Tech companies, including Zulily, have had great success in the 114-year-old building that sits at the corner, and it’s paid off handsomely for different real estate investors over the years with Portland-based Felton Properties being the latest.
Last week, Felton sold the brick-and-beam building for nearly $27.7 million to Urban Renaissance Group of Seattle. That’s 38 percent higher than what Felton paid for the building seven years ago.
The price hike comes even though Zulily’s is moving out of the former cold-storage building at 2200 First Ave. S. Zulily, whose lease expires in July, is relocating to a large Seattle building at 2601 Elliott Ave.
Already companies are expressing interest in taking all or part of the four-story building, said Urban Renaissance Group CEO Pat Callahan. No leases have been signed, but the new owner does have proposals out to prospective tenants, he said.
Seattle real estate investor David Zarett bought the cold-storage building in 1997 for about $1.2 million and spent $8 million converting it to office space. Since then, an all-star group of companies has occupied the 106,500-square-foot structure.
One tenant was the Cobalt Group, which designs websites for auto dealers. Four years ago, ADP bought Cobalt for $400 million cash. Then there’s Zulily, the daily deals website that sells clothes and other items for moms and kids. Zulily went public in November and made $253 million.
Felton CEO Matt Felton said none of his company’s leasing expectations for the building were realized. With Zulily moving out, the company would have had to lease it up. Plus, Felton’s investment partner, an unnamed institution, wanted to exit the deal, he said, adding he is pleased to sell a soon-to-be-vacant property for significantly more than what his company paid for it.
Last week’s sale of the building was an off-market deal. Callahan said Urban Renaissance Group approached Felton about buying the “classic and irreplaceable” building. “A lot has been invested in the asset and that attracted us to it,” Callahan said.
Callahan also likes the neighborhood, which is transitioning from an industrial area. Seattle’s two professional sports stadiums are just to the north, and Starbucks’ headquarters are kitty-corner to the southwest.
Dan Dahl and David Gurry, commercial real estate brokers with the Seattle office of Colliers International, helped facilitate the sale, and are marketing the space for lease to tech and other creative companies.
Because of the character of the building, “I don’t think we’ll have much down time” between when Zulily’s lease is up and new tenants move in, Dahl said.
By MARC STILES – Staff Writer
This story has been updated with comments from Matt Felton. Portland Business Journal Staff Writer Wendy Culverwell contributed to this story.