Capstone Partners Lands $155M for Seattle Office Project

Esterra Park. Image courtesy of Capstone Partners

HFF has arranged joint venture equity and construction financing totaling $154.7 million for the development of One Esterra Park, a transit-oriented, Class A office development next to Microsoft’s world headquarters in Redmond, Wash. The firm worked on behalf of the developer, Capstone Partners LLC, to source equity capital from an institutional investor and then, on behalf of the joint venture, secure the construction loan with US Bank.

Developed on a 2.2-acre site at 15550 NE Turing St., One Esterra Park will be a six-story, 245,000-square-foot, LEED Silver building. With technology tenants in mind, it’s intended to feature “robust amounts of power and mechanical infrastructure and collaborative common areas,” according to a prepared statement. In addition, the location is adjacent to the planned Overlake Village Transit Station and the future State Route 520 off-ramp that will provide connectivity to major area highways, including I-405 and I-90.

CBRE is the leasing broker, and JTM Construction is the general contractor. Completion is scheduled for the fourth quarter of 2020. The HFF debt and equity placement team included Ben Bullock, Charles Halladay, Bruce Ganong, Zach Goodwin, Michael Leggett and Tom Wilson.

One Esterra Park. Image courtesy of HFF

In a separate announcement by Capstone, Scott Davis, senior vice president at CBRE in Seattle, said One Esterra Park will be the only completely available building with large floorplates for at least a year, in a market with more than 1 million square feet of projected demand.

The project is the next, and nearly the final, phase of Capstone’s 3 million-square-foot, $1.2 billion Esterra Park live-work-play master-planned community. Ground was broken for Esterra Park in 2013, and since then more than 2,000 apartments have been completed or are under construction. In 2016, a 285-key, dual-branded Aloft/Element hotel opened at Esterra Park. And Capstone has one more site there, which is currently in the permitting process for a further 600 apartments. When completed, Esterra Park will be home to 6,000 to 7,000 residents in more than 2,600 apartments, and will include 600,000 square feet of office, retail and hotel space, plus a 3-acre park.

Moving out vs. staying put

Major move-outs rocked the Puget Sound office market a bit in early 2019, with net negative absorption of about 280,000 square feet, bringing an end to nearly nine straight years of positive absorption, according to a first-quarter report from Colliers International. Still, the metro continues to have strong tenant demand, and the Eastside submarket saw about 83,000 square feet of absorption, largely in Bellevue.

The submarket’s average vacancy remained flat, at 4.9 percent, but Class A space was lower, at 4.0 percent. As rents continue to climb, there has been a bump in lease renewals, as tenants want to ensure they have the space they need. As of March, only about eight spaces of 50,000 square feet or larger were available on the Eastside, also per Colliers.

Big projects like Esterra Park reliably attract attention, but of course a slice of the market is always in the smaller, bread-and-butter deals. Last October, Sterling Realty acquired the 101,605-square foot Redmond Technology Center for $38 million. The building was 93 percent occupied at closing. And barely a month ago, KBS bought The Offices at Riverpark, a 106,281-square-foot Class A property in Redmond, for $48 million from an affiliate of Colony Capital.