At $117 million, the price works out to $136 per square foot, which is no more than 40% of current replacement cost and well below what it cost to build. The exact project cost is difficult to calculate because the scope included a 300,000-square-foot expansion of the Seattle Art Museum. The total cost, including the museum expansion and six levels of underground parking, was $350 million, according to Seneca Real Estate Group, which provided development management services for the project.

Regardless, the price appears to be in line with recent estimates on the value of the portfolio Chase is unloading, especially given the fact that the building is largely empty. In addition, the building was designed to house a single tenant so there will be costs involved in to convert the building for lease to multiple tenants.

Investment specialist Andy Miller, a partner with Seattle-based GVA Kidder Mathews, tells GlobeSt.com that "from an economic standpoint, in the short run, it's probably a fair price, but it's so far below replacement cost that from a longer-term perspective it is an absolute steal. Unless there are additional sales supporting that price most people will write this off in the short run as an anomaly."

"It's definitely a fire sale but from Chase's perspective it's free money," says a local market specialist on condition on anonymity, because his firm is one of several seeking the the leasing assignment. "It was rolled into the purchase of Washington Mutual so it's on their books basically for free."

As reported earlier this week, Northwestern Mutual will use approximately 300,000 square feet of the building to house Russell Investments, a global financial services firm it owns that has been based in Tacoma for the past 73 years. The only other tenant is Chase, which plans to consolidate its operations onto three floors, which equates to about 60,000 square feet. Washington Mutual, before being seized by the federal government and sold to JP Morgan, housed some 4,000 employees in the building.

Upon Russell's move-in in 2010, the building's name will be changed to Russell Investments Center. A source with Northwestern Mutual Life tells GlobeSt.com that it will not be moving any other of its operations into the building, in part because Russell Investments is its only operation housed outside of its two corporate campuses in Milwaukee.

That means the remaining 500,000 square feet in the building will be marketed for sublease. Given Northwestern Mutual Life's low cost basis in the asset, even with the extra costs associated with multi-tenanting the building it will be able to offer below-market lease rates, which would force other owners of new Downtown buildings to lower their lease rates in order to compete for any near-term requirements in the market.

Several speculative class A-plus properties were delivered to the Downtown market in the second half of 2009 and all of them still have huge vacancies. The current asking lease rate for class A-plus properties in the Downtown core is approximately $30 per square foot, triple net, and negotiated rates are coming in 10% to 20% below that mark, according to local sources. Given its low cost basis, Northwestern Mutual could offer the space for $20 per square foot, triple net, and still make a healthy return on its investment.

"They will easily be able to undercut $25 triple net, which is the best we've seen for new construction here, and when you condense the price at the top you lower everything," another local brokerage source tells GlobeSt.com. "Their cost basis is below every single building here that has traded in the last five years and they have a much shorter distance to go from a TI perspective than brand new construction. It will compete very favorably."

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860,000-SF Former WaMu HQ Trades for $115M

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