Developers Buy Back High-Rise

Developers of the Pacific First Centre at Fifth Avenue and Pike Street have arranged financing to buy back the 44-story tower from Seafirst Bank, saving the building from permanent foreclosure.

Seafirst took the building's deed last June in lieu of foreclosure, giving the Prescott development firm time to seek financing to pay off a $185 million short-term construction loan, on which Seafirst was the main lender.

Seafirst took the deed after an initial deal for permanent financing collapsed in September 1989, sparking rumors that Prescott was in serious financial trouble - a rumor the developers denied.

Richard Clotfelter, a general partner in Prescott, said today he closed a deal late yesterday for permanent financing with a Japanese lending institution, which he declined to identify. He said the deal also included Japanese and other investors who put up cash for a necessary down payment on the new loan.

The deal, Clotfelter said, ``demonstrates the third-party lender's attitude about downtown Seattle. It's still looked at as one of the positive areas in the country . . . from an office-market standpoint.''

Pacific First's original owners, PFC Holdings limited partnership, included Prescott and Hazama USA Corp., a Japanese construction company. The partnership has changed slightly, but the key players remain the same, Clotfelter said. He would not say what Prescott's remaining equity holding in the building will be, but he said it is ``somewhat reduced.''

The fact that the developers were able to attract Japanese money makes the deal significant at a time when Japanese investment in U.S. real estate is declining.

``People are saying it's declining,'' Clotfelter said, ``but I think what's really happening is they're being more selective.''

Pacific First Centre, opened in 1989, has 900,000 square feet of office space, three floors of retail shops and a lobby known for its display of local art.

The building remains about 21 percent vacant, the result of a soft downtown office market that came about after four new high-rises were built almost simultaneously. The Washington Mutual Tower (also called the 1201 Third Avenue building), Two Union Square, AT&T Gateway Tower and Pacific First all opened between late 1988 and early 1990, bringing about 4 million square feet of new office space into the market.

Because of the overbuilding, lenders are reluctant to make new loans to downtown developers.

Despite that, Clotfelter said, ``We did what we said we were going to do. The fact that we did it in this kind of climate is positive for the city itself as it's looked at from the outside - and, obviously, for the building.''

Clotfelter and Gary Carpenter, Prescott's other general partner, negotiated 15 months for permanent financing. Recently, industry insiders speculated that the developers might work out a deal with Tokyo-based Da Ishi Kanyo, the world's largest bank.

Luke Helms, Seafirst chief executive officer, said he was pleased to see the financing arranged.

``It is a landmark project, both in its status and its success in lease-up in a very difficult market,'' he said. ``It is a tribute to the strength of our central business district and the commitment of the developer.''

Clotfelter and Carpenter still are struggling to save their investment in another development project downtown.

The Third and Pike Limited Partnership they formed to buy the so-called ACT block filed for Chapter 11 bankruptcy protection in July. Clotfelter and Carpenter are seeking financing to pay off the partnership's $11.7 million mortgage, used to buy the land, to First Interstate Mortgage Co.