Harbor Steps fetches steep price

Harbor Steps, the high-end, mixed-use apartment complex in downtown Seattle, has sold for $191.1 million, likely a record for a residential purchase in the region, real estate analysts said Tuesday.

The sale by Harbor Properties Inc. to Chicago-based Equity Residential officially closed Friday, according to papers filed with King County.

Analysts said the price shows how valued downtown Seattle real estate has become to regional and national investors.

"There hasn't been an apartment complex that has sold for that ever, not for that total dollar amount," said Greg Laycock, senior director in Cushman & Wakefield's Seattle office.

"To have a firm like Equity Residential purchase a trophy property like this is an indication of investor desire to place money in Seattle."

King County Assessor Scott Noble said the sales price probably is the highest for apartments in the Seattle area. "It seems to be," he said, adding that at the very least, it sets a record in recent history.

Equity Residential, which approached Harbor Properties this year about buying the complex, reiterated its position Tuesday about maintaining the status quo.

"We'll operate it as a residential property," said spokesman Marty McKenna, who declined to discuss the price.

With Harbor Steps, he said, Equity Residential now has 39 properties and about 8,470 apartments in the Seattle area.

Both parties announced the sale in May.

In addition to having 730 apartment units, which total about 649,000 square feet, the complex has 83,000 square feet of commercial retail space, fountains and a boutique inn.

Harbor Properties will use proceeds from the sale to develop affordable apartments in Seattle neighborhoods, said Doug Daley, its president and chief executive.

Mike Scott, president of Seattle-based Dupre + Scott, said Harbor Steps differs from other apartment complexes because it has office and retail space. But if its apartments are only counted, he believes, the sale will still be a record.

"Even if you're doing a $50 million transaction, you're in rarefied territory," he said.

The most recent record sale for an apartment complex was Carillon Heights, a 179-unit complex in Kirkland that sold in early September for $66.8 million.

Noble said apartment sales in King, Pierce and Snohomish counties last year totaled nearly $1.3 billion. "That was an all-time high," he said.

In comparison, the sale of Harbor Steps is about 15 percent of that amount.

It also appears to be a good time to own commercial space.

Marcus & Millichap, an investment brokerage company, is forecasting that average rent in the Seattle area will increase by 1.6 percent in 2005, after dropping every year since 2001.

"It should continue to gather steam in 2006 in most of the markets in the Seattle area," said Gregory Wendelken, vice president and regional manager in its Seattle office.

He added the region's improving economy is helping the rental market.

So how did Daley feel about Harbor Steps making the record books?

He kept everything in perspective, noting that another real estate deal could eclipse it.

"The market is funny," he joked. "(The record) may not be there for long."

P-I reporter Brad Wong can be reached at 206-448-8137 or bradwong@seattlepi.com.

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