Island Corporate Center and 10 other commercial office buildings in Bellevue, Kirkland and Seattle will be under new day-to-day management after a receiver was appointed in King County Superior Court on Monday.
King County Superior Court Commissioner Nancy Bradburn-Johnson ordered on July 2 that Kirkland-based real estate investment firm Talon Portfolio LLC will act as custodian of the properties, effective July 9. The current owner, a Goldman Sachs-affiliated partnership called Whitehall Street Global Real Estate, defaulted on its commercial loan obligations to creditors Credit Suisse-First Boston on April 9.
The Puget Sound Business Journal reports that Whitehall owned a total of 11 office buildings totaling 2.6 million square feet of prime office space and the commissioner's order could result in renegotiated market-rate rents, tenant improvement and property upgrades.
Business owner John Kuder of , a local on the first floor of the Island Corporate Center, said the demise of Whitehall was expected after the huge downturn in real estate values during the Great Recession.
Whitehall amassed its portfolio of office properties at the market's peak in 2007 for a price of $900 million, according to court records. Island Corporate Center was purchased for $42 million. Its assessed value, according to the King County Assessor's Office, had fallen to $25,426,000 by 2010.
"It's encouraging that they have someone who will base leases on market value and that they treat it like a legitamately 'Class A' building," he said. "It seems as if nothing has been rented out for some time, and there's vast amounts of empty space here."
Kuder said despite attractive offers to relocate to Seattle, he kept offices here because his clients and staff enjoyed the relative ease of driving to Mercer Island and parking a few feet away from his door for free. But that hasn't been true for all businesses in the building. The office next to his, Suite 120, has been vacant for over 5 years.
Built in 1987 and located at 7525 SE 24th Street, the Island Corporate Center is Mercer Island's second-largest office building and holds 106,899 square-feet of "Class A" office space. The building makes up roughly 1/5 of Mercer Island's estimated 500,000 square-feet of office space, said Amber Bergin, an analyst at commercial real estate firm Cushman Wakefield. Island Corporate Center currently maintains a 70-percent occupancy rate, while the rest of Mercer Island is estimated at 88 percent.
There are 26 businesses currently located in the building. Twelve offices are currently available for leasing, according to commercial real estate broker Jones Lang Lasalle, at $33.60 per square-foot.
Lory Lybeck, managing partner of lawfirm , said he relocated his business from the troubled building in May 2011. Shortly after the building was purchased, he said, it became obvious that the building's owners were in trouble and the needs of his business weren't being met.
"I think they were less responsive to tenant needs," he said. "It was obvious that it was unsustainable. It seemed that, about 14 months ago or longer, a change in ownership was inevitable. When you have a business that doesn't run well, it's not worth investing in."
Lybeck & Murphy is now located at 7900 SE 28th Street on the top floor of the Chase Building, managed by local commercial real estate firm .
"They're very nice people, very responsive and a great landlord," he said. "We couldn't be happier."