Property in Seattle Near Amazon Headquarters Trades at Double-Digit Discount

Originally published:

A multifamily investor bought an office and apartment property in Seattle’s South Lake Union at a discount in what appears to be the region’s biggest commercial property sale of the year ranked by price.

Timberlane Partners, one of the most active apartment investors in the Pacific Northwest over the past year, bought the 278-unit Stack House apartments and the Amazon-leased Supply Laundry Building for $115 million — about 23% less than the $149.5 million that JPMorgan Chase & Co. paid to acquire the property from Vulcan Real Estate in 2015, the buyer said in a statement.

The sale of the property a few blocks east of Amazon’s sprawling headquarters is the latest example of a Seattle property that has traded for a fraction of its prior sale price as high borrowing costs and debt have stifled apartment and office investment activity. The decline has spurred a pricing correction that has opened the door for such buyers as Seattle-based Timberlane.

In another recent deal, King County agreed on May 29 to buy the historic downtown Dexter Horton office building for less than a quarter of the $151 million price paid in 2018 by Los Angeles-based seller CIM Group.

Still, the deal is the highest-priced commercial property sale in greater Seattle’s muted investment market since last August, when San Francisco-based Jackson Square Properties paid $125 million to buy the 360-unit Radiate apartments from Fairfield Residential, based in San Diego, CoStar data indicates.

With the purchase, Timberlane has now acquired 719 apartments in deals totaling more than $250 million over the past two years as multifamily sales have slowed to a crawl across greater Seattle, reflecting similar declines in sales across the United States. Timberlane in April closed its first multifamily investment fund with more than $100 million intended to buy discounted apartments.

“With values this far below replacement cost, now is the time to buy the best assets in the best locations, ”Timberlane Managing Director Jon Hallgrimson said in a statement.

The region’s $2 billion in apartment sales over the past 12 months is more than 62% below the five-year annual average of $5.2 billion, according to CoStar Market Analytics.

Small and midsized investors are seeing less competition for deals as large institutional buyers have moved to sidelines, discouraged by high interest rates and the softening rental market following the multifamily buying frenzy earlier in the COVID-19 pandemic, according to the report.

The seven-story Stack House, developed by Vulcan in 2013, has one-, two-, and three-bedroom apartments as well as townhouses and loft-style units. The portfolio also includes 8,545 square feet of ground-floor retail and the Supply Laundry Building, a 36,600-square-foot office that was built in 1904 and renovated in 2013, according to CoStar data. Timberlane acquired the assets from institutional investors advised by J.P. Morgan Global Alternatives in an off-market transaction.

Timberlane’s first multifamily investment fund will be dedicated to discounted deals as investors capitalize on a sales slowdown that has shaken up property values.