I wonder how this property became so valuable? From land valued at $4.5 million with negligible improvements to a quarter of a billion in five years.
Alexandria Real Estate Equities has sold a 70% interest in its 400 Dexter life sciences building in the South Lake Union neighborhood for $254.8 million, or $1,255 per rentable square foot.
Could it be the development taking place nearby?
“This transaction marks another strong data point reflective of the current demand for core life science product in Seattle,” said Kevin Shannon, co-head of U.S. capital markets for Newmark. “Life science fundamentals are faring better than the overall office fundamentals with rents that are now ranging from $65 to $80 (including operating expenses) annually, which allowed us to achieve record-setting pricing for the Puget Sound marketplace.”
[…]
“The Puget Sound ranks third nationally for life science growth over the past five years with venture capital having increased 200% during that time frame,” Jesse Ottele, executive managing director for Newmark, said in a statement.
What doesn’t make sense to me is how the building, shown here as improvements, is assessed at higher values each year while the land rises more slowly. The building was assessed at $24,330,400 in 2015, $230 million in 2020, while the land was assessed as being worth $5,160,000 in 2015 and $9,114,000 in 2020. The land — the location — is what become more valuable, not the building. And we know the rents charged by the landlord haven’t stayed where they were in 2015 while the land and location remained the same.
The property taxes are $1,773,255.28/year on property valued at $212,266,000 on about .27 of an acre. If the 1% rule holds, that should be about $2.1 million but I think the balance between the value of land and improvements is what needs recalibrating. That rise in value should be assessed on the land, not the improvements: the location is what’s making the money for the landlord and that value should be remitted back to the original investors — the taxpayers and those who live and work here.