Amazon.Com Building Seattle, Washington
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Amazon.com Building Seattle, Washington Project Type: Commercial/Industrial Case No: C031006 Year: 2001 SUMMARY The Amazon.com Building is an adaptive use of a former U.S. Marine hospital located in the Beacon Hill neighborhood overlooking downtown Seattle, Washington. Situated on 9.1 acres, this 314,400-square-foot historic art deco structure was renovated extensively to provide unique office space for Amazon.com’s corporate headquarters. When the government conveyed the building and grounds to the Pacific Hospital Preservation and Development Authority (PacMed), it required that the hospital building continue to be used for medical purposes, but that requirement was eased to allow a mix of office and medical uses with the stipulation that the profits derived from the office lease be used as a long-term funding source for health care and support services for the medically needy FEATURES Preservation of a historic structure on the National Register of Historic Places Adaptive use of an obsolete medical building by conversion into modern, state-of-the-art office space Public/private cooperation Catalyst for neighborhood revitalization Creative solution for providing medical funding to an underserved community Amazon.com Building Seattle, Washington Project Type: Mixed-Use/Rehabilitation Volume 31 Number 06 April-June 2001 Case Number: C031006 PROJECT TYPE The Amazon.com Building is an adaptive use of a former U.S. Marine hospital located in the Beacon Hill neighborhood overlooking downtown Seattle, Washington. Situated on 9.1 acres, this 314,400-square-foot historic art deco structure was renovated extensively to provide unique office space for Amazon.com’s corporate headquarters. When the government conveyed the building and grounds to the Pacific Hospital Preservation and Development Authority (PacMed), it required that the hospital building continue to be used for medical purposes, but that requirement was eased to allow a mix of office and medical uses with the stipulation that the profits derived from the office lease be used as a long-term funding source for health care and support services for the medically needy. SPECIAL FEATURES Preservation of a historic structure on the National Register of Historic Places Adaptive use of an obsolete medical building by conversion into modern, state-of-the-art office space Public/private cooperation Catalyst for neighborhood revitalization Creative solution for providing medical funding to an underserved community DEVELOPER Wright Runstad & Company 1191 Second Avenue, Suite 2000 Seattle, Washington 98101 206-447-9000; fax 206-223-8791 http://www.wrightrunstad.com ARCHITECTS Shell and Core: Zimmer Gunsul Frasca Partnership 1191 Second Avenue, Suite 800 Seattle, Washington 98101 206-623-9414; fax 206-623-7826 http://www.zgf.com Tenant Improvement: SPACE LLC 1520 Fourth Avenue, Suite 400 Seattle, Washington 98101 206-464-9000; fax 206-447-0958 http://www.workplayce.com CONTRACTORS Shell and Core: Sellen Construction Company 227 Westlake Avenue North Seattle, Washington 98109 206-682-7770; fax 206-623-5206 http://www.sellen.com Tenant Improvement: Turner Construction 830 Fourth Avenue South, Suite 400 Seattle, Washington 98134 206-505-6700; fax 206-505-6701 http://www.turnerconstruction.com ENGINEERS Mechanical: McKinstry & Company 5005 Third Avenue South Seattle, Washington 98124 206-762-3311; fax 206-762-2624 http://www.mckinstry.com Electrical: Sparling 720 Olive Way, Suite 1100 Seattle, Washington 98101 206-667-0555; fax 206-667-0554 http://www.sparling.com Structural: Andersen Bjornstad Kane Jacobs (ABKJ) Engineering 800 Fifth Avenue, Suite 3800 Seattle, Washington 98104 206-340-2255; fax 206-340-2266 http://www.abkj.com SITE DESCRIPTION Located on a hilltop two miles southeast of downtown Seattle, the property overlooks downtown, Puget Sound, the Olympic mountain range, and Mt. Rainier. The 9.1-acre triangular site is in Beacon Hill, a residential neighborhood on the east side of Interstate 5, populated largely by descendants of immigrant families. The entire campus is surrounded by a black wrought-iron fence with concrete posts. There are eastern and western entrances to the site, with the western entrance driveway lined with large birch trees and historic art deco streetlights. The Amazon.com building is situated in the center of a large open space, surrounded by mature trees and landscaping. Designed by the Seattle architecture firm of Bebb & Gould, the 16-story, 312-bed hospital was completed in 1932. There are six quaint houses, called the Quarters buildings, on the site’s perimeter that were built with buff-colored brick and copper rooftops. Originally developed as housing for the staff of the Marine hospital, they later were converted into additional space for medical and administrative offices. A new, freestanding four-story parking structure also was designed to mimic the brick pattern, color, and art deco architecture of the original building. The new parking structure, completed in December 2000, lies to