Union Investment Buys Amazon Phase VI for $299M

Union Investment, one of Germany's largest real-estate fund managers and the investment arm of the DZ Bank Group, announced that it has purchased the Amazon's Phase VI office complex in Seattle's South Lake Union market for $299 million, or approximately $757 per square foot. Seattle-based Vulcan Real Estate sold the two-building property in a deal brokered by CBRE Group Inc.’s Kevin A. Shannon. Union Investment was advised on the deal by Metzler Real Estate and represented by Mayer Brown, while Vulcan Real Estate was represented by Foster Pepper PLLC.

"Seattle is one of the fastest-growing U.S. cities, and highly attractive to young, well-educated employees, so it provides ideal conditions for our increased international focus," said Martin Brühl, an executive at Union Investment, in a statement. The complex at 515 Westlake Avenue North and 500 Ninth Avenue North was bought by Union for its open-ended, Unilmmo: Europa fund. Amazon Phase VI is part of a 1 million-square-foot expansion of Amazon' South Lake Union campus that Vulcan developed. Two other buildings — Phases VII and VIII — were finished this summer as part of the expansion and are not for sale.

In concert with the announcement, Vulcan said several signature eateries would be moving into the complex’s 15,000 square feet of retail space. Early next year, Ethan Stowell plans to open a Ballard Pizza Co. location in the 500 Ninth Avenue North building. In June, Seattle restaurateur Josh Henderson will open Poulet Galore, Vestal and Cantine Bottle Shop and Bar in the same building. And Seattle dnut company Frost will open a store next summer in 515 Westlake Avenue North.

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Amazon Seeks to Expand Seattle Footprint, Add One Block of Office Space

Amazon is hoping to increase its presence in the Denny-Triangle neighborhood by adding another 778,000 square feet of office space on a fourth block to its 3.3 million square foot, three-block campus in Seattle, according to proposals submitted to the city. The permit filing seeks to build a 24-story office tower, 6-story office building, 5-story office podium and retail space to the fourth block, which is bounded by Seventh and Eighth avenues and Blanchard and Bell streets. If the plans are approved by the city, it will give Amazon a total of nearly 4.1 million square feet of space on the four blocks.

In addition, the company's headquarters in the South Lake Union area totals 1.7 million square feet of office, and Amazon leases space in other buildings in downtown Seattle, according to a Puget Sound Business Journal article. Currently, the company is in a total of 3.7 million square feet, and by 2021 it will occupy 8.2 million square feet of space, according to commercial real estate trade group NAIOP. Based on industry standards for employees per square feet, that would be enough for around 41,000 employees.

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Amazon's Global HQ for Sale

Microsoft co-founder Paul Allen's Vulcan Real Estate announced last Thursday that it would be putting Amazon.com Inc.'s 11-building Seattle headquarters on the market with plans to use the proceeds for other real estate projects in the area. "We have been deeply involved in the redevelopment and revitalization of South Lake Union for over a decade, and the sale of the Amazon campus will allow us to continue to invest in the neighborhood and the community," Ada M. Healey, vice president of Vulcan's real estate unit, said in the statement.

"Vulcan's portfolio is heavily weighted in office and we need to rebalance that distribution," Lori Mason Curran, Investment Strategy Director of Real Estate at Vulcan said in a statement. "With the current low interest rate environment and high values for core assets this feels like a good time to capitalize on market conditions."

Built in the former warehouse district north of downtown, the 1.8 million square foot campus is being listed for sale through CBRE Group Inc. While no asking price was listed, industry experts expect the property to sell for more than $1 billion. According to a Reuters report, Amazon, which only recently moved into its new headquarters, declined comment on whether it would be a bidder to buy the 11 buildings on 1.8 million square feet of land which make up its headquarters. Amazon already has plans to build new offices nearby to house its growing staff.

"If they're going to take the cash and use it to do more development in South Lake Union, I see it only as a good thing," commented Jerry Dinndorf, president of the South Lake Union Community Council.

"The Amazon corporate headquarters buildings represent exactly what core capital wants today: new product featuring durable, credit income streams in great CBD locations. Markets like South Lake Union in Seattle, South of Market in San Francisco and Silicon Beach in Santa Monica, command premium rents because of huge tenant demand," said Kevin Shannon of CBRE in a CoStar Group report. "Technology and corporate tenants love state of the art campuses in amenity rich, transit oriented environments like Amazon's because these locations allow them to attract and retain the best talent in the workforce."

For more news and information visit Blumberg Capital Partners.