Russell Investments moving to Seattle

Russell Investments is moving its headquarters from Tacoma to the former WaMu building in downtown Seattle, the company told employees by e-mail this morning. The company plans to move into its new location by the end of 2010, according to the e-mail.

The global investment firm's parent company, insurance giant Northwestern Mutual, is buying the 42-story Chase Center – known as the WaMu center until that bank went belly-up and JPMorgan Chase bought the remains, Chase spokeswoman Darcy Donahue-Wilmot said this morning. The deal was finalized today. Chase’s 400 employees will remain in the building, located at 1301 Second Ave.

“We’re deeply disappointed in the decision on their part to move,” Mayor Bill Baarsma said Wednesday. “This doesn’t change our plan on what we intend to do in the International Financial Services district.”

Seattle City Council President Richard Conlin said Wednesday his city did not offer Russell any special incentives – other than a promise the firm would enjoy a reduced B&O tax rate, a status it now enjoys in Tacoma.

“We did not do anything to poach them,” Conlin said. “We did not put any kind of package of our own together.

"I guess it’s analogous of the Port of Tacoma taking on some of the clients that the Port of Seattle once did," he said. "Private businesses make decisions. These things happen.”

The company employs 900 people in Tacoma and more than 1,800 worldwide. It directly manages $150 billion in investment funds and separately advises the management of more than $1 trillion.

George Russell Jr., who built the company into an investment powerhouse from downtown Tacoma before selling it in 1999, declined to comment.

Representatives from Northwestern Mutual did not return calls for comment.

Baarsma said Russell CEO Andrew Doman called him personally Wednesday morning to inform him of the decision, and that U.S. Rep. Norm Dicks also received a phone call. Baarsma said it was a straightforward and polite conversation.

“I’ve had better days,” Rep. Norm Dicks, D-Belfair, said after he received an early morning phone call from Russell’s CEO. Dicks said Russell’s decision to move was “painful” and a “bit surprising.” “Russell has been a big leader in Tacoma,” he said. “They will be just another company in Seattle.” “I think we did everything we could,’ he said. “I just don’t think we could compete with a discounted WaMu building.” He said he had heard Russell would pay $150 a square foot for the Seattle space.

That's a significantly less than what it cost WaMu to build the center, said Jeff Lyon, the CEO of commercial real estate firm GVA Kidder Matthews. He estimated that the 863,000-square foot building cost $350-400 a square foot to build.

Donahoe-Wilmot, JPMorgan Chase spokesperson, declined to comment on the sale price.

The multiple vacancies in downtown Seattle's commercial market influenced the decision, which Russell acknowledged in its news release. CEO Andrew Doman said in the statement that moving was the right decision "particularly given the unique conditions of the commercial real estate market in Seattle."

As far as the idea of Seattle recruiting Tacoma businesses, Dicks said “I wish they had just said ‘we don’t engage in that stuff.’ But they didn’t.” Dicks said it was Russell, however, that approached Seattle, not the other way around.

“We gave it our very best effort,” Baarsma said of the city’s attempt to keep the company’s headquarters. “I didn’t lose a wink of sleep over the effort that we made.

“It’s obviously greatly disppointing that company born and raised in Tacoma and that is part of the fabric is leaving,” he said. “It’s disappointing for employees, who will have to travel up that godforsaken freeway, or hopefully get on a bus or the Sounder, and it's going to affect their families and quality of life.

"That's why I so appreciated DaVita's decision because they said their employees are Number One," Baarsma said, referring to the recent decision by kidney dialysis giant DaVita to keep their main business office in downtown Tacoma.

"I hope they are focusing on how they retain their teammates," said Jim Hilger, DaVita vice president and controller. "A lot will (commute to Seattle) because they need a job, but it’s not so straightforward. That's when the law of unintended consequences will come in to play."

Russell Investments announced last year it was looking for a new location for its headquarters, currently at 909 A St. The 225,000-square foot building is owned by Seattle-based Ilahie Holdings, which has a lease with Russell through 2013.

Ilahie president Nate Dreon said the vacancy was something they had been preparing for "for some time," though he declined to comment further on that timeframe or the preparations. Dreon expressed confidence that it wouldn't be hard to fill the space.

"Tacoma's had a real lack of (class-A office) space, and despite that there's been a real continued growth and evolution of that downtown market," he said. "There's been constant interest in our properties in Tacoma."

Russell also leases two floors at about 14,000 square feet each in the Wells Fargo tower at 1201 Pacific Ave. from Seattle-based Unico Properties. It was unclear what would happen to that space.

Baarsma said he was optimistic about the future of downtown.

"There are problems and opportunities," he said. Because of the effort to keep Russell, "we have this legislation - the tax increment financing - that will give us opportunities. (And) prior to the economic decline, three rather major businesses approached the city looking for (office) space we just didn't have.

"We still have some really first class businesses downtown - DaVita, Columbia Bank, True Blue – and they're gonna benefit from the investments we're going to make," Baarsma said. And the mayor said Erivan Haub was still looking to move ahead on the "superblock" project, though he wasn't sure of details.

(The News Tribune is looking to talk to Russell Investment employees about their reaction to the move. Please call reporter Kris Sherman at 253-597-8659.)