One Twelfth @ Twelfth Undergoes Recapitalizing and Refinancing

BELLEVUE, WA—The recapitalization and refinance of the One Twelfth @ Twelfth office campus has been completed by Gemini Rosemont Commercial Real Estate in partnership with an affiliate of Beacon Capital Partners. Acquired in December 2016, the property had been held entirely on Gemini Rosemont’s balance sheet pending the completion of a capital improvement and leasing plan that was largely completed in 2019.

“We successfully implemented our strategy of completing several key capital improvement projects that helped us recast One Twelfth’s rent roll,” said Ian Brownlow, chief executive officer of Gemini Rosemont. “We attracted several top tier and credit tenants, including one of the world’s largest technology firms which will ultimately occupy approximately one-third of the campus. From the onset, we had planned on bringing in a capital partner when appropriate, and now was the right time to do so. The significant liquidity provided to Gemini Rosemont through this transaction will be used to acquire additional class-A assets in coastal and tech-centric markets in keeping with our acquisition mandate.”

The One Twelfth campus is a comprised of three six-story buildings totaling 480,187 square feet. The class-A LEED Gold-certified buildings are located just off the Interstate 405 corridor in downtown Bellevue, with more than 500,000 square feet of retail amenities within walking distance.

“In late December 2019, our new partner acquired an 80% interest in the joint venture formed to hold the asset,” said Jon Dishell, chief capital officer for Gemini Rosemont. “Beacon shares our vision for the asset, and we are looking forward to both working together to continue to increase One Twelfth’s value, as well as to pursuing other opportunities together.”

King County reports show the transaction was completed at $230 million but company officials tell GlobeSt.com that the total valuation is actually $288 million.

As a part of the transaction, the partnership financed the property with a five-year loan of $204 million from MetLife Investment Management. The floating rate loan includes a $19 million facility for future leasing costs and capital expenses.

“We will be upgrading areas that will help to make it a true core asset,” Dishell tells GlobeSt.com. “Bellevue rents and absorption are increasing. A quarter of the square footage will have rent increases during the next three years while existing leases are at below-market rents.”

Gemini Rosemont has an existing portfolio totaling approximately 8 million square feet with a gross asset value of approximately $1.6 billion.

The fourth quarter ushered the Puget Sound office market into historic territory by adding 1.6 million square feet of absorption, bringing the year-end total to 5.6 million square feet, according to a report by Colliers International. This is by far the highest annual absorption of the century.

2019 also marked the first time in recent memory that the region absorbed more than 2 million square feet in two quarters. Overall vacancy followed suit, dropping to 7% to close the year, again the lowest since the year 2000. Amazon was a big reason for the surge, moving into 853,000 square feet at its newly delivered Block 21 project in Seattle.

Google and WeWork influenced Eastside absorption in fourth quarter, moving into nearly 480,000 square feet of aggregate space in four buildings. Sales activity was just as robust as leasing in fourth quarter as buyers raced to avoid the new REET excise tax or add properties to portfolios by year end. The Puget Sound had $3.3 billion in volume transacted in 32 properties.

The Summit I, II and III properties in downtown Bellevue garnered the largest price tag of the quarter at $756 million. Both the high volume of transactions in this last quarter and the implementation of the REET are likely to impact future activity, says Colliers.