Washington Top Developer - Schnitzer Northwest
Bullish Attitude Helps Firm Thrive in Bearish Times

Schnitzer Northwest's InterUrban Exchange project is a five-building, 572,000-sq.-ft. biotech office development in Seattle's South Lake Union neighborhood; a 50-50 joint venture with Vulcan Inc. The development's Rosen Building, at Republican and Westlake Ave. N., was completed in 1999. Image courtesy of Schnitzer Northwest

During the past eight months, Schnitzer Northwest managing investment partner Dan Ivanoff and four colleagues visited 29 cities in Western Europe, Canada and the United States.

They skipped grand old landmarks and toured contemporary commercial buildings, all in preparation for the firm's development of approximately 1.5 million sq. ft. of office, retail and hotel space on property around Bellevue's Meydenbauer Center.

"I was trying to elevate the game," Ivanoff said about the field trips.

The search for new, different development solutions is a typical measure for the Bellevue, Wash.-based real estate investment, development and asset-management company. Every decision at Schnitzer Northwest is based on extensive research - from polling future tenants and studying the market to touring exemplary projects around the world.

Research has been the foundation for the company's fast success.

Schnitzer Northwest LLC, is a joint venture of Ivanoff and Portland-based Schnitzer Investment Corp. Ivanoff, formerly regional vice president at MBK Northwest, teamed up with Schnitzer president Ken Novack in 1997 on the strength of Ivanoff's bullish business plan and his reputation developing Van Doren's Landing, a commercial industrial park in Kent Valley, Wash.

From the beginning, the Schnitzer Northwest approach set it apart from traditional, institutional development models. The company couples entrepreneurial investment strategies and aggressive and dynamic development expertise with the financial strength of an established investment company.

Novack and Ivanoff envisioned a $10 million company with a maximum staff of eight people. It has grown beyond the vision.

In its first four years, Schnitzer Northwest developed, leased or acquired 2.5 million sq. ft. of Class A office space and 220 luxury apartments in Portland, Ore., and the Puget Sound. In the past year, the company acquired the management and leasing responsibilities for nearly 5 million sq. ft. of additional property owned by Schnitzer Investment Corp.

The Schnitzer Northwest portfolio is made up of approximately 60 percent industrial buildings located in three markets - Kent Valley, Vancouver (Wash.) and Portland. The company has 85 employees in Bellevue, Portland, Vancouver, Seattle, Bothell and Issaquah.

"Neither Ken nor I remotely figured it would be as big as it is," Ivanoff said.

But big is not without its challenges. Ivanoff works hard to maintain the ethos and spirit of a small, lean company. Horizontal investment teams are built around ambitious, multifaceted individuals who understand all sides of the equation.

He's not interested in people who are "functionally set." Instead, investment directors must be able to manage all the pieces - marketing, design, leasing, research, etc.

Ivanoff said he surrounds himself with motivated, creative people who have to like a "high-octane, hair-on-fire kind of approach."

Because Schnitzer Northwest sees itself as an investment firm that happens to be good at development, the company is highly selective about its projects. The company has seriously considered only 16 opportunities in its five-year history, and it has closed on 12.

"The definition of an entrepreneur is a very disciplined opportunist," Ivanoff said. "Instead of casting a wide net, we focus the pursuit and move when the market is appropriate."

Of course, once the firm decides to jump in, there is no hesitation. Schnitzer Northwest began work on its first three developments at almost the same time - Civica Office Commons, a Class A office mid-rise in Bellevue, completed in 2001; Schnitzer North Creek, Class A offices in Bothell, Wash., ongoing; and Merrill Creek, a 220-unit luxury apartment community in Everett, completed in 1998.

In 2001, Schnitzer Northwest moved its headquarters from Kirkland to the Civica Office Commons because the user-driven development embodies the company's design and research philosophies. If a building doesn't have the extra something special, "Dan tells them to go find it," said Trisha Quigley, the firm's investment coordinator. "He makes people think beyond what they think they can think."

That's one reason Schnitzer Northwest was named Developer of the Year in 2000 by the Puget Sound Chapter of the National Association of Industrial and Office Properties (NAIOP).

After a year of consolidating management and leasing, and readying future projects for an improved market, Schnitzer Northwest expects to be breaking ground on new projects no later than the end of this year.

The company has an eye on making greater inroads into high-end residential development. Its only residential property to date is Hearthstone at Merrill Creek.

Ivanoff also said he'll look to expand outside the Northwest, particularly in Denver, Colo., and Boise, Idaho.

