Nordstrom's big lease will aid art museum

The Seattle Art Museum got an early Christmas present from Nordstrom on Tuesday.

The retailer announced it intends to lease about three-quarters of the museum-owned office space in downtown Seattle that Washington Mutual had leased before its collapse.

WaMu's departure carved a deep hole in SAM's finances: The thrift had been paying the museum $5.8 million a year for the 240,000 square feet it leased from SAM.

The tentative deal with Nordstrom should make up about 75 percent of the museum's shortfall, said Matt Griffin of the Pine Street Group, who represented SAM in the negotiations.

"It certainly has been challenging since Washington Mutual left," museum spokeswoman Calandra Childers said. "We're thrilled to have this letter of intent with Nordstrom."

Altogether, Nordstrom said it plans to lease 265,000 square feet in the high-rise complex on Union Street between First and Second avenues that SAM and Washington Mutual had partnered to build earlier in the decade.

A lease should be signed early next year, the retailer said, and it should start moving in later in the year.

About 182,000 square feet of Nordstrom's new space is owned by SAM, the other 83,000 by Northwestern Mutual. The insurance giant bought what had been WaMu's share of the complex — the 42-story tower formerly known as the WaMu Center — three months ago.

The museum-owned office space is in a 16-story building connected to the skyscraper.

Nordstrom spokesman Colin Johnson characterized the deal as a "business decision" that gives the company space both to consolidate its far-flung downtown operations and to grow.

Given the depressed state of the downtown office market, Nordstrom almost certainly is getting the space for a bargain price, local commercial real-estate professionals said.

But the retailer also helped bail out a treasured civic institution, several added.

"Nordstrom had a lot of choices," said Leigh Callaghan, a senior vice president with brokerage Colliers International. "There's a little bit of a philanthropic bent to this."

Nordstrom and SAM have a long relationship, Johnson said: "Maybe the silver lining here is we found some space that also benefits SAM."

Nordstrom's corporate offices will remain above the flagship store at Sixth Avenue and Pine Street, he said.

For SAM, the deal concludes a year of financial uncertainty that began when JPMorgan Chase, which acquired WaMu's banking operation and many other assets when regulators declared it was failing, announced in January that it would not honor WaMu's long-term lease on the museum-owned office space.

JPMorgan did pledge SAM $10 million, which Childers said has been used this year to help make debt payments. She said she had no details concerning the financial impact of the Nordstrom deal.

To fill the space, the museum turned to Griffin, who had engineered the complicated arrangement between SAM and WaMu that led to construction of the two towers. In the 1990s he helped piece together another complex downtown redevelopment deal that put Nordstrom in the building at Sixth and Pine.

Were those old ties helpful this time? "I like to think so," Griffin said Tuesday.

The Nordstrom-SAM-Northwestern Mutual deal took six to nine months to put together, he said.

Talks stalled while JPMorgan Chase still owned the WaMu Center but revived after Northwestern Mutual bought the building in September, said Craig Kinzer, of Kinzer Real Estate Services. He advised Russell Investments, whose decision to move its headquarters from Tacoma to the WaMu Center coincided with parent Northwestern Mutual's acquisition of the building.

"They were fairly scattered around town," Kinzer said of Nordstrom. "They're getting a wonderful building at a discounted rate."

Nordstrom employs 3,500 administrative workers downtown. In addition to the space above its flagship store, which it owns, it occupies space at 1700 Seventh Avenue, Century Square on Fourth Avenue, and the Metropolitan Park North building.

Its leases at Metropolitan Park and Century Square expire in January 2012 and January 2013, respectively. Nordstrom's lease at the Seventh Avenue building, where it has an ownership interest, expires in 2027.

"It's been tricky having employees spread across four buildings downtown," said spokesman Johnson. "This is a long-term solution that's going to allow us to consolidate the number of buildings."

While he would not provide details, others said it's expected that most employees moving to the new space probably will come from Century Square and Metropolitan Park.

"It's also fair to say we've been challenged for space at some of our current locations," Johnson said. "This gives us space now and in the future. We think we have flexibility in the lease to add space as we grow."

While the Nordstrom deal fills most of SAM's space, about half the former WaMu Center — now known as the Russell Investments Center — remains unleased.

The Nordstrom lease could be the first of several big ones brewing in downtown Seattle, said Oscar Oliveira, managing director at brokerage The Broderick Group.

"There's definite momentum in the market now," he said. "Some of these companies are beginning to think they don't want to miss the bottom."

Eric Pryne: 206-464-2231 or epryne@seattletimes.com. Amy Martinez: 206-464-2923 or amartinez@seattletimes.com