The value of an Amazon-leased building in Seattle increased 25% in three and a half years.
Not the building…the land under it.
King County on Wednesday posted an affidavit that shows Alexandria Real Estate Equities (NYSE: ARE) sold the 5th & Bell building in the Denny Triangle for $118.7 million to Hudson Pacific Properties (NYSE: HPP). Hudson said it bought a leasehold interest and that the remaining term on the ground lease is 50 years.
Read that back: “Hudson said it bought a leasehold interest and that the remaining term on the ground lease is 50 years.” We don’t know the terms of the ground lease but if it wasn’t going to make a profit, they would never have taken it. Those payments on the lease could be going to the city tax coffers but instead will go to the speculators who know a good thing when they see it — unlike our electeds and the local chamber of commerce.
Hudson Pacific said it funded the acquisition with a combination of proceeds from the company’s recently closed preferred stock offering and a $75 million draw on its revolving credit facility.
I wonder how much of their revolving credit facility is made up of payments against and income from other land investment…the sort of thing that a city could also be doing, to the benefit of the taxpayers.
The 25% rise in value indicates Amazon.com Inc. has renewed its lease for the six-story building with approximately 192,000 square feet. In a press release, Hudson Pacific Chairman and CEO Victor Coleman said that with the purchase, the company has “nearly doubled our portfolio of premier quality, long-term-anchored office tenants” in the Denny Triangle.
25% in 3 1/2 years is pretty good. That’s 7.1% annualized. The Mercer project only offered 2.5% and it still would have paid out quite a lot. Imagine any other investment with a 50 year term that pays that well.