Seattle Times business reporter
The developer who remade downtown's skyline in the 1970s and 1980s is no stranger to the financial brink. He has survived past crises only by selling some of his trophy properties, including the
76-story Columbia Center.
He spent much of the 1990s dealing with foreclosures, bankruptcies, receiverships and lawsuits from unpaid contractors. Seattle City Light threatened on several occasions to cut power to his properties because he hadn't paid bills topping $600,000.
And now, in this real-estate downturn to end all downturns?
"We're in fine shape," Selig says.
At least for the moment, he appears to be right.
• Other developers are scrambling to fill mostly vacant office towers completed after the real-estate bubble burst. Selig also delivered two empty projects in 2009 but since then he's leased most of one to the federal government and inked a tentative deal to fill more than half of the other with Seattle's most-watched biotech company.
• The vacancy rate in his 17 older buildings is in the single digits. For the greater downtown office market overall, it's pushing 20 percent.
• Some office landlords are struggling with debt they no longer can afford. A couple of buildings already have gone back to the bank, and more could follow.
Selig? He's carrying hundreds of millions in debt. But public records and loan-servicer reports give no indication he's in trouble with his numerous lenders.
And City Light says he's current on all 55 of his accounts.
What's Selig's secret? What's he doing differently this time?
Nothing, Selig insists. "Just working harder," he said in a terse, 13-minute telephone interview.
Selig hasn't changed, other landlords and brokers agree things just happen to have worked out better for him this time.
"He's been the cat with nine lives," said Matt Christian, a senior director at brokerage Cushman & Wakefield/Commerce.
But Selig does have an advantage over many other downtown landlords, industry insiders say.
Over the past two decades most of Seattle's big office buildings have been acquired by out-of-town investors.
"Twenty years ago the bulk of Seattle real estate was owned by people you could see walking down Fourth Avenue," said Rob Aigner, senior vice president of Harsch Investment Properties. "That's no longer the case."
Selig, who arrived in Seattle at the age of 3, is a throwback. He runs his own show no partners, no committees, no corporate higher-ups. That means he can respond to the market more quickly, insiders say.
With out-of-town, institutional landlords, "sometimes it's like turning a battleship," Aigner said.
"Martin can turn much faster."
Major office owner
Selig, now 73, remains among the region's biggest office owners, and probably still is the best-known.
His 19 buildings, which stretch from Lower Queen Anne to the Chinatown International District, contain 3.3 million square feet of leasable space more than two Columbia Centers. He also owns more than a dozen parking lots.
Twenty years ago, however, Selig cast an even bigger shadow. In the 1970s and 1980s he built office buildings at a dizzying pace, completing about one a year. He invested in neighborhoods where no office developer had gone before, like Belltown and the Denny Triangle. At one time he reportedly owned one-third of all the office space in greater downtown.
The Columbia Center, completed in 1985, was his crowning achievement, but some of his other projects became landmarks as well: the 25-story Fourth & Blanchard tower, known as the "Darth Vader Building" for its dark exterior and angled top, and the aluminum-sided Metropolitan Park East and West buildings, nicknamed the "Twin Toasters."
But Selig operated close to the edge, and when the real-estate market entered a prolonged downturn in the late 1980s his creditors came calling. The Met Park towers and Columbia Center were among properties Selig had to sell under duress.
New development slowed to a trickle. In the mid-2000s Selig attracted more attention for his politics than his business dealings.
He bankrolled unsuccessful initiative campaigns to kill Seattle's monorail expansion which later collapsed anyway — and to repeal Washington's estate tax.
Through all the ups and downs, however, Selig survived.
He's held on through at least two serious downturns before this one, said Greg Smith, principal with Seattle developer Urban Visions. "You can't help but admire his ability to weather these storms and come out the other side."
Rumors of demise
A year ago rumors of Selig's demise surfaced once again.
After a long stretch of relative inactivity, he had finished two of his biggest projects in years: a 17-story tower at Fifth Avenue and Yesler Way, and a two-building, 330,000-square-foot complex on the waterfront at 635 Elliott.
But the market had collapsed while those projects were being built. Between them, Selig's new buildings had just one small tenant and construction loans approaching $200 million.
