Sale of Russell Center may triple insurer’s money [The Seattle Times]

April 05--Insurance giant Northwestern Mutual apparently expects to sell downtown Seattle'sRussell Investments Center for at least three times what it has invested in the 42-story office tower, a company document suggests.

The company gave the building a "fair value" of $447.5 million in its 2011 year-end financial statement, filed earlier this year.

That's nearly triple what Northwestern Mutual reports is its total investment for the building: $156.5 million.

The tower went on the market late last year. One office brokerage, Broderick Group, says in its first-quarter market report that the building already is under contract to a buyer.

Another brokerage, Colliers International, says the tower is expected to fetch more than $500 per square foot, or $450 million-plus.

"Many institutional investors are keeping their eyes on the transaction, as it will potentially set the bar high" for future sales of similar buildings, Colliers added.

A Northwestern Mutual spokeswoman declined comment on the status of the sale.

When it's finalized, the Russell Center's sale will culminate a remarkable turnaround for a property that once was the poster child for all that had gone wrong with the downtown-office market.

Built six years ago as Washington Mutual's headquarters, the 890,000-square-foot tower at Second Avenue and Union Street emptied after the thrift was seized by regulators in late 2008.

When Northwestern Mutual bought the building in September 2009, it was almost entirely vacant. The Milwaukee-based insurance company paid a bargain-basement price of $115 million, about one-third the tower's construction cost.

The purchase coincided with Northwestern Mutual subsidiary Russell Investments' decision to move its headquarters from Tacoma to Seattle and lease about one-quarter of the building.

Since then, according to Northwestern Mutual documents, the company has invested another $40 million in the tower. A conference center, fitness center and cafe were added, and the lobby was renovated.

The building now is 96 percent leased, according to Broderick and Officespace.com, with an all-star list of tenants that includes not only Russell, but also Nordstrom, online real-estate marketplace Zillow, biotech Dendreon and Boeing.

Northwestern Mutual's 2011 financial statement also shows the Russell Center's gross income last year was $20.8 million, while taxes, repairs and other expenses totaled $9.1 million.

In 2010, in contrast, when the building was only about half-leased, expenses exceeded income by $1.3 million.

If Northwestern Mutual does get anywhere the $447.5 million at which it has valued the Russell Center, the deal would be King County's biggest real-estate transaction since Beacon Capital Partners of Boston purchased the 76-story Columbia Center for $621 million in early 2007 -- before the market collapsed.

Eric Pryne: 206-464-2231 or [email protected]

___

(c)2012 The Seattle Times

Visit The Seattle Times at www.seattletimes.com

Distributed by MCT Information Services