August 7, 2015
Columbia Center sold to
Hong Kong investors
Hong Kong-based Gaw Capital Partners completed its purchase
of the 76-story Columbia Center for $711  million Friday.
By Sanjay Bhatt
Seattle Times business reporter
A Hong Kong investment firm has purchased the Pacific
Northwest’s tallest skyscraper, 76-story Columbia Center, marking
the first time a big Asian investment firm has acquired a trophy
tower in Seattle.
Hong Kong-based Gaw Capital Partners completed the $711
million acquisition Friday, records show.
It ranks as one of the biggest real-estate transactions in the region’s
history. Market experts said the only two larger deals they could
recall were for collections of buildings: the $1.15 billion
Amazon.com paid Vulcan in 2012 for its 11-building South Lake
Union campus, and a Goldman Sachs affiliate’s 2007 bulk
purchase of a dozen properties in the Seattle area for $921 million.
An affiliate of Gaw Capital outbid a handful of other investors to
buy the 1.5 million-square-foot Columbia Center from Beacon
Capital Partners, which had paid $621 million for the tower in
April 2007, near the peak of the last real-estate boom.
Asian institutional investors have been shopping for deals in the
Seattle area over the past year, but Gaw Capital’s successful bid
for a trophy tower against domestic funds and long-established
European investors is something new, said Lori Hill, a managing
director at commercial-real-estate brokerage JLL in Seattle.
“I think it is safe to say there will be more to follow,” said Hill,
who was not involved in the transaction.
To be sure, Asian funds have bought other commercial properties
in the area, but nothing like a major office tower.
“This is the first,” said Pat Callahan, CEO of Urban Renaissance
Group, the Seattle-based commercial-real-estate firm that will
manage Columbia Center for Gaw. “It’s just an affirmation of the
worldwide interest in investing in this market.”
Gaw Capital also has a pending deal to buy the 27-story Seattle
Tower, a historic office building also in the central business district
at the corner of Third Avenue and University Street, according to
two sources familiar with the matter.
“We continue to be interested in this market,” said Christina Gaw,
managing principal and head of capital markets at Gaw Capital, in
an email after completion of the Columbia Center sale.
Built 30 years ago at 701 Fifth Ave., Columbia Center rises to a
height of more than 930 feet. It’s the West Coast’s second-tallest
building after the 1,018-foot U.S. Bank Tower in Los Angeles,
according to the Council on Tall Buildings and Urban Habitat.
Seattle’s top 10 buildings
Who owns Seattle’s skyline? Here is the rundown on Seattle’s top 10 buildings, ranked by floors.
Source: Emporis, JLL, Seattle Times staff research (Kelly Shea / The Seattle Times)
Buying Seattle’s tallest building is “a pretty powerful message,”
said Brian Hayden, a broker at Flinn Ferguson who said he’d never
heard of Gaw before the news of a potential deal broke earlier this
year. “It’s no secret there’s a lot of money in China.”
The property is 89 percent leased with 125 tenants, according to
Urban Renaissance.
Several big Canadian investors have acquired Seattle skyscrapers
since the recession, but major Asian investors previously have
been on the sidelines.
Gaw Capital’s deal now indicates Seattle is on the radar of big
players in Hong Kong, China and Korea who are able to place
large amounts of capital in a single trophy tower.
In recent years, Gaw has been scooping up trophy properties in the
world’s top office markets and raising billions of dollars from
pension funds and wealthy families. Bloomberg reports that as of
March, Gaw Capital had raised $4.26 billion.
Columbia Center becomes the
largest office property in Gaw
Capital’s U.S. portfolio, which
includes buildings in San
Francisco, New York and Chicago,
according to the firm’s website.
Investment by Chinese institutions,
corporate funds and wealthy
individuals in global commercial
real state reached an all-time peak
of $10 billion last year, according
to brokerage CBRE.
