Pension fund puts stake in Columbia Center up for sale

Seattle's tallest building, the 76-story Columbia Center, could soon have a new owner.

A New York pension fund has put its 49.9 percent stake in the building up for sale, brokers said, and some speculate that majority owner Chicago-based Equity Office Properties Trust might consider selling all or part of its 50.1 percent share.

Real-estate-investment companies, many of them based outside Washington state, have been sending representatives to tour the 1.5-million-square-foot building in recent weeks, an indication that it's drawing lots of interest, said Wende Sauvage, a broker at Cushman & Wakefield in Seattle.

"It's an iconic building," Sauvage said. "To have the tallest building in Seattle — I think people are willing to pay for that."

Seattle's office market is heating up as owners consider cashing in on their investments and buyers look to take advantage of declining vacancies and rising rental rates, brokers said. Investors are attracted to Seattle primarily because of its strong job growth and the continued success of such well-known employers as Microsoft and Boeing.

Built in 1985, Columbia Center has changed hands twice before. In 1989, developer Martin Selig sold it for $355 million to Seafirst Bank, which sold it to Equity Office in 1998 for $404 million, or $269 a square foot. The New York State Common Retirement Fund, called CRF, paid $210 million for nearly half of it two years later.

Sauvage said she thinks the building, or some portion of it, might sell for at least $350 a square foot.

Columbia Center is about 90 percent full, with Amazon.com and law firm Heller Ehrman as major tenants. Annual rental rates run from $27 to $37 a square foot, fairly typical for a premium downtown building, according to Officespace.com, a Web site for commercial real-estate professionals.

Brickman Associates of New York recently paid a record $575 a square foot, or $175.7 million, for the Civica Office Commons in Bellevue. And in June, New York-based Tishman Speyer paid $560 a square foot for Market Place I and II in downtown Seattle.

Steve Storrar, a broker at CB Richard Ellis in Seattle, said Columbia Center "could be more affirmation of how our market is perceived if it comes in at a big number."

Equity Office, which declined to discuss its plans for Columbia Center, owns and manages about 10 million square feet of office space in the Seattle area, making it the largest landlord in the area.

The company said in August that it plans to sell up to $3.5 billion in assets this year and next, including all of its properties in Atlanta. Equity Office said it also intends to reduce its holdings in Chicago, Denver and Northern California and might sell select buildings in other core markets.

"Investors are going to make it make sense for Equity to sell," Sauvage said, referring to Columbia Center. "It's just too special of an asset."

But for tenants at Columbia Center, there could be a downside: a steep increase in rents. Sauvage said tenants who signed five-year leases in 2002, when the economy was sputtering, could see particularly sharp increases because they're probably paying below-market rates. If the building goes for top dollar, she said, tenants "will be stuck paying rents to justify that."

Columbia Center, which rises nearly 1,000 feet above ground and once laid claim to the title of tallest building west of the Mississippi River, historically has been popular with banks and law firms.

But it's had its share of problems. Its vacancy rate climbed above 25 percent after the 2001 economic recession and the Sept. 11 terrorist attacks, which caused some to question whether it might be a target.

What's more, its dark-granite lobby and awkwardly shaped floors fell out of favor with brokers and tenants as newer, more modern buildings came online. And its location in the city's southern section lost some of its appeal as development shifted northward with the revitalization of the city's retail district.

Even so, Columbia Center remains a measure with which many commercial buildings in Seattle are compared.

"There always are going to be critical comments made about any building, but I'm looking out at Elliott Bay at the moment," said Christopher Cripps, director of administration at Heller Ehrman, which occupies floors 57 through 62. "It's an unobstructed view that goes for miles."

The law firm's lease at Columbia Center expires in 2008, and Cripps said he's "curious about any impending sale." But he's not too concerned.

"No matter who owns it, it's going to be desirable," Cripps said.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com