Wright Runstad faces foreclosure on former Amazon HQ
Seattle developer Wright Runstad has defaulted on its loan on the PacMed building — Amazon's former headquarters on Beacon Hill — and the lender has begun foreclosure proceedings, according to a recent loan servicer's report.
Seattle Times business reporter
Seattle developer Wright Runstad has defaulted on its loan on the PacMed building — Amazon.com's former headquarters on Beacon Hill — and the lender has begun foreclosure proceedings, according to a recent loan servicer's report.
Amazon's lease expired May 1, leaving the 16-story landmark, a former hospital, mostly vacant and yielding no rental income for one of Seattle's most prominent developers.
The company missed its August loan payment, according to LNR Partners of Miami, which services Wright Runstad's $23 million loan from investment bank Credit Suisse.
"Borrower continues to try and lease the building," LNR wrote, "but lender is proceeding with foreclosure at this time."
All this could be saber-rattling: Owners of other financially troubled buildings, such as downtown Seattle's Columbia Center, have engaged in "strategic defaults" to prod lenders to modify their loans.
And there's no evidence so far of any foreclosure filing involving the PacMed building in King County court or property records — although the first step in foreclosure in Washington, a "notice of default" from lender to borrower, generally isn't recorded.
Wright Runstad President Greg Johnson declined to discuss the servicer's report or the company's dealings with its lender.
"All I can say is, it's a situation with a lot of moving parts," he said Tuesday.
Spokesmen for Credit Suisse and LNR declined to comment. The servicer's report lists Sept. 12 as the "foreclosure date," but it's unclear just what that means.
Rob Aigner, senior vice president of Harsch Investment Properties in Bellevue, said he doubts Credit Suisse would really want to repossess the empty PacMed building.
Less than loan balance
An appraisal last September valued the tower at $11.3 million, about half of what Wright Runstad owes on it.
"I can't imagine [Credit Suisse] wanting even a sniff of it," said Aigner, who emphasized he has no direct knowledge of the situation. "Who knows what's going on behind the curtain here."
Wright Runstad is a solid company, said Kip Spencer, co-founder of commercial real-estate database Officespace.com. "I would be very surprised if this is really a distress situation for them," Spencer said.
Wright Runstad has been looking for a new tenant since late 2007, when Amazon, which leased 13 of the building's 16 floors, announced it would relocate its headquarters to a new, 11-building complex in South Lake Union.
After Amazon moved out this spring, Johnson said Wright Runstad planned to tap reserves to make its loan payments and fulfill other financial obligations until a new tenant is found.
"We are incredibly focused on getting a new user," Johnson said in May.
A proposal to relocate King County's juvenile court and jail to the tower fell through last month. But other prospective tenants remain interested, Johnson said Tuesday.
Wright Runstad doesn't own the brick Art Deco tower, which sits above Interstate 5 and Interstate 90 at 1200 12th Ave. S.
Instead, it controls most of it through a 99-year lease signed in 1998 with the owner, the quasi-public Pacific Hospital Preservation & Development Authority.
Wright Runstad converted the building into office space and subleased it to Amazon.
For financing, the developer borrowed $23 million in 2000 from Credit Suisse. That loan was packaged with dozens of others, then sliced into commercial mortgage-backed securities that were sold to investors.
Wright Runstad still owes $20.5 million, according to LNR. Its monthly payments are about $181,000. The loan doesn't mature until 2030.
When the developer borrowed the money, the tower was appraised at $31.3 million — nearly triple the latest appraisal.
Lenders have been concerned for some time about Amazon's departure from the building.
In February 2010 Wright Runstad's loan was transferred to a "special servicer" — LNR — that handles debt that has defaulted or is in danger of defaulting.
Johnson said last year that Wright Runstad pushed for the transfer to help find a solution, and that a loan modification was under discussion.
Wright Runstad also missed a 2010 deadline to refinance and began paying higher interest as a consequence.
Credit-rating agency Fitch labeled the debt a "loan of concern" in July
In addition to debt service, Wright Runstad faces monthly lease payments of $143,000 to its landlord, the Preservation & Development Authority.
The developer is paid up through November, said Rosemary Aragon, the authority's executive director.
The authority uses the money to provide access to health care for the uninsured and underinsured.
A number of prominent Seattle-area properties have been repossessed — or turned back to lenders to avoid that fate — since the recession began.
Among them: the high-rise Bellevue Towers condo project; the new Seventh & Madison and 1100 Eastlake office buildings; the Burien Town Square condominiums; and the boutique, luxury 200 West Highland condo project across from Queen Anne's Kerry Park.
Other properties include downtown Seattle sites once slated for high-rise projects at Fifth Avenue and Virginia Street; 1915 Second Avenue; and Eighth Avenue and Seneca Street.
Eric Pryne: 206-464-2231 or email@example.com