High Hopes for Historic Tacoma Skyscraper

Downtown Tacoma is fortunate to have a handful of old structures that could easily serve as witnesses to the city’s history: Old City Hall (built in 1893); Murray Morgan Bridge (built in 1913); Winthrop Hotel (built in 1925); and the Elk’s Temple (built in 1915).

Another structure to include on that list is the Washington Building. Considered by many historians and architects to be a signature downtown Tacoma property, the building boasts terra cotta trim, a grand marble staircase in the lobby, and a penthouse suite with wrap-around views of downtown, the tide flats, and Commencement Bay. It also has a colorful history dating back to the early Twentieth Century. Construction of the building was originally started in 1919 by the Scandinavian-American Bank, but was halted when the bank failed, according to information from the Tacoma Public Library’s Northwest Room. The Washington-California Company took over construction. The building was dedicated by the city on June 30, 1925, and officially opened on July 2, 1925. It was touted as the “second tallest building in the Pacific Northwest” (behind Seattle’s Smith Tower). It is on the national and state historic registers.

After nearly nine decades, however, the building has seen better days. To be sure, the structure itself is in great shape: high-speed elevators whisk visitors to their destinations; a $200,000 lobby renovation three years ago still looks brand new; and an on-site superintendent makes sure all the equipment is up and running.

In August 2005, a group of investors led by Seattle-based Stratford Company purchased the 17-story, 125,000-square-foot building at 1019 Pacific Avenue for $9.7 million.

But five months ago, the Washington Building’s biggest tenant, the Washington State Attorney General’s Office, moved down the street and into the shiny, LEED-platinum Pacific Plaza — leaving behind six floors of vacant space. During an interview Tuesday with Michael J. Allan, building investor and owner representative, and David B. Morton, building manager, I inquired about the Washington Building’s vacancy rate. “I’d rather not share that,” said Allan. “We can’t deny that it’s tough. The economy is just terrible. Our vacancy is very high — much higher than we would like it to be.”

“The Great Recession is a big headwind in the commercial market that we’re just working our way through,” added Morton.

Another challenge for anyone leasing office space in downtown Tacoma: Russell Investments’ 900 employees moved out of the company’s 12-story building and into its new home in the former WaMu Center in downtown Seattle. Suddenly, there is a flood of available office space in downtown Tacoma.

If you have paid close attention to another iconic historic building downtown, Old City Hall, the Stratford Company name should be familiar to you. Two months ago, water pipes inside the Stratford-owned building froze then burst following an arctic storm, spreading approximately 30,000 gallons of water throughout the 117-year-old, 55,505-square-foot building and causing much damage. That forced the few tenants that were left in the building to evacuate. Last month, a law firm for Union Bank of California published a legal notice in the Tacoma Daily Index announcing plans to auction off Old City Hall on Jan. 7 if the ownership group failed to pay approximately $320,000 in missed mortgage payments, late fees, and related costs. Stratford Company founder and CEO George Webb reportedly reached an agreement with the bank last week that postponed the auction until March.

“From a marketing standpoint, I think there was a lot of concern about the viability of the building, the direction of the building, and some prospects were concerned that if they were going to move their business [to the Washington Building] that we were safe — and even to our vendors, to an extent,” said Morton. “One thing we emphasize is that, yes, there is some common ownership, but they really are different entities, different accounts, different ownership. I believe very few people in the syndication of the Washington Building have an ownership stake in Old City Hall. So they are very separate, but with a common thread.

Stratford really believes in Tacoma and made a substantial investment in downtown and I think they are in it for the long run,” Morton added.

As proof, Allan and Morton point to a Jan. 7 letter to tenants that outlines plans for this year. The ownership group has hired Neil Walter Company to launch a marketing campaign in February to draw new tenants. The group is also working with Umpqua Bank on a financing package that will “improve our cash flow, and thus our ability to maintain and improve the structure and attract new tenants,” said Allan. They have also completed a model office unit for prospective tenants and hired a designer to revamp common areas throughout the building. On Tuesday, Allan told me one of the building’s investors has provided $872,000 to “help us meet all of our financial obligations for a good many periods of time to go. So we’ve got some positive things to say about the building right now.”

And despite the economic downturn, Morton was able to attract 13 new tenants last year by focusing on small businesses and start-up companies. Lease rates range from $16-to-$18 per square foot. But single-user tenants can take advantage of a flat rate as low as $350 per month. Today, its biggest tenant is Encore, which invested $250,000 on renovating street-level space into an upscale night club that opened in October. Another big tenant, Sterling Savings, occupies the entire 13th floor.

