Microsoft’s landlord is cashing in after selling offices occupied by the computer giant.
Los Angeles-based investment firm Preylock bought the 245,000-square-foot One Esterra Park office building at 15550 Northeast Turing Street south of Microsoft’s Redmond headquarters for $225 million, the Puget Sound Business Journal reported. The sales price is more than three times its current assessed valuation, according to the Business Journal.
The seven-story building is located in the 28-acre Esterra Park mixed-use development, also home to 2,600 apartments, a dual-branded Aloft and Element hotel and 3-acre park. Microsoft signed a 15-year lease at the property four years ago.
The deal marks Preylock’s second Redmond real estate purchase this year. In January, Preylock bought an office leased by Amazon in Redmond Town Center for $58 million. Preylock’s other Seattle-area transactions include the acquisition of Willow Creek Corporate Center, where Meta is a tenant, in 2018 for $136 million as well as T-Mobile’s headquarters in Bellevue the following year for $467.5 million, according to the Business Journal.
The One Esterra Park sale is purportedly a sign that capital markets are beginning to stabilize, Mike Hubbard of Capstone Partners, which co-developed the $1.3 billion Esterra Park with PGIM, told the Business Journal. Boston-based Capstone and Houston-based Lionstone Group began construction at the Esterra Park site in 2013 after paying nearly $32.6 million for the future Esterra Park property that year.
Four years later, Capstone considered building more housing at Esterra Park in place of the planned office building that eventually went up. At the time, Microsoft was believed to be interested in such offices, though it hadn’t pre-leased any space and was reportedly using its current space more efficiently.
“They don’t need any office space from us, because they can create so much density on their own campus,” Hubbard said then, per the Business Times. “The demand for us is coming out of housing.”
In subsequent years, the Eastside became a hotspot for tech offices as Amazon, Google and Meta expanded into the area.
Office vacancy across the Puget Sound region ticked up from the previous quarter to 27.4 percent last quarter, according to CBRE’s second-quarter report. In the Eastside specifically, vacancy increased to 23.5 percent from 21.9 percent. — Chris Malone Méndez
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