500 MILWAUKEE WAREHOUSE
Algona, WA
Facility Lease-Up
Transaction Size: 278,038 Sq. Ft.
Transaction Value: $9,250,000
The Situation
In August 2004, KG Management Investment Company hired NAI Puget Sound Properties to lease on their behalf the 500 Milwaukee Warehouse, a proposed 278,038 square foot warehouse to be built in the south end of the Kent Valley (Algona, Washington). This property was tucked away behind an existing building owned by RREEF. The only access to this building was through a new road that was to be built to allow access to the property. The property had no visibility or exposure to the freeway or to any other major arterials. This project was one of six spec developments that were under construction in Pierce and King County.
Our Solution
Prior to completion of the project (which was April 1, 2005), NAI Puget Sound Properties had leased the entire building to two tenants. The first tenant was Broder Bros; they signed a seven-year lease for 160,000 square feet. The second tenant was Central Pet; they signed a 10-year lease for 118,000 square feet. Both tenants paid the proforma rate, which was $0.31 per square foot (shell) and $0.70 per square foot (office add-on).
By being able to lease this project ahead of its completion, NAI Puget Sound Properties saved the landlord the interest carrying costs on the building and was able to increase the yield by signing a long-term tenant at a proforma rate. Fully leasing the building prior to its completion also prevented the landlord from having to reduce its rents to compete with the other five projects that were available. At the same time 500 Milwaukee was being leased up, the other five projects in the market were still vacant and had reduced their asking rates to $0.28 to $0.29 per square foot (shell). Also, NAI Puget Sound Properties participated in the design of this property and made several suggestions, which contributed to making the building more efficient to the user.