the west of the tower building and augments the existing parking structure to the east. DEVELOPMENT PROCESS The developer, Wright Runstad & Company (WRC), learned that Amazon.com was actively seeking new office space and looked for an opportunity that fit its needs. Amazon had several choices for space, but it ultimately decided that the PacMed building best fit its corporate culture. Once the dot.com expressed interest in subleasing the retrofitted space, WRC began to complete the predevelopment and entitlements process. When WRC approached PacMed with a proposal to convert its building from medical to office use, PacMed had been seeking a buyer or a tenant for seven years. A public development agency of the city of Seattle, PacMed administers 13 clinics throughout the Seattle metropolitan area. PacMed’s shift from large hospitals to small neighborhood medical clinics, however, obviated the need for the obsolete Marine hospital, which had been substantially vacant for almost ten years. The developer envisioned a 24-hour facility that not only would rescue a dilapidated art deco masterpiece listed on the National Register, but also would create a safer environment for the neighborhood and help secure Amazon.com’s long-term future in Seattle. APPROVALS Attaining neighborhood support was a long, drawn-out process, with dozens of meetings taking place during the two-year predevelopment stage. Although some community members opposed the project mainly because of increased traffic, the majority of the neighbors saw it as a positive addition to the community because it would bring more people to the area, thus stabilizing the neighborhood and providing economic stimulus in the area. WRC worked closely with the community to catalyze economic development that would mitigate any negative impacts from the project. WRC committed its project resources to establishing and funding neighborhood residential parking zones, hosting an economic development conference on Beacon Hill, providing a meeting facility and funding for the local neighborhood group (which WRC continues as part of a community outreach program), plus distributing books of coupons for Beacon Hill businesses. The successful rehabilitation of the PacMed tower required the cooperation and teamwork of public agencies, including PacMed, the U.S. Department of Health and Human Services (DHHS), state legislators, and the city of Seattle. Because development rights to the hospital were granted for medical use only, the developer needed strong support from all parties. They worked together until they reached a compromise to convert the hospital’s tower into office space and to give PacMed the minimum size and critical mass needed to satisfy its criteria, while still allowing enough space to accommodate a large office user. FINANCING Although some developers and lenders balk at the prospect of underwriting a building on a leasehold property, it was business as usual for the developer, who had experience structuring several landhold properties. The overall financeability of the ground lease is attributable to the lender protection it offers and its favorable economics. The leasehold payments to PacMed generally provide for a Consumer Price Index--based step in year 11 and a mark-to-market in year 20, subject to other market-related conditions favorable to the developer. The project was financed with a 90 percent construction loan and 10 percent developer equity. The net operating income results in an annualized cash-on-cash return in excess of 11.5 percent for the first five years of the lease, increasing to 12.7 percent in years six through ten. The construction loan was made by Key Bank, despite the single-tenant nature of the building and reservations about Amazon.com as a going concern. The bank weighed several other factors in its decision to finance the property. These included 1) the strength of the market in a re-lease scenario; 2) the relatively low cost to the developer to fill the property with multiple tenants as needed; 3) the receipt of a satisfactory security deposit posted by Amazon.com; 4) the project’s ability to provide sufficient returns at below-market rents; 5) the value-added nature of tenant-paid improvements; 6) the financeability of the ground lease; and 7) the sponsorship of the developer. The construction loan was taken out in May 2000. DESIGN AND CONSTRUCTION Amazon wanted an interior design aesthetic of high-tech overlaid on an industrial space, in homage to the company’s beginnings in the founder’s garage. Elements include exposed concrete and brick, and mechanical ductwork visible in the ceilings. The walls, desks, and office doors are surfaced in birch and trimmed in stainless steel; some office doors slide sideways, similar to barn doors. Each floor has bathrooms that allow workers to enter and exit without touching a door handle. Because the structure is on the National Register of Historic Places (designated a historic place by the federal government in 1979), all exterior and main lobby interior renovations needed to be approved by the state’s historic preservation office.