|
Puget
Sound Business Journal (Seattle) - June 30, 2003 |
|
|
|
Business Pulse
Survey:
Sonics arena
deal: too little, too late?
Real
Estate Notebook
Ex-Rainier
Brewery sale a mixed bag for Benaroya
Puget Sound Business Journal (Seattle) - June 27, 2003
The impending sale
of the old Rainier Brewery off Interstate 5 is bittersweet for Larry Benaroya.
Don't get him wrong.
Benaroya, head of the real estate development firm his father founded in 1956,
is content with the Benaroya Co.'s impending sale of the 15.87-acre site to
Seattle-based Ariel Development Inc.
But Benaroya had big
plans for the property a few years ago and a far better deal in the works.
When the company
purchased the property from Stroh Brewery Co. in 1999, Benaroya had planned a
massive redevelopment of the neighborhood. That plan withered when Sound
Transit said it planned to assert its rights to take two-thirds of the property
for a maintenance yard, he said.
The transit system's
action not only squelched Benaroya's proposed redevelopment, it also
subsequently nipped a particularly sweet deal in the bud.
"It was at the
height of the market," Benaroya recalled. "Some telecom folks wanted
to pay a huge amount for it."
When Benaroya told
the prospective buyer Sound Transit was taking a large chunk of the property,
the deal fell flat on its face.
The Sound Transit
sale was "a nice profit," Benaroya said. But he added wistfully,
"only a fraction of what we could have sold it for."
Stuck with an
awkwardly positioned property, Benaroya last summer hired a consultant to help
figure out how to reposition it. The old brewery currently is fully leased to
Tully's Coffee Corp. but only half-occupied. The solution: artists' housing.
That meant putting the historic brewery on the block again.
"We did the
plans and the pricing but we are not into rehabilitation. Our plan was to scrap
the building and then start new," Benaroya said.
Benaroya expects the
sale to Ariel Development will close within the next three weeks, with Ariel
developing artists' quarters and office space for nonprofit organizations in
the space that Tully's isn't using. Benaroya declined to disclose the purchase
price except to say it would not exceed the $6.5 million asking price.
Benaroya said he
isn't looking for property although, he admits, he's always ready to listen to
a pitch.
Particularly if it's
similar to a pitch made late last year by New York-based pension fund investor
TIAA-Cref, which purchased three of Benaroya's industrial properties in the
Kent Valley in one of the largest real estate deals in recent years.
Said Benaroya,
"They said just what I would have said -- 'We will be quick and we won't
retrade (negotiate for a better price after the agreement is signed).' I said,
'You write the offer and I will sell it to you quick and easy.' "
Benaroya is wistful
that there aren't nearly as many good sites to develop as there were in the
early days when his father, Jack, built the company's industrial portfolio in
the Kent Valley. He does admit that the industrial strip along the Duwamish
River south of downtown is "attractive and interesting to us."
"I'm chilling
for a while," Benaroya said. "We haven't been aggressive about
expansion actually for a few years. We put the brakes on -- if there is not
growth in the economy you can't develop new construction."
He has a different
style than his father when it comes to development, he said. But they share a
canny ability to know when to buy and sell property.
The elder Benaroya
sold the company's entire portfolio in 1984, just ahead of a slump in the real
estate market. His son re-entered the market with a bang in 1995, with a covey
of purchases just as the tech boom began.
The younger Benaroya
recalls struggling with the design of an industrial building at 236th and West
Valley Highway. Something about the layout bothered him, but he just couldn't
figure it out. His father had stopped in the office that morning and Benaroya
asked him to look over the plans.
Five minutes later,
his father came back with a sketch. He had changed the orientation of the
loading docks from west to north and south, making it far easier for trucks to
maneuver through the property. It was just the solution the younger Benaroya
had been seeking.
"I'm probably a
little more analytical in the work I do. He's more intuitive," Benaroya
said. "But there's no difference in our trying to be honorable, to do a
good job and give our tenants good service."
These days, Benaroya
is concentrating on keeping his buildings full. Tenants downsizing or going
bankrupt have led to an unprecedented 11.35 percent vacancy in the company's
properties, with some 300,000 square feet of space vacated recently.
Benaroya said his
biggest difficulty is convincing his struggling tenants to buy out their leases
so his company can find new tenants for their unoccupied space.
"Usually a
lease buy-out is a win-win," he said.
That's because as a
landlord he can offer better terms to the subtenants, such as an ability to
negotiate a sublease beyond the expiration of the lease or a concession on
tenant improvements.
Triad
launches residential construction company
Seattle-based Triad
Development has set up its own construction company to build its residential projects.
With a nod to the fact that Seattle and the San Francisco Bay area share the
same longitude, the new wholly owned subsidiary is named Longitude 122 LLC.
The newly formed
company will work on Triad's West Coast projects under construction manager Bruce
Moe, the former owner and founder of Titan Construction Corp. Its first
assignment will be a condominium project in Edmonds that currently is in design
review.
Rising insurance
rates for condominium projects are behind the creation of the new company. With
insurance rates up eightfold in recent years, few contractors are willing to
work on condo projects these days, said Triad executive vice president Ross
Woods.
"Most all the
general contractors now are not bidding on condos as general contractors,
although they will do them as construction management," Woods said.
By having its own
construction firm, Triad can obtain a wrap-up insurance policy. These umbrella
policies are written for a specific construction project and enable the
developer to extend its coverage to its general contractor and the
subcontractors. In return, the subcontractors pay a pro rata share of the
policy costs.
Another reason for
rolling out its own construction company: Condo construction is particularly
demanding work since units must be customized for each individual owner.
"It's
complicated dealing with a general contractor in trying to work through all
those changes that sometimes come on the spur of the moment or at the last
minute," Woods said.
Triad was formed in
1984 by principals Fred Grimm and John Goodman and now has 20 employees.
Longitude 122 will have 10 employees, Woods said.
Reach Jeanne Lang
Jones at 206-447-8505 ext. 118 or jlj@bizjournals.com.
Contact the Editor
Need Assistance?
More Latest News 
Entrepreneur
Case Studies
Sponsored by 
All contents of this site ? American City Business Journals Inc. All rights reserved.