$303,442
$511
135
2014
4.5% BlackRock
Capstone Partners
Element 170
1563 SW 172 Ter Beaverton, OR
2/13/15 $39,000,000
$160,494
$218
243
2014
5.6% Security Properties
Metropolitian Land Group
Avalon Apartments
20300 SE Morrison Ter Gresham, OR
10/30/15 $32,890,000
$146,159
$173
225
2004
5.8% Friedkin Realty Group
American Capital Group
Montclair Terrace
4824 SW Oleson Rd Portland, OR
10/29/15 $32,800,000
$162,376
$176
202
1981
5.8% Resource Real Estate
Bascom Northwest Ventures
Green Leaf Springs
4545 NE 125th Pl Portland, OR
11/1/15 $29,050,000
$109,211
$130
266
1974
6.2% Latitude Management Real Estate Investors
Green Leaf Partners
102
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Arnada Pointe Apartment Homes
4820 NE Hazel Dell Ave Vancouver, WA
8/18/15 $28,000,000
$140,000
$146
200
1997
5.9% Strada Equity
Holland Partners
The Park At Tualatin
7800 Sw Sagert St Tualatin, OR
7/15/15 $28,000,000
$133,333
$174
210
1979
5.9% TruAmerica Multifamily
Fowler Property Acquisitions
Springville Oaks
16320 NW Canton St Portland, OR
12/15/15 $28,000,000
$250,000
$248
112
2015
5.6% Praedium Group
Arbor
Miramonte Lodge
12200 SE McLoughlin Blvd Portland, OR
7/21/15 $27,800,000
$120,346
$170
231
1989
5.8% Starwood Capital Group
Holland Partners
Powell Valley Farms
1500 SW Pleasant View Dr Gresham, OR
6/15/15 $27,750,000
$121,711
$142
228
2003
6.0% Jackson Square Properties
Sunnyside Construction & Development
Heatherbrae Commons
10303 SE Bell Ave Milwaukie, OR
12/8/15 $26,500,000
$152,299
$173
174
1995
5.8% Kennedy Wilson
Guardian Real Estate Services
Parkside Apartment Homes
2831 SE Palmquist Rd (Part of Portfolio) Gresham, OR
3/26/15 $24,533,400
$109,037
$121
225
1999
6.1% Kohlberg Kravis Roberts & Company
Crossbeam Capital
Seattle & Portland 2015 Investment Overview 103
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Woodspring
16100 SW 113th Ave Portland, OR
7/23/15 $22,000,000
$127,907
$124
172
1991
6.0% Hamilton Zanze & Company
Transpacific Investments
Tualatin View Apartments
18480 SW Boones Ferry Rd Tualatin, OR
4/29/15 $21,970,000
$104,619
$109
210
1994
6.2% Hamilton Zanze & Company
Grand Peaks Properties
The Addison Apartments
7531 NE 18th Ave Vancouver, WA
8/13/15 $21,700,000
$147,619
$131
147
2008
6.0% Jackson Square Properties
Matteson Companies
Fieldstone Apartments
20650 NE Halsey St Fairview, OR
10/15/15 $20,800,000
$135,065
$136
154
1997
6.0% Affordable Housing Associates
Montagne Development
Prestige Plaza
305 E Mill Plain Blvd Vancouver, WA
9/1/15 $20,360,000
$203,630
$265
100
2014
5.6% John Evilsizor Realty
Prestige Development
Courtyard at Cedar Hills
13643 SW Electric St Beaverton, OR
7/30/15 $19,850,000
$136,897
$149
145
1969
6.1% Virtu Investments
Prime Group
Summerlinn
400 Springtree Way Westlinn, OR
6/19/15 $19,200,000
$160,000
$123
120
2001
6.2% The Reliant Group
Steven F. Hansen
Central Eastside Lofts
111 NE 6th Ave Portland, OR
1/21/15 $18,900,000
$249,121
$429
70
2013
4.7% Juniper Management
Andrews Management
104
Portland multifamily sales ($10M+)
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Harbour Court Apartments
910 N Harbour Dr Portland, OR
2/27/15 $17,700,000
$178,788
$179
99
2000
5.8% ConAm
Goodman Real Estate
Willow Grove Apartments
11835-11981 SW Center St (Part of Portfolio) Beaverton, OR
2/27/15 $17,300,000
$145,378
$156
119
1989
6.0% Blackstone Group
Praedium Group
The Bluffs
12601 SE River Rd Portland, OR
7/21/15 $16,500,000
$120,438
$155
137
1968
6.0% Starwood Capital Group
Holland Partners
Haven at Charbonneau
8755 SW Illahee Ct Wilsonville, OR
6/4/15 $16,000,000
$126,984
$146
126
1990
6.0% TruAmerica Multifamily
Fowler Property Acquisitions
The Mark at Lake Oswego
15000 Davis Ln Lake Oswego, OR
10/8/15 $15,500,000
$189,024
$217
82
1989
5.6% Pacific Urban Residential
Fowler Property Acquisitions
Jasper Place
18300 NW Walker Rd (Part of Portfolio) Beaverton, OR
2/27/15 $14,800,000
$148,000
$165
100
1986
6.0% Blackstone Group
Praedium Group
Village on Seventh
12800 SE 7th St Vancouver, WA
12/14/15 $14,750,000
$141,827
$136
104
1992
6.0% TruAmerica Multifamily
Fowler Property Acquisitions
Seattle & Portland 2015 Investment Overview 105
Property Closing Date Sale Price$ Per Unit
$ Per SF
UnitsYear Built
Cap rate BuyerSeller
Hanover
3150 SW 185th Ave Beaverton, OR
12/11/15 $13,500,000
$160,714
$175
84
1998
5.9% TruAmerica Multifamily
Fowler Property Acquisitions
Jasper Square
15195-15211 SW Walker Rd (Part of Portfolio) Beaverton, OR
2/27/15 $12,900,000
$155,422
$159
83
1987
6.0% Blackstone Group
Praedium Group
West Slope Terrace
8585 SW Canyon Ln Portland, OR
6/11/15 $12,700,000
$132,292
$126
96
1969
6.0% Daniel E. Casey
David M. Dufenhorst
Westover Tower Apartments
930 NW 25th Pl Portland, OR
2/24/15 $12,400,000
$177,143
$397
70
1950
4.8% Prometheus Real Estate Group
Langley Investment Properties
Red Tail Canyon
8149 SE Aspen Summit Dr Portland, OR
2/2/15 $12,010,000
$164,479
$138
73
2004
5.8% Pathfinder Partners
JBH Company
The Township
700 SE 5th Ave Canby, OR
9/4/15 $12,000,000
$129,032
$130
93
1999
6.0% TruAmerica Multifamily
Fowler Property Acquisitions
Beaumont Village Apartments
4419-4439 NE Fremont St Portland, OR
2/27/15 $11,500,000
$230,000
$372
50
2014
5.0% Bluestone Communities
Everett Custom Homes
The Astoria
1913 NE 73rd Ave Portland, OR
12/18/15 $11,250,000
$165,441
$276
68
1947
5.5% West Valley Properties
Fowler Property Acquisitions
601 Union Street, Suite 1100, Seattle, WA 98101 tel +1 206 607 1700 fax +1 206 607 1701
225 108th Avenue NE, Suite 550, Bellevue, WA 98004 tel +1 425 974 4000 fax+1 425 974 4020
1120 Couch Street, Suite 500, Portland, OR 97209 tel +1 503 972 8000 fax +1 503 972 8001
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