Russell Building Sold for $64 Million (21. December 2006, 12:28 by Derek) ~ Big Sale
This story is a few days old, but here it is…
The News Tribune reports that the Russell Investment Group building on A Street was sold for $63.7 million to a Seattle investment group.
Ilahie Holdings Inc. will manage 909 A Street’s investment in the building, said Ilahie President Nate Dreon.
The private investment company bought the Russell headquarters building because it believes in the future of Tacoma, said Dreon.
$281 per square foot for the twelve story 226,000 square foot building. Interesting.
Link to The News Tribune
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There was no announcement to Russell employees, so I would not anticipate any changes. Just some people realizing a profit.
1 | Posted by Kevin | Dec 21, 01:24 PM
Why do you find the $281 psf price interesting?
My guess? Dig this:
133 + 281 = 414
133 X 281 = 37373
It’s all about the cool numeric palindromes dealing with 133.
3 | Posted by jamie from thriceallamerican | Dec 21, 02:45 PM
I find the sale price of $281/sf interesting in what it implies about the market. I don’t know much about commercial real estate prices, but stay with me on some math…
$281/sf purchase and a lease rate of $20/sf (~ Wells Fargo rates) means a gross rent multiplier of ~14. This seems high to me.
If these were income and price numbers for a residential property, you might be able to get a return of 4%/yr for an all cash investment. (Not including appreciation/tax benefits/etc.)
I know there are some commercial real estate readers out there. Are these $/sf numbers the norm these days?
5 | Posted by DavidS | Dec 21, 04:36 PM
What the articles haven’t mentioned is that the seller has only had the building for about 2 years. They picked it up in 2004 for $52M. That’s a $12M or 23% return – not bad!
What does the future of Russell in Tacoma hold? Since it was sold to Northwestern Mutual in 1999 and is still here, we can hope that there are no changes on the horizon.
6 | Posted by morgan | Dec 21, 04:41 PM
I’m assuming that lease rates in the Russell building could easily trump those in the Wells Fargo building: newer, better views, etc. Granted Russell Investments might be locked in at a good rate, but I’m sure the price potential is huge for that building. Then again, I probably know even less about commercial real estate than you do…
7 | Posted by jamie from thriceallamerican | Dec 21, 04:42 PM
Are these $/sf numbers the norm these days?
These are not normal days.
8 | Posted by morgan | Dec 21, 04:43 PM
Possibly just another sneaky tax-evasion strategy by our corporate overlords? Does anybody else hear the sound of cooking books and paper shredders through the conical ear flaps of their tinfoil hats? Even so, seasons greetings comrades!
9 | Posted by RR Anderson | Dec 21, 06:06 PM
(Just getting a jump on Friday…)
“It’s all about the cool numeric palindromes dealing with 133.”
Jamie, I’ll call your post, and say that’s the most brilliant discovery I’ve seen on Exit 10000101! I really think you’re onto something. What’s more weird is that the number 10050859271 takes exactly 133 iterations of reversal & addition to create a numerical palindrome! And of the 29 11-digit numbers that result in palindromes, an uncanny seven actually contain the number sequence 133 (and of course 331) in their resulting palindromes! And what does this all mean: $281.00 happens to be the exact price per mg. for goat anti-monkey secondary antibodies.
Go figure.
Like RR, I wish Happy Holidays and Merry Festivus to one and all of us.
10 | Posted by Dave L. | Dec 21, 07:23 PM
The real story here is the fact that the Russell Company has aligned all of their current leases in Tacoma to end in 2013. While the Russell Company is rumored to be needing upwards of 40,000 sq ft of additional space, they refuse to sign a lease beyond 2013. New York City here they come!
11 | Posted by Ol Timer | Dec 21, 11:03 PM
These kind of RE deals (medium-large commercial) generate values based on a buyer’s target return on investment that is based on a combination of cash flow and capital appreciation. The cash flow is easy to calculate if there is a long-term lease in place, as Northwestern Mutual is a credit tenant. Capital appreciation ought to be OK since Tacoma will increasingly benefit from the growth of the economy in the area, driven by Seattle.
However, I don’t think commercial office is terribly strong in Tacoma in general – how many new office buildings like the Russell building have been built lately or are under construction? You’ve got the Columbia Bank building, which is sort of a “B” class office building (that’s not a slur, you could call it a very small “A”, I guess). But there are no new Wells Fargo sized buildings going up in Tacoma. A number of rehab’s, like that old furniture building on Pacific, etc. But those workers were already here, I think.
The center of gravity for commercial office space is Seattle & Bellevue. Which is too bad, really. Developers here have not been able to attract big tenants to Tacoma, even though you’d think they should be able to based on the lower costs of doing business here and how many people commute up to Seattle every day on the buses & trains. You could easily fill an office building with them. Maybe the bosses don’t want to come to Tacoma, and it’s just cheaper to put the back office south of Seattle, but not this far south.
Interesting.
12 | Posted by RCC | Dec 21, 11:03 PM
That last post about 2013 was posted while I was writing my last one.
7 years isn’t bad, but not great. Of course Russell could move, but why should they? They’ve got offices in NY already for the functions they need to have there, as they do in other cities as well. Tacoma is way way cheaper than NYC, and their business is information based, so it’s matters less & less where people are physically located anyway.
My guess is they’ve lined up their leases this way so they have a stronger hand in negotiating a better deal with building owners & the government… a sweet tax deal with the city & state is the more likely scenario than a move to NYC. Russell has a bigger economic impact in the region than does, say, the Seahawks.
13 | Posted by RCC | Dec 21, 11:12 PM
I realized last night that 281 is also a prime number. But according to this page, it’s not just any prime number… The plot thickens.
14 | Posted by jamie from thriceallamerican | Dec 22, 10:52 AM
‘New York City here they come’
But where would the execs park their giant yachts – there would be no Gig Harbor to take advantage of and dominate….
15 | Posted by Les | Dec 22, 11:36 AM
Wow, that makes the prime numbers 277 & 283 seem pretty boring in comparison. I guess that’s why they make the big bucks. “$281” in Wingdings also makes sense, and isn’t too earth-shattering. On the other hand, when I then typed JAMIE in all caps…(!)
16 | Posted by Dave L. | Dec 22, 12:34 PM
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