Current Schnitzer Northwest Projects

InterUrban Exchange

Schnitzer Northwest wholly owns and manages most of the properties in its portfolio. The one exception is this five-building, 572,000-sq.-ft. biotech office development in Seattle's South Lake Union neighborhood, which is a 50-50 joint venture with Vulcan Inc., owned by Paul Allen.

When Merck & Co. signed a lease for the 133,173-sq.-ft. Exchange 3 building last summer, it was reportedly the largest new lease in Seattle in more than one year. Exchange 3 should be complete the second quarter of 2004.

The first and only completed building thus far is 60,000-sq.-ft. Rosen Building, at Republican and Westlake Ave. N., completed in 1999. A specialized biomedical research lab for the University of Washington, the Rosen Building was R&D Magazine's Lab Renovation of the Year winner. Architect: NBBJ, Seattle. General contractor: Lease Crutcher Lewis, Seattle and Portland.

Soon after Schnitzer Northwest was formed, the company purchased a fledgling, 140-acre office park in the Bothell/Woodinville area. During the past five years, it has developed approximately 1 million square feet of Class A office space there. Image courtesy of Schnitzer Northwest

Schnitzer North Creek

Soon after Schnitzer Northwest was formed, the company purchased a fledgling, 140-acre office park in the Bothell/Woodinville area. During the past five years, it has developed approximately 1 million square feet of Class A office space there.

The company purchased and updated existing structures, and built 15 new ones, including a pair of two-story, flex-tech office buildings completed in December 2001 and January 2002.

For a final proposed 107,000-sq.-ft. building, Schnitzer is prepared to start the shell and core with a prelease tenant and could break ground this year.

In 2001, Schnitzer North Creek was a regional entry in the Building Owners and Managers Association's (BOMA) annual, national TOBY awards for operating buildings.

Architect: Randy Brown with Synthesis Architects, Bellevue, Wash. General contractor: Sierra Construction, Redmond.

Recently Completed Schnitzer Northwest Projects

Civica Office Commons, a Class A office mid-rise in Bellevue, Wash., was completed in 2001. Photo courtesy of Schnitzer Northwest

Civica Office Commons

Completed in 2001 and home to Schnitzer Northwest headquarters, this two-tower, 305,835 sq.-ft. Class A office mid-rise in the Bellevue central business district exemplifies the company's emphasis on customer-focused design.

Early in the process, Schnitzer Northwest asked future tenants what amenities they would like to see.

"If you really climb inside the demand side, you can fit the market well," Ivanoff said.

The results are innovations that include direct garage-to-floor elevators, common space designed to support productivity needs and a Four Seasons-style front lobby. The "Great Room," designed by well-known hotel/hospitality designers Chhada Siembieda & Remedios Inc. of Long Beach, Calif., features cozy meeting spaces, a concierge and valet parking.

The project was voted the 2001 Office Mid-Rise Development of the Year by Puget Sound NAIOP. Architect: LMN Architects, Seattle. General contractor: Sierra Wright, Redmond and Seattle.

Schnitzer's acquisition of two commercial office buildings in Lake Oswego, Ore., signaled the company's goal to establish itself in the Portland-area market. The suburban Class A office buildings include creative workplace design such as alternative workspaces and interstitial stair systems. Amenities include showers for bicycle commuters. Image courtesy of Schnitzer Northwest

Schnitzer Northwest Meadows

When Schnitzer Northwest acquired two commercial office buildings off Kruse Way in Lake Oswego, Ore., in early 2001, it signaled the company's goal to establish itself in the Portland-area market.

The suburban Class A office buildings (200,000 sq. ft. total) are built in the Schnitzer Northwest mold that includes creative workplace design such as alternative workspaces and interstitial stair systems. Amenities include showers for bicycle commuters.

Architect: Group MacKenzie, Portland. General contractor: Perlo McCormack Pacific, Tigard, Ore.

Future Schnitzer Northwest Projects

Two projects could break ground this year in Bellevue and Portland.

Meydenbauer Property

Schnitzer Northwest plans a 2 million-sq.-ft. superblock development surrounding the Meydenbauer Center in Bellevue. While the company is keeping details close to the vest, early plans include two 20-story office towers and a 500-room world-class hotel.

Executive architect: Callison Architecture, Seattle. Hotel architect: Hill-Glazier, Palo Alto, Calif.

Cornelius Pass

In the third quarter of 2002, Schnitzer Northwest purchased the 232,000 sq.-ft. flex/industrial park, Cornelius Pass, outside Portland. The project will be renamed. Some tear-down will begin as early as this year. No architect or general contractor has been announced yet.

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