On Tuesday, Allan and Morton spoke at length about a variety of issues related to the Washington Building. Here are some of their comments.

ON THE IMPACTS THE RECESSION HAS HAD ON LEASING SPACE AT THE WASHINGTON BUILDING

MICHAEL J. ALLAN: We can’t deny that it’s tough. The economy is just terrible. Our vacancy is very high — much higher than we would like it to be. This whole economy — not just Tacoma, but nationally — reminds me of when my 16-year-old daughter got behind the wheel of my stick-shift Volkswagen. She started it up and it died. She put it in gear, it got a few feet, sputtered, and then locked up. That went on for a couple blocks before she finally got going. That’s kind of the way I feel about the economy. The doggone thing is just lurching forward a little bit at a time, but eventually that will smooth out and we will be on the road.

ON THE IMPACT OF THE WASHINGTON STATE ATTORNEY GENERAL’S OFFICE MOVING OUT OF THE BUILDING

ALLAN: That hurt a lot. They were a good tenant. They had been here a long time. They occupied six floors. It’s very unfortunate that we lost that tenant. If I can be really candid, I think it’s unfortunate that a state agency facing a budget shortfall chose to double the rent that they pay in this market. What that will mean is that’s one of the contributing factors that the state has to deal with and it will result in cuts to health insurance for the poor, disability payments to people who are disabled and unable to work, and serious cuts to social services while, at the same time, a state agency has chosen to double the rent they are paying.

DAVID B. MORTON: We actually looked into it pretty closely and the main reason they gave [for leaving] was that they wanted to increase efficiency by being consolidated on a fewer number of floors. I think they are on two or three floors there [at Pacific Plaza], I’m not sure, whereas they were on six floors here.

ON WHAT IMPACT THE FORMER RUSSELL INVESTMENTS HEADQUARTERS BUILDING (NOW VACANT) WILL HAVE ON LEASING AT THE WASHINGTON BUILDING

ALLAN: I don’t think they are a competitor. I have never been inside the building. I tried to go over there the other day and get in but it’s all locked up. From what people have told me, it’s a building designed for a single large user. They are going to be looking for a much different size and type of tenant than we are looking for in this building. It’s also kind of a strange building. I don’t know if you have ever been over there, but it’s not very visitor-friendly. I counted the steps from the sidewalk up to the front door: there are 41 steps to get to the front door. It would be a great building for a large user that doesn’t want any traffic coming in to visit. It’s good for a large company like Russell Investments or a large insurance company that does all its business by telephone or the Internet and doesn’t want any walk-in visitors at all. I think smaller tenants will not be interested in that because they will want people to be able to park fairly close by, walk in, and take an elevator up to where they are going. It’s a different building altogether.

MORTON: That’s a Class A building. It’s more space to absorb, for sure. But it shouldn’t affect our site too much. There are just not that many [large-size] tenants on the market right now. We’ve been focusing on — and have been very successful with — the small tenants basically because they are in the market right now. We can accommodate them really well here. We’re reserving some of our bigger spaces — for instance, the space the Attorney General’s Office vacated — for those types of large users and we’re in-filling some of the other spaces we have. We can accommodate anything from 200 square feet all the way up to 30,000 square feet if we combine floors.

ON THE OWNERSHIP STRUCTURE OF THE WASHINGTON BUILDING AND HOW IT RELATES TO OLD CITY HALL

ALLAN: The building is owned by five different entities. Actually, four now. Originally it was five. There were two individual owners — I’m one of those. The partner, who is no longer involved, was the other one. There are three LLC’s. One of those LLC’s is the Stratford Fund, and that is the entity that George Webb is involved in. George has some ownership through the fund. He is also the manager of the LLC, which is the umbrella of the syndication. He’s also the property manager and the one who hired David to come in and manage the building. George has several relationships with the building, including being one of the owners here.

MORTON: From a marketing standpoint, I think there was a lot of concern about the viability of the building, the direction of the building, and some prospects were concerned that if they were going to move their business [to the Washington Building] that we were safe — and even to our vendors to an extent. One thing we emphasize is that, yes, there is some common ownership, but they really are different entities, different accounts, different ownership. I believe very few people in the syndication of the Washington Building have an ownership stake in Old City Hall. So they are very separate, but with a common thread. Stratford really believes in Tacoma and made a substantial investment in downtown and I think they are in it for the long run. The great recession is a big headwind in the commercial market that we’re just working our way through.

