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CMA
July 29, 2016  

NYSTRS Financing Buyer of Amazon Offices

New York State Teachers has committed to provide $148 million of debt for the acquisition of a portion of Amazon.com’s Seattle headquarters.

The fixed-rate loan, with a term of five years, would be backed by the 317,000-square-foot Phase 8 of the online retail giant’s office complex in the South Lake Union neighborhood. The borrower, a group led by Mirae Asset Global Investments of South Korea, is buying the property from local developer Vulcan Real Estate for $246.8 million, or $782/sf.

The loan is expected to close in the next couple of weeks, in conjunction with the sale. Newmark Grubb is brokering the trade for Vulcan and advising the Mirae team on the financing.

New York State Teachers occasionally takes on large loan assignments. The pension system had a $3.8 billion mortgage portfolio as of mid-2015, its last reporting date. It focuses on fixed-rate loans on high-quality properties in strong locations. Overall, the pension system had a $5.5 billion real estate debt portfolio as of mid-2015.

The property, completed last year, is part of a massive 2.8 million-sf urban campus that Vulcan developed over the last several years for Amazon. Phase 8, a 12-story building at 325 Ninth Avenue, is designated LEED gold and has street-level retail space and a parking garage. Amazon’s lease runs until 2032.

Vulcan, owned by Microsoft co-founder Paul Allen, has sold off all but one piece of the campus. Amazon itself bought Phases 1-5, encompassing 1.8 million sf, in 2012 for $1.2 billion. A German investor, Union Investment, purchased the 395,000-sf Phase 6 last year for $301 million. Vulcan began shopping Phase 7 a few weeks ago, also via Newmark. That 319,000-sf building, fully leased to Amazon until 2031, is expected to draw bids of about $250 million.

The South Lake Union area has many restaurants, stores and nightspots that have helped attract technology companies in recent years. A recent survey by Newmark found that, since 2010, rents have grown annually by an average of about 11%, despite the completion of 4 million sf of office space over that period.