Seattle's stature, bargain on building won over Russell
Russell Investments will move its headquarters from Tacoma to downtown Seattle's WaMu Center in 2010, lured by Seattle's higher global profile and a good deal on a slightly used skyscraper.
Seattle Times business reporter
As Russell Investments weighed whether to keep its headquarters in Tacoma or move to Seattle, the Downtown Seattle Association arranged a meeting this spring between Russell officials and the CEOs of a half-dozen major Seattle-based companies.
Tacoma, with state support, already had offered the global financial-services company $148 million in tax breaks and other incentives to stay. But Russell's leaders didn't want to talk money.
"They wanted to know, 'Does Seattle play on a global stage?' " Kate Joncas, president of the Seattle business group, recalled Wednesday. " 'Is Seattle competitive in getting the best talent from around the world?' "
Russell must have liked the CEOs' answers.
The company announced Wednesday that, after 73 years in Tacoma, it will move its headquarters and 900 employees by the end of next year into the 42-story tower known until recently as the WaMu Center.
Russell's parent company, insurance giant Northwestern Mutual, purchased the skyscraper — at a bargain price, sources said — as the move was being announced.
A high-profile player in global markets, Russell boasts offices on five continents and more than $151 billion assets under management. Its ties to Tacoma have weakened since its acquisition by Milwaukee-based Northwestern Mutual 10 years ago.
Andrew Doman, Russell's president and CEO, said in a prepared statement that the move will "place Russell in the center of a major Pacific Rim city, alongside other like-minded global firms and business pioneers."
Tacoma could offer money and history, but not the bigger city's bright lights.
The presentation by the Seattle CEOs was powerful, said Craig Kinzer, a real-estate consultant who advised Russell. The executives spoke of the benefits of doing business in such a diverse, culturally rich city, he said.
The move is in Russell's best interests long term, Kinzer said: "They'll have great opportunities not only to recruit, but to network with other ... businesses."
In his statement, Doman also attributed the move in part to "the unique conditions of the commercial real-estate market in Seattle." Russell spokeswoman Jennifer Tice would not elaborate.
But real-estate industry insiders said that because of the recession, Washington Mutual's collapse last year and fast-rising vacancy rates in the downtown Seattle office market, Northwestern Mutual almost certainly got its new building for a steeply discounted price — perhaps less than one-third of what it would cost to build now.
"They're getting a tremendous value by buying that building at this point in the market," said Matt Christian, a senior director at brokerage Cushman & Wakefield's Seattle office.
Neither Northwestern Mutual nor seller JPMorgan Chase would disclose the purchase price of the tower, which will be renamed the Russell Investments Center.
Russell is downtown Tacoma's largest private employer, and civic leaders there waged a fierce campaign to keep the company.
"[The move] hurts Tacoma a lot more than it helps Seattle," said Oscar Oliveira, managing director of the Broderick Group, another Seattle brokerage.
Russell's decision could attract other financial-services firms to downtown Seattle, he added. What's more, it gives the downtown office market a badly needed psychological boost.
The three-year-old WaMu Center, once Washington Mutual's headquarters, was acquired by JPMorgan Chase a year ago as part of its takeover of the failed thrift.
Since then, layoffs have largely emptied the building: Where more than 4,000 once worked, fewer than 500 are employed today. And Chase made no secret of its desire to unload the tower.
Russell spokeswoman Tice would not say how much of the 900,000-square-foot skyscraper the company will occupy. Other sources had said Russell was in the market for about 300,000 square feet.
Chase will continue to lease about three floors, spokeswoman Darcy Donohoe-Wilmot said. Its bank branch on the ground floor will remain.
As for the remainder of the building, Oliveira and Christian said the presumably low purchase price could allow Northwestern Mutual to offer lower rents and better incentives to prospective tenants than comparable downtown office buildings could.
"I'm sure they'll be aggressive," Oliveira said. "The question is, how much?"
In Tacoma, Mayor Bill Baarsma said he was "deeply disappointed" by Russell's decision.
"It's disappointing for employees, who will have to travel up that godforsaken freeway, or hopefully get on a bus or the Sounder, and it's going to affect their families and quality of life," he said.
Baarsma contrasted Russell's choice with the recent decision by kidney-dialysis giant DaVita to keep its 900-employee accounting and billing office in downtown Tacoma: "They said their employees are No. 1."
"Russell has been a big leader in Tacoma. ... They will be just another company in Seattle," said U.S. Rep. Norm Dicks, D-Bremerton, whose district includes downtown Tacoma and who worked hard to persuade the company to stay.
"I think we did everything we could," he said. "I just don't think we could compete with a discounted WaMu building."
In a written statement, Seattle Mayor Greg Nickels said he recognized the effect of Russell's departure on Tacoma.
But "the most important fact is that workers can stay in the Puget Sound area and that a prominent company will continue to call the Northwest home," he added.
Nickels and some Seattle City Council members insisted they did not offer Russell a tax break or other incentives to move, despite their plan to take up legislation that would lower the local business-and-occupation (B&O) tax rate paid by the company.
Under the proposal, Russell would avoid Seattle's highest B&O tax of 0.415 percent and instead pay a lower rate of 0.15 percent, saving roughly $450,000 a year. In a June 2 letter to a Russell representative, Nickels estimated the company would pay $250,000 a year in B&O taxes to the city under the reduced rate.
In the big picture, though, the Seattle tax-code change was more a friendly gesture than real competition with Tacoma, whose wide-ranging incentive package included complete elimination of its B&O tax for Russell.
Seattle City Council President Richard Conlin said Seattle did not offer any such major incentives and had no plans to do so.
"We didn't go out and solicit them," Conlin said. He said the only other possible city action for Russell would be a change to the restrictive sign ordinance to allow the firm to put a large Russell logo on its new building.
City Councilmember Jean Godden said in a news release that the council's Finance and Budget Committee, which she chairs, will take up the tax-code legislation next Thursday. Eight council members already have signed a letter generally supporting the proposal.
Tice said she knows of no other incentives Seattle has offered Russell.
She said the company is exploring ways to help workers with the new commute, as well as possible relocation assistance. Not surprisingly, most Russell headquarters employees live closer to downtown Tacoma than to Seattle, according to a recent state commuter survey.
A Downtown Seattle Association affiliate has plotted transit routes to downtown Seattle for every Russell employee, Joncas said: "That was a big hurdle for them — how to get people to work."
Russell's move does not solve the financial pressures facing the Seattle Art Museum, which owns a 16-story tower connected to the future Russell Investments Center and leased half of those floors to WaMu before the Chase takeover.
Those floors are now vacant. Museum spokeswoman Cara Egan said SAM still is searching for tenants.
Seattle Times staff reporters Jim Brunner and Mike Lindblom contributed to this report, which also includes material from The News Tribune of Tacoma.
Eric Pryne: 206-464-2231 or firstname.lastname@example.org
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