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SEATTLE- Citing the lack of access to debt capital, the Clise family has pulled from the market a 12-acre chunk of Downtown considered to be one of the largest metropolitan assemblages in the nation. Capable of supporting as much as 13 million sf of development, the portfolio of mostly parking lots and low-rise buildings was expected to fetch more than $600 million and cost an estimated $7 billion to build out.

Located between the Downtown core and South Lake Union in the Denny Triangle area, Clise put the portfolio on the market this time last year , saying it wanted to sell to a strong developer who could complete the redevelopment sooner rather than later. Prior to pulling the portfolio from the market, the company was reportedly in serious negotiations with an international developer that shared the company’s vision for a redevelopment project on par with London’s Canary Wharf or New York’s Rockefeller Center.

“We were unable to come to terms and collectively decided it would be best for both parties to re-examine the proposal after the credit markets settle,” says company chairman/chief executive Al Clise. “We do not take our decision lightly to withdraw from the market at this time, but we are not interested in disrupting the value inherent in the master plan for this site…. We are in no rush to sell a site that took 100 years to put together.”

David Doupé, a managing director of Jones Lang LaSalle, the advisor for the Clise offering, is confident the project will happen, “just not now,” he says. Doupé and fellow JLL managing director Michel Seifer had the exclusive assignment.

“When we brought this project to market in the summer of 2007, we knew it would take a very well-capitalized development player to complete the transaction,” Seifer says. “However, the debt markets seized up two months after our initial marketing efforts. Without access to reasonable debt capital, there is little reason to keep an offering of this size on the market at this time.”

Dave Christensen, head of Jones Lang LaSalle’s West Coast Real Estate Investment Banking team says transactions over $100 million are challenging to finance today for existing product, let alone a ground-up development of the size Clise envisions. “The Fed has injected some liquidity into the market, but it still has not revived the market for large new issuances, conditions that will not change overnight,” he says.

Jones Lang LaSalle conducted more than 60 tours from qualified potential bidders and received 15 final submissions to purchase. A number of submissions reportedly indicated interest in partnering with Clise Properties long-term on the redevelopment.

“Interested buyers had to best $600 million just to compete in this offering, and they did,” Doupé says. “We turned away several proposals that met the family’s target price but did not maximize the right concept.”

When the property came to market, Al Clise told GlobeSt.com that he wanted the redevelopment to happen sooner rather than later and that he was putting the property up for sale because Clise wasn’t a big enough company to get it done by itself in a reasonable time frame.

“I think it needs to happen now, (and) for us to do it, because of the size of the company we are, would be very difficult,” Clise says. “We have developed high-rise real estate for many years, but this is on a different level, a bigger level than we could probably do in any kind of timeframe. Others are better suited to do it than us…or we might do it with them.”

A 2006 up-zoning of the Denny Triangle area increased the allowable building height by 30% to approximately 40 stories, resulting in the Clise portfolio’s 13 million-sf potential. Land-sale comps suggest a property value of between $40 and $60 per sf that can be built, which translates to between $400 million and $780 million, depending on how much the buyer thinks it can develop and how much it‘s willing to pay on a per-sf basis.

Clise told GlobeSt.com last summer, shortly before the credit crisis began, that he expected the property to be sold before the end of the year. JLL’s Doupé told GlobeSt.com at the time that JLL was hired because of its access to international capital. “I’d say there’s a greater than 50% chance that the group that acquires the portfolio will include offshore money,” he said.

The portfolio has no historic preservation issues, no affordable housing issues and no long-term lease impediments. “Everything has construction clauses in them,” Doupé said. In addition, he said one parcel was far enough along in the development approval process that a buyer could be breaking ground for a one-million-sf office condo project this spring.

Clise Properties was founded in 1889 by JW Clise, who played an integral role in rebuilding Seattle after the Great Fire of the same year. As part of the business establishment, Clise supported the Denny Regrade Project, a massive 32-year effort begun in 1897 to connect Puget Sound to South Lake Union by razing Denny Hill. The result of that project was the Denny Triangle.

Second-generation family leader Charles F. Clise began buying property in the Triangle in the late 1920′s and 1930s. A citizens’ initiative in the early 1980s capped building heights, stunting development of the area. The city’s up-zone of the area in 2006 was part of its plan to channel growth to the urban core and maximize utilization of the region’s multi-billion investments in public mass transit.

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