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PORTLAND, OR-Unico Properties, a Seattle-based real estate investment and operating company, has recapitalized US Bancorp Tower in a transaction that values the building at $279.5 million. Two years ago, the last time Unico recapitalized the asset, the asset was valued at $185 million.

The 1.09-million-sf, 43-story landmark at the north end of the Downtown core is the largest office building in the city and is 94.7% leased. The anchor tenant is Minneapolis-based US Bancorp, which leases 473,000 sf. The lease runs through 2015; about 80,000 sf of the bank’s leasehold is subleased to third parties.

Unico acquired the building from US Bancorp in 2000 in a 50-50 partnership with Chase, which subsequently became JP Morgan Chase. The asset was valued at about $172 million for that transaction. In the third quarter of 2004, Palo Alto, CA-based Broadreach Capital bought out JP Morgan Chase and also acquired half of Unico’s interest in a deal that valued the asset at about $185 million.

This time around, institutional investors of JP Morgan Asset management bought out Broadreach and about half of Unico’s 25% stake in a deal that values the building at about $95 million more than two years ago.

Broadreach decided to sell the asset because it was able to meet its five-year return expectations in just two years, a source related to the company tells GlobeSt.com. Trevor Wilson, the Broadreach director responsible for investment activity in the Pacific Northwest region, was unavailable Thursday for comment.

In a prepared statement, Wilson says “the trading velocity in Portland, coupled with invigorated institutional interest in the CBD, made this a good time for us to sell our interest in this project. That being said, we continue to actively seek Portland investments as we believe that the underlying market fundamentals have only just begun to move upwards.”

Improvements made to the building during Broadreach’s ownership included significant upgrades to HVAC systems and renovation of the building’s 28,000 sf of ground floor retail. During its tenure, the building’s vacancy dropped from 8% to about 5%.

Unico officials aren’t saying exactly how much of a stake it now owns, only that the company retains a minority stake in the asset as well as the long-term management and leasing assignments. Unico’s Portland portfolio manager Brian Pearce tells GlobeSt.com that it retains a stake in the building not only because it likes the asset but also because it is required to as part of its original acquisition agreement with US Bancorp.

As part of the recapitalization, new securitized debt was placed on the property. “The old debt in today’s market wasn’t very good,” Pearce says. “We still maintain an ownership stake; we’re just taking advantage of lower cap rates and more favorable debt.”

Unico plans to reinvest its upside from the transaction, hopefully the lion’s share of it in Portland,” Pearce says. “This is a growth market for Unico.”

Some of the money will flow toward its $90-million, two-block development in the Pearl District. Block One will hold a mixed-use building anchored by a Safeway grocery store and topped with 82,000 sf of office space. Block Two will have 20,000 sf of ground-floor retail topped by 200-plus market-rate apartment units. The timeline calls for the Safeway building to be delivered in early 2008 and the apartment building in mid-2008.

US Bancorp Tower is the largest of three Portland CBD office buildings to trade hands this month. Earlier this month, Chicago-based Rreef paid about $70 million or $220 per sf to acquire One Main Place, a 20-story, 315,000-sf Downtown office building that is located near the waterfront. Earlier this week, Ashforth-Pacific Inc. paid $48 million or $200 per sf for One Pacific Square, a 13-story, 240,000-sf office building at the north end of the Downtown core. The US Bancorp Tower recapitalization priced the building at about $255 per sf. All three buildings were built in the early 1980s.

The only significant office building sale in the city that has crested $300 per sf occurred in November, when Ashforth Pacific and GE Asset Management paid $308 per sf for ODS Tower, a 24-story, 400,000-sf Downtown office building. That building, however, was built in 1999 and was 99% leased at higher rental rates, Pearce says.

“I don’t think anybody expected US Bancorp Tower would go for $300 per sf because ODS is a much newer asset and US Bancorp Tower is such a large asset,” Pearce says. “It’s 10% of the class A market here; that’s a huge amount of eggs to be putting in one basket.”

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