Columbia Center trades again
Seattle’s tallest skyscraper has gone
through several owners since it was built
in 1985. Here’s a list of them along with
what they paid.
1985: Developer Martin Selig built the
skyscraper, only to sell it four years later
to raise cash to settle creditors’ claims.
1989: Seattle-based Seafirst Bank,
$355  million.
1998: Chicago-based Equity Office
Properties Trust, $404 million.
2007: Boston-based Beacon Capital
Partners, $621 million.
2015: An affiliate of Hong Kong-based
Gaw Capital, $711 million.
Source: Seattle Times archives
The U.S. attracted one-fifth of that total, with a majority going into
hotels, offices and development sites, the commercial-real-estate
brokerage said.
Some Chinese investment comes through the EB-5 immigrant
investor visa program. Such funds have helped bankroll more than
$2 billion in current Puget Sound area projects, including The
Mark, a 44-story tower under construction in downtown Seattle.
“Chinese investors are only beginning to tap into the vast set of
opportunities available to them in the U.S.,” said Brian McAuliffe,
executive managing director for CBRE’s capital-markets division,
in the report.
Renovations planned
Gaw Capital plans “significant” capital improvements to Columbia
Center over the next few years, said Urban Renaissance’s
Callahan. He declined to specify how much those might cost.
Gaw wants to renovate the
lobbies, restrooms and other
common areas as well as
create more open floor plans
in offices as tenants’ leases
expire. That floor plan would
accentuate the tower’s views,
he said.
The tower’s 50,000-squarefoot retail area on the lower
floors also will be renovated
to turn Columbia Center into
a destination, he said.
With the opening of the
luxury SLS Hotel next door
at Kevin Daniels’ The Mark
skyscraper, Columbia Center
has an opportunity to attract
Columbia Center’s new owners envision
people in the downtown core
renovations to maximize views. (Mike Siegel /
and Pioneer Square who are
The Seattle Times, 2014)
looking for restaurants,
entertainment and shopping after business hours and seven days a
week.
Already the multimillion-dollar renovation of the Columbia Tower
Club — the private club on the tower’s top two floors — is a big
draw, he said.
The plan is “continuing what Beacon started and finishing it,” he
said.
A turnaround
For Beacon Capital, Columbia Center’s sale marks a turnaround.
When it bought the building in 2007, the tower was 89 percent
leased. But by 2010, nearly 40 percent of the building was listed as
“available” on online commercial-real-estate database
OfficeSpace.com, partly because Amazon.com, which leased
177,000 square feet in the tower, was moving to South Lake
Union.
That year, the firm defaulted on a $380 million loan it took out in
2007 to buy Columbia Center. Bondholders agreed to extend the
loan to 2017.
As the office market recovered and tech firms began leasing more
office space in the Seattle market, Columbia Center’s owner
completed an extensive renovation and brought the vacancy rate
down.
The skyscraper’s vacancy rate is now about 10 percent.
Its biggest tenant is the federal Social Security Administration,
which leases 100,000 square feet.
Other large tenants include the City Attorney’s office, the Dorsey
& Whitney law firm, the regional office of U.S. Health and Human
Services and financial services firm D.A. Davidson.
Columbia Center is the latest office building Beacon has sold. It
was one of 14 Seattle-area office buildings the company bought in
2007, making it this market’s largest landlord.
Beacon has disposed of several of those properties in recent years.
In 2013, it sold Wells Fargo Center in Seattle to Canadian realestate investment firm Ivanhoé Cambridge for $389.9 million.
This year it sold a nearly three-acre parking lot in Bellevue to Plus
Investment USA, a firm backed by Chinese investors, for
$45.9  million.
According to its website, Beacon has a few buildings left in its
Seattle portfolio: the 184,000-square-foot Maritime Building and
the 309,000-square-foot Exchange Building. In Bellevue, it owns
the Lincoln Executive Center Campus, Eastgate Office Park and
Sunset North Corporate Campus.