Then, in April the General Services Administration (GSA), the federal government's real-estate arm, announced it had signed a 10-year lease and would move several agencies into Fifth & Yesler, taking about two-thirds of the tower.
For Selig, "it was a home run," said Christian of Cushman & Wakefield.
The story of how he snared the feds illustrates how Selig operates, industry insiders say.
"Martin is one who rolls up his sleeves every day and tries to keep his buildings full," said Sean Barnes, a vice president with brokerage Jones Lang LaSalle. "He's creative, he's tenacious, and he's working it every day."
Selig wouldn't discuss the deal, or any others. "I don't talk about my tenants, or my past tenants, or my prospective tenants," he said.
Here's what happened: Selig had staged a full-court press to lure the regional office of the Environmental Protection Agency to Fifth & Yesler from its longtime home, the Park Place building at Sixth Avenue and University Street.
He lost. In June 2009 the GSA renewed the EPA's big lease at Park Place for another 10 years.
Selig didn't quit. He filed an administrative appeal, arguing the GSA hadn't properly evaluated the bids, said agency spokesman Ross Buffington.
The details of that appeal aren't known — the GSA refused to provide any records, contending they are exempt from disclosure requirements.
But the agency did reopen the bidding. And, while it decided to keep the EPA at Park Place, it also concluded that other federal agencies needed more space, and that Selig's revised offer was "advantageous to the government," Buffington said.
Copies of the leases provided by the GSA show Park Place's owner had to reduce the rent to keep the EPA.
The government is paying even less for Fifth & Yesler.
Some industry insiders say Selig's willingness to accept lower rents is one reason his buildings have fewer vacancies. Selig says that's not so — but bond-rating agency Fitch made the same observation earlier this year when it examined a loan secured by seven of his properties.
Selig is a hands-on landlord, brokers say. He negotiates every significant lease in his buildings himself. He's been known to call 10 times a day in pursuit of a prized tenant.
"There's no marketing brochures," said broker Barbara Jacobson of The Jacobson Group. "They don't have voice mail over there. It's much more person-to-person."
Biggest deal now
What's next for Selig? Right now the biggest deal on his plate probably is up-and-coming biotech Dendreon, which signed a letter of intent this spring to lease 191,000 square feet at brand-new 635 Elliott for 15 years.
The lease still hasn't been signed. "Until we do so, we continue to pursue all opportunities," Dendreon Vice President Katherine Stueland said in an e-mail last month, declining further comment.
Several brokers said the hangup is finding financing to finish the space, an expensive undertaking for a biotech. But Dendreon has received city permits for those improvements in recent weeks. And city records suggest it may be taking even more space than originally announced.
That could be more good news for Selig. But he said he has no plans to build any more office projects anytime soon — and doesn't expect anyone else will for three to five years.
He is pushing for permits for a controversial apartment building just north of downtown's Olympic Sculpture Park. But he said his plan is to get that project approved, then sell the property.
Meanwhile, he's got a mountain of debt to manage just how much is unclear. "I don't discuss my debt," Selig said.
The biggest chunk apparently is nearly $400 million in mortgages on 14 of his buildings that have been packaged into commercial mortgage-backed securities. There are six separate loans, some interest-only, all with balloon payments due at maturity.
Other downtown landlords are defaulting on similar loans, or seeking modifications or extensions as maturities near. In some cases their debt now exceeds the depressed value of their buildings.
But most of Selig's debt doesn't mature for several years. "He's got time on his side," said Aigner, of Harsch Properties.
For now, according to the loans' servicers, Selig is making his monthly payments with only an occasional hiccup. The servicers have raised no red flags, or even yellow ones.
Fitch, the bond-rating agency, did calculate in a report a year ago that Selig's interest-only mortgage on his 3-year-old 333 Elliott building now exceeds the property's value. If market conditions don't improve, it said, investors could lose money when the loan matures.
But that isn't until 2017.
Will Martin Selig still be running Martin Selig Real Estate then? Selig said he has no plan to retire or turn over day-to-day management to any of his three children.
"There's a tremendous amount of experience there," Aigner said of Selig. "Hopefully, after all these years, you come away smarter."
0 comments:
Post a Comment
Tell us what you think