For Boston Properties, the cost of expanding into the Seattle market was much higher than the initial buyout.

The company, one of the largest office landlords in the United States, completed its second acquisition in Seattle last month when it acquired Madison Center for $730 million, or $960 per square foot, from a joint venture of Barings and Schnitzer West. Newmark’s co-head of U.S. capital markets Kevin Shannon brokered the sale, which he called the biggest multi-tenant office sale of the year to date.

“Ownership stabilized and there were a lot of people inquiring off-market,” Shannon said. “The depth of investment capital that has driven this asset reflects the belief that capital has in the fundamentals of the Seattle office market. Office job growth is exceptional in this market, and its technology and life sciences are attractive.”

Boston Properties entered the market last July when it spent $465 million, or $567 per square foot, to acquire Safeco Plaza, a 50-story, 800,000-square-foot tower one block from Madison Center. .

“After exploring the Seattle market for some time, we were thrilled to acquire Safeco Plaza last year as our first flag in the market,” said Kelley Lovshin, Boston Properties’ vice president for the Seattle area. Seattle in an email. “The diversity of businesses headquartered here, positive population growth, and easy access to talent make Seattle a vibrant and sought-after location.”

The company acted as a cash buyer. According to its first-quarter earnings report, it funded the Madison Center acquisition with a $730 million one-year term loan, but ultimately plans to fund the acquisition through additional asset sales. structured as like exchanges or joint venture equity. Overall, the company expects to sell between $700 million and $900 million in assets in 2022.

“Debt buyers are affected by interest rates,” said Newmark’s Shannon. “Cash buyers are taking advantage of this to capture an inordinate share of trades right now. They gravitate towards trophy markets and assets.

The 37-story Madison Center was completed in 2017 and certified LEED Platinum by the US Green Building Council. It was Fitwel Viral Response Certified in 2021. At $960 per square foot, Shannon estimates the value to be slightly below replacement cost, as construction costs for a similar building would currently be around $1,000 per square foot. Additionally, the building has been grandfathered to certain building codes which offer additional savings over new developments.

Despite the Pacific Northwest’s penchant for rain, amenities include a rooftop terrace with panoramic views. Tenants can also use common and private meeting spaces such as a great room with a three-story fireplace and living wall, conference/training center, boardroom, and library. The Washington Athletic Club operates a 5,700-square-foot fitness center in the building, and Amazon Go runs a cashier-less marketplace on the ground floor. The area is sought after for its excellent access to highways and public transit, and is adjacent to future East Link light rail extensions.

In addition to being the major headquarters of Microsoft, Amazon and Nintendo, Seattle has attracted more than 100 out-of-town tech companies that have expanded to the city over the past decade, according to industry tracker Geekwire.

“We have nationwide relationships with many of these customers, and we look forward to deepening our relationships with them through our expansion into the Seattle area,” Lovshin said.

Tenants include technology and professional services companies such as entertainment company Hulu, accounting firm E&Y and the headquarters of law firm Davis Wright Tremaine. At the time of acquisition, it was 93% leased to 20 companies with a weighted average lease term of seven years.

Madison Center was completed nearly a decade after developer Schnitzer West acquired the site. The original office plans stalled in 2008 due to the Great Recession, but construction moved ahead in 2014. The intersection where the building sits has been completely transformed in recent years.

The neighboring F5 tower at 801 Fifth Avenue leased its entire 516,000 square foot office portion to F5 Networks in 2018 at a starting rate of $40 per square foot per year, rising to $56.52 per foot by the end of its 14.5-year lease, according to documents filed with the Securities & Exchange Commission. South Korean hotel brand Lotte operates a 189-room hotel on the lower floors of this building.

Although the Seattle market suffered pandemic-related job losses, it rebounded faster than other coastal markets heavily dominated by tech companies such as San Francisco. Asking rates were $51 per foot in the first quarter in the Seattle CBD submarket where the Madison Center is located, according to Newmark’s Office Market Report. That’s down 1.1% from the first quarter of 2021, but up about 10% from five years ago. Tech employers have added 16,000 jobs over the past two years in the greater Seattle area, and the region’s unemployment rate fell below 4% in February 2022 after hitting 16.6% in April 2020.

With the addition of this building, Boston Properties’ portfolio totals approximately 54 million square feet across 200 properties in Boston, Los Angeles, New York, San Francisco, Seattle and Washington, D.C. Eleven of these properties are under construction or in redevelopment course.