By Murray W. Wolf
KKR’s real estate unit assumes control of the vacant, 211,066 s.f. Cascadian
Even with an increased emphasis on life sciences, the building has remained empty since it delivered in 2021. (Photo courtesy of Real Retail)
SEATTLE – Cascadian – a vacant, three-year-old, nine-story, 211,066 square foot life sciences building at 330 Yale Ave. N. in Seattle – has been turned over to its lenders, according to a deed in lieu of foreclosure filed with the King County (Wash.) Department of Assessments.
A deed in lieu of foreclosure is an agreement between a borrower and its lender to transfer property ownership to the lender if the borrower does not make its mortgage payments. In lieu of foreclosure, the borrower relinquishes ownership of the property to the financial institution.
Although some local news media reported the Cascadian transaction as a “sale,” and even an indication that “Seattle’s life science market continues to draw investors,” it appears that isn’t quite accurate. According to King County records, no money changed hands, and the reported $161.76 million “sale price” was merely the appraised value of the property when the lenders took possession.
The deed in lieu of foreclosure, dated June 28 and filed with the county July 12, states that the grantor of the property was Cascadian Owners LLC. Taking possession were 330 Yale Owner LLC, described on the deed as KREF Grantee, and GA 330 Yale Member LLC, described as Forethought Grantee.
KREF, referred to in the documents as the “lead lender,” is an affiliate of New York-based KKR Real Estate Finance Trust Inc. (NYSE: KREF). KREF is externally managed and advised by an affiliate of KKR & Co. Inc., a global investment company also known as Kohlberg Kravis Roberts & Co.
Forethought, described as “a lender,” is an affiliate of Indianapolis-based Forethought Life Insurance Co.
KREF acquired a 74.61 percent interest in Cascadian and Forethought acquired the remaining 25.39 percent, according to the documents on file with King County.
Life sciences evolution
Since the early 2000s, the once primarily industrial South Lake Union (SLU) neighborhood has been gradually transformed into a hub of technology, biotech and residential development.
In July 2014, it was announced that Seattle-based PEMCO Insurance Co. would be relocating its longtime headquarters from a prominent site fronting U.S. Interstate 5 on the eastern edge of the SLU area. The roughly 2-acre site was a full city block bounded by Eastlake Avenue East, Yale Avenue, Thomas Street to the South and Harrison Street. It was occupied by two adjoining office buildings, a stand-alone parking structure and about 30,000 square feet of developable land.
In December 2014, the former PEMCO property was acquired for a reported $51.75 million by private equity real estate investment firm Unico Properties LLC, a subsidiary of Unico Investment Group LLC.
In summer 2017, it was reported that Amazon (Nasdaq: AMZN) planned to lease the three-story, 161,095 square foot former PEMCO headquarters building at 301/325 Eastlake Ave. E., known as the Yale & Thomas Building, which Unico was renovating. Amazon confirmed that lease in December 2017. (A Unico affiliate sold the 301/325 Eastlake property to Broad Street Principal Investments LLC, a Goldman Sachs affiliate, for $116 million as part of a 27-asset portfolio in December 2020.)
With the Amazon lease in hand for the southern end of the former PEMCO block, Unico moved ahead with a proposal for the ground-up construction of a new office building on the abutting lot at the northern end of the block, redeveloping the site of an existing three-story building and a surface parking lot. By 2018, Unico had received city approval for a plan to develop what was then referred to as the Yale & Harrison Building, a speculative nine-story office tower at 330 Yale St. N.
With the e-commerce giant Amazon leasing the building next door, the project that came to be known as Cascadian was originally positioned as a “creative office” building catering to other technology-related users. Construction began in summer 2019, with Perkins + Will as the architect and Sellen Construction as the general contractor. Along the way, Unico had brought in Zug, Switzerland-based Partners Group AG, a global private markets investment manager, as a capital partner.
With the LSRE market booming in the SLU area at the time, the developers recognized the opportunity and broadened the marketing to appeal to potential life sciences tenants. But, even with the increased emphasis on life sciences, the LEED Platinum-certified Cascadian was empty when it delivered in August 2021.
However, the property had caught the eye of other life sciences developers and investors. In September 2021, Partners and Unico sold the newly completed Cascadian to a partnership of Invesco Real Estate and LPC West, a division of Lincoln Property Company, paid $164.5 million, or about $779 per square foot (PSF), for the building with an eye toward a full “Class A” life sciences conversion. Newmark Group Inc. (Nasdaq: NMRK) brokered the sale. The new owners, through a partnership called Cascadian Owner LLC, took on a $188 million loan as part of the acquisition.
The original project team of Perkins + Will and Sellen was then tasked with modifying the interior spaces, transforming the building to a mix of 60 percent lab and 40 percent office. The conversion work was completed in fall 2022. CBRE Group Inc. (NYSE: CBRE) was retained to handle leasing.
Of course, we all know what has happened to the LSRE market since then, in Seattle and most markets nationwide, as aggressive new development outstripped softening tenant demand, driving down occupancy rates. According to an online CBRE listing, all of the lab space at Cascadian remains available.
According to the CBRE listing and information on file with the county, about 32,000 square feet per floor of speculative lab space is available on the second and third floors of Cascadian. The lab space is topped by six floors of office space, and there are plans to add more spec lab space on the ninth floor. The first floor consists of office space and a 1,852 square foot retail suite, which also remains vacant. The building has 31 underground parking spaces.
Now that the lenders have taken possession of Cascadian, KKR officials reportedly say they plan to invest additional capital “to position the property for success” and “to deliver new amenities and attract a roster of high-quality tenants.” The local Puget Sound Business Journal said that KKR indicated that it plans to continue to work with LPC West and CBRE, but did not mention Invesco.
To view the information on file with the county, please click here.
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