New, empty biotech building faces foreclosure

Add one more building to the list of Seattle commercial properties in financial distress.

The empty office-and-life-sciences building at 1100 Eastlake, next to Interstate 5 in South Lake Union, has been served a foreclosure notice by a representative of lender Key Bank.

The five-story building across the street from the Fred Hutchinson Cancer Research Center campus will be sold at auction Jan. 7 unless the owner pays $46 million it still owes on the construction loan, the trustee for the bank said in a filing earlier this month.

But Bruce Blume, who heads the partnership that owns the 177,000-square-foot building, said he is close to bringing in new investors and is "95 percent certain the situation is going to be resolved in a positive manner before the end of the year."

1100 Eastlake was completed in early 2009 — "just around the time the world fell apart," Blume said — and has remained almost entirely vacant since. But Blume said he is in lease negotiations now with two firms — one a biotech — for three of the building's five floors.

Prospects are brighter now than they were a year ago, he added.

Blume is chairman and CEO of The Blume Co., which he founded in 1982. It owns 16 office and retail buildings in the University District and neighborhoods near Lake Union.

Blume's predicament with 1100 Eastlake is evidence that "no developer is immune from what's going on in this challenging market," said Kip Spencer, co-founder of commercial real-estate database Officespace.com.

But Blume has made some smart real-estate moves over the years, he added, and "if anybody can find a resolution to this, it's Bruce Blume."

Blume broke ground on 1100 Eastlake with no signed tenants in 2007, before the economy and the real-estate market turned south. For financing it borrowed $55 million from a consortium of lenders led by Key Bank, according to county records.

"We took what we thought was a measured, prudent risk," Blume said. "Our timing proved to be less than perfect, to say the least."

He had plenty of company. Developers were at work on buildings containing more than 2.5 million square feet of speculative office space in the greater downtown area when the market tanked.

All those buildings are finished now, and much of the space remains unleased.

In its foreclosure notice on 1100 Eastlake, Key Bank's trustee said it notified Blume and his partners in July that they had defaulted on the loan. Blume said he and the bank have had "significant differences in interpreting the loan documents," but would not provide details.

A Key Bank representative was not available for comment.

Blume said he and his partners are talking with the bank as they move to recapitalize the building. "It seems to be moving in the right direction," he said, with a national investment company looking to assume an equity interest in the property.

In addition to its problems with 1100 Eastlake, Blume stands to lose the major tenant in two of its other South Lake Union office buildings after the Bill & Melinda Gates Foundation moves into its new headquarters near Seattle Center next year.

The foundation now leases about 125,000 square feet in two Blume buildings, 617 Eastlake and 1260 Mercer.

But Blume said the termination of those leases is phased, and the last one won't expire until December 2014. The foundation already is marketing its space at 1260 Mercer for sublease, with availability next July.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com