Seattle Office Building Commands $180M

By Keith Loria, Contributing Editor

Hill7, Seattle

Seattle—Hudson Pacific Properties and the Canada Pension Plan Investment Board have acquired Hill7, a 285,680-square-foot office building in Seattle’s Denny Triangle neighborhood, from Touchstone and its financial partner Principal Real Estate Investors, for $179.9 million.

“The Seattle market is performing very well and still has significant upside. Local firms are expanding, and many are opting to move from the suburbs into the city,” Alex Vouvalides, Hudson Pacific Properties’ chief investment officer, told Commercial Property Executive. “California companies are increasingly opening a Seattle hub to gain access to the region’s talent. So market fundamentals are strong, and we’re seeing significant pre-leasing for new office supply.”

In conjunction with the acquisition, the joint venture closed a 10-year, secured, non-recourse loan in the amount of $101 million from a prominent institutional lender.

Located at 1099 Stewart St., the 11-story building features an 1,800-square-foot conference room, private showers, bike storage, an outdoor deck, and hotel conference facilities and catering.

This is CPPIB’s first entry in the Seattle office market, while Hudson Pacific has been active in the Puget Sound for several years, particularly in Pioneer Square, where it owns three assets and is building the eight-story 450 Alaskan.

“Hill7 is another opportunity to deepen our presence in Seattle, one of our core markets, and acquire an asset just down the street from our Met Park North property,” Vouvalides said. “It is the newest asset in one of Seattle’s hottest neighborhoods—Denny Triangle/South Lake Union, where Amazon is located and Google is now moving. While Hill7 is Class A, new construction, the fact that we can still add significant value through leasing in the near-term made this transaction particularly appealing.”

According to Vouvalides, the transaction is consistent with the company’s strategy in other urban markets, such as Los Angeles, the Silicon Valley and San Francisco.

“We look for high-quality office properties in very select, high-barrier submarkets that afford us opportunities to add value through leasing, repositioning, and/or redevelopment,” he said. “At Hill7, we will increase the leased percentage from 80 to 100 percent, and the building’s quality has already garnered some of the highest rents in the marketplace. Our decision to purchase the asset in a joint venture with CPPIB highlights our ability to attract strong capital partners, and aligns with our efforts to preserve dry powder for other strategic acquisitions in our core markets.”

The Puget Sound has seen strong activity of late, as many international buyers stake claim to Seattle’s booming economy.

According to a recent report by JLL, foreign investors have invested more than $2.5 billion this year, and while the volume will not surpass last year’s $4.4 billion, the market is on pace to exceed $3 billion, far exceeding the 10-year average.

Image courtesy of Yardi Matrix