ON RECRUITING NEW TENANTS IN 2010

MORTON: Our largest tenant is Encore, which is the group that owns Varsity Grill. They launched their night club. The rest are a real variety of smaller businesses. We have two massage therapists, a construction company that focuses more on government work and has been expanding, a property management company that takes care of properties owned by banks, a gentleman on the 16th floor who does seminars to improve communications in cockpits for flight crews, a graphic designer, a young lawyer who went out on his own — it’s just a real nice variety of businesses. A range of people going out and starting their own business.

ON THE WASHINGTON BUILDING’S HISTORIC PEDIGREE

ALLAN: The building obviously is an historic, classic design. I always tell people when I talk about the building is the fact that it’s a classic and historic icon right in the heart of Tacoma. This intersection right here [at South 11th Street and Pacific Avenue] is the very heart of Tacoma, which is a marketing cue for us because a lot of people like to be in the heart of things. They want to be in center court. The fact that we have an historic building in a prime location is an advantage.

ON MAINTAINING AN 85-YEAR-OLD HISTORIC BUILDING

ALLAN: Plumbing is a constant maintenance requirement for us. We had one plumbing plug that cost us $3,000. We had to go in through some space between floors, cut a four-inch waste line, remove that, remove the obstruction, and then get it welded back into place. It was just a very costly thing. That’s very common in a building like this. You just have to stay on it. That’s one of the many reasons I’m really pleased we’ve got building superintendent Alphonso Melton. A lot of buildings in town don’t have a full-time building superintendent. They have to call somebody in and there’s always that delay. We kind of have a handle on it.

MORTON: It’s been a real education in building systems. The building hasn’t been stagnant for 85 years. There have been constant improvements. The HV/AC system was put in around 1976 and I have some very interesting archival photos of them craning in the cooling tower and excavating and sliding the chiller in. I think there was something like four miles of copper pipe installed in this building at that time. It’s pretty fabulous. Most of the components in the building have been very well maintained. So far, we have been very fortunate that most of the equipment is still serviceable. It’s quite good quality. The compressor that runs all the pneumatics in the building are probably from the 1950s. We had our technician look at it and he said it’s a beautiful machine. If we keep it up it can run for a long time and be rebuilt when necessary. But it’s like a ship. It takes a lot of maintenance and constant supervision of the equipment.

"We can't deny that it's tough," says Washington Building investor and owner representative Michael J. Allan (right) of the current recession. "The economy is just terrible. Our vacancy is very high -- much higher than we would like it to be." Still, Allan and building manager David B. Morton (left) are working with a commercial real estate broker and a local bank to draw new tenants and make investments in the historic 85-year-old building in downtown Tacoma (PHOTOS BY TODD MATTHEWS)

“We can’t deny that it’s tough,” says Washington Building investor and owner representative Michael J. Allan (right) of the current recession. “The economy is just terrible. Our vacancy is very high — much higher than we would like it to be.” Still, Allan and building manager David B. Morton (left) are working with a commercial real estate broker and a local bank to draw new tenants and make investments in the historic 85-year-old building in downtown Tacoma (PHOTOS BY TODD MATTHEWS)

To read the Tacoma Daily Index‘s complete and comprehensive coverage of downtown Tacoma’s historic Washington Building, click on the following links:

Todd Matthews is editor of the Tacoma Daily Index and recipient of an award for Outstanding Achievement in Media from the Washington State Department of Archaeology and Historic Preservation for his work covering historic preservation in Tacoma and Pierce County. He has earned four awards from the Society of Professional Journalists, including third-place honors for his feature article about the University of Washington’s Innocence Project; first-place honors for his feature article about Seattle’s bike messengers; third-place honors for his feature interview with Prison Legal News founder Paul Wright; and second-place honors for his feature article about whistle-blowers in Washington State. His work has also appeared in All About Jazz, City Arts Tacoma, Earshot Jazz, Homeland Security Today, Jazz Steps, Journal of the San Juans, Lynnwood-Mountlake Terrace Enterprise, Prison Legal News, Rain Taxi, Real Change, Seattle Business Monthly, Seattle magazine, Tablet, Washington CEO, Washington Law & Politics, and Washington Free Press. He is a graduate of the University of Washington and holds a bachelor’s degree in communications. His journalism is collected online at wahmee.com.