The City of Seattle could indeed get more with less, by purchasing and creating the nation’s first vertical municipal campus.
The City of Seattle had a unique public-sector dilemma: it needed more space in a high-occupancy market cycle and it wanted nicer space to improve working conditions, but as a public entity, the budget was severely constrained. The City was faced with a real estate challenge as well as a potential public relations uproar.
Based on detailed financial analyses, Kinzer saw a clear opportunity for the City to save money by purchasing rather than leasing core facilities, and then subleasing any unused space to others. It sounded simple, but what followed was one of the most complicated — and ultimately one of the most successful — financial transactions in the City’s history.
When the Kinzer team proposed that the City buy a 62-story Class A skyscraper, then called Key Tower, it was a public sector first. It was an expensive property, but the owners were in default. Kinzer entered into negotiations that would achieve a 50-cents-on-the-dollar purchase price, and with tax-exempt financing, the City would be mortgage-free in 20 years, while paying less than their previous rent. Meanwhile, throughout the property negotiations, Kinzer worked to communicate the advantages to the city council, the mayor, the public, and seven banks holding the deed-of-trust, and finally, to the fee owner in possession and default. It was complex consensus-making at its finest.