Koll Canyon Park Building Under Way -- Project Was Held Up By Financing Woes

BOTHELL It took more than three years, but construction has begun on a 93,000-square-foot, three-story office building in the Koll Canyon Park Business Center in Bothell.

The project was caught in a prolonged rezoning effort and then faced the financing complications now common to all commercial real estate development, says Jack Martin, the project's developer.

Financing the project, which has no tenants, in this financial climate was difficult, he says. To complete the loan, the bank required considerably more equity and other securities than were necessary before the financing crunch.

A couple of years ago, a developer could get a loan for 75 percent of a project's value, which was typically 100 percent of costs, Martin says. To finance this project, Martin and his partners were required to risk a large chunk of their own money.

The partnership had to put "a ton" of its own cash into the project and then post 80 percent of the project's cost in cash-equivalent securities, he says. And the loan is only a 2.5-year, short-term arrangement. By the end of that time, the developers must have secured long-term financing.

The good news is that tough financing means little competition, Martin says.

Eastside developer Basil Vyzis has put up similar buildings in the area, but he secured financing before the crunch, says Craig Wilson, a leasing agent for Martin's project. Those buildings have already been leased, he says.

The latest lease in the new Vyzis buildings was Heart Technology, which in August took 96,000 square feet of space at Bear Creek Business Park in Redmond. Heart Technology may also have an option to lease another 75,000 square feet of space at that park in a third building not yet under construction.

Martin's building at Canyon Park, with its 31,000 square feet per floor, is also designed to accommodate large users, says leasing agents Al Hodge and Wilson. Space will cost between $14.25 and $15.75 per square foot, depending on tenant size, Wilson says.

Hodge and Wilson say they are talking to a few large users who they say are interested. They will not speculate about when leases will be signed. They will say, however, that most of the interested companies are Puget Sound-area companies that are considering relocating and expanding.

The building is designed with additional ceiling space, beefed up electrical systems and other amenities that would appeal to biotechnology companies, although the space is appropriate for any number of industries, Martin says.

Canyon Park already has an established biotechnology base, including Immunex's new laboratory space, Icos Corp., MicroProbe Corp. and CellPro Inc.

Developer Roger Belanich eventually plans to develop another 25 acres, which likely will be targeted to biotechnology companies. However, that development is at least a couple of years away.

The Koll Co. is constructing its own speculative project at Canyon Park. That 70,000-square-foot project, which will be constructed by late fall, is flexible and can be used as either warehouse or office space, says Jim Mueller, Koll vice president.

Koll has already constructed two similar buildings near this latest project. One building is occupied by the University of Washington branch campus and the other by Federal Express, which demonstrates the flexibility of the building's design, Mueller says.

Koll, which controls most of the leased property at Canyon Park, also controls about 80 additional developable acres at the business center. That acreage will be developed in a deliberate fashion when the market can absorb the square footage, he says.

The business park is about 95 percent occupied, Mueller says. Both Martin and Mueller say the two new speculative buildings are not competitors because they target different tenants.