278 SLU units trade at a loss for $115M

Originally published:

The Stack House apartment complex, at 1280 Harrison St. and related addresses, has sold for $115 million. Local buyer Timberlane Partners announced the deal before the county recorded two related sales on Thursday.

The seller was an LLC associated with J.P. Morgan Asset Management, which acquired the full-block development in 2015 for around $148.7 million. It was then about two years old.

The recent sale represents a surprising loss of some 23% over a nine-year hold. The mixed-use complex is in the heart of South Lake Union, in an area full of well-paying tech jobs.

For the buyer, public records indicate a nearly $63.9 million loan from Prudential Insurance. Timberlane didn’t name any brokers, and presumably represented itself.

Now with that firm is former CBRE broker Jon Hallgrimson, who said of the deal, “With values this far below replacement cost, now is the time to buy the best assets in the best locations. Stack House is exactly that. I had the privilege of selling it for Vulcan back in 2015, so when the opportunity arose to acquire it now, I knew we should jump on it.”

The recent deal was worth about $450 per square foot. Vulcan Real Estate, Runberg Architecture Group and Exxel Pacific completed the project in 2013. It has two seven-story buildings with 278 units, both with retail and restaurant space; underground parking with 312 stalls; and the preserved two-story Supply Laundry Building, now mostly offices; and the very prominent old 140-foot-tall smokestack that centers the complex and is its namesake.

Amazon leased the former laundry building in 2014, and a 10-year lease would be standard. That space isn’t publicly listed, so Amazon will evidently remain. If those 28,631 square feet were vacant, that might partly explain the drop in value. Constructed in 1912, the building is now on the National Register of Historic Places.

For the apartments, rents and vacancies can’t be gleaned from the website. Avenue 5 Residential will apparently continue to manage the apartments. They range from studios to three-beds, plus a few townhouse-style units. Some have air conditioning. Amenities include a gym, two roof decks, community garden, cinema room, in-unit washer/dryers, quartz countertops, and stainless-steel appliances. The complex features public art and many green features, and is LEED Platinum-certified.

Timberlane made the investment with an unnamed equity partner. Stars REI, a Chilean investor, has been a partner in recent acquisitions including the Koi and Wilcox in Ballard. Along with an Olympia purchase, the recent Stack House deal contributes to about $252 million invested over the past 12 months to acquire 719 units.

Timberlane announced in April that it had closed its value-add acquisition fund after raising $100 million from investors.