Start designing the invitations for the “Say Farewell to Russell Investments” party.

Tacoma’s shot at keeping the international financial services giant has dwindled with the spiraling U.S. economy, the announced departure of key Tacoma-minded executives, the strengthening hand of Russell’s parent company, Northwestern Mutual, and the sudden availability of inexpensive office space in Seattle.

Consequently, Seattle has edged ahead of Tacoma as the city of Russell’s destiny.

The company announced Thursday only that it has delayed a decision on whether it will relocate to a new headquarters in Tacoma or Seattle until next year.

Russell attributed the delay, in a prepared statement, to “recent economic events (that) have had a significant impact on the Puget Sound real estate market.”

Those recent events involve the nosedive of Washington Mutual, its subsequent purchase by JP Morgan Chase, and the likely departure of the former powerhouse bank from its headquarters in the WaMu Center at the corner of Union and Second avenues in downtown Seattle.

WaMu employs roughly 3,500 in a portion of the 42-story building.

A source involved in Russell’s site search confirmed Thursday that a high-ranking Russell executive said the WaMu Center had recently come into play as a headquarters option Russell wanted to investigate.

Jeff Lyon, president and CEO of GVA Kidder Matthews, said Thursday he expect the WaMu Center to come up for sale in 2009 for approximately $400 million. If that happens, Northwestern Mutual, which has a significant real estate investment arm, could buy the WaMu Center and lease the space back to Russell.

Beyond WaMu Center, the U.S. economic turmoil has left other Seattle space vacant and new buildings under construction without prospective tenants.

That availability of vacant office space means Russell will have multiple landlords offering highly competitive lease rates far lower than what Russell would have to pay to lease space in a new building built for the company in Tacoma.

“I know of at least 10 buildings that they could go into easily in Seattle that are already there, existing now as Class A space or in the process of being constructed that will be done in the next 10 months,” said Nate Dreon, principal of Ilahie Holdings, which owns the Russell headquarters in Tacoma.

“There are a tremendous amount of options in Seattle, many more now than there were this summer, and they’re going to all become economically more compelling,” he said.

Dreon’s company made one of the two leading offers to keep Russell in Tacoma. Ilahie’s package would keep part of Russell in its current building, then phase in construction of new, connected space across A Street as Russell needed it.

Russell announced last year that its leases in all four of its Tacoma buildings expire in 2013 and it wanted to consolidate its 1,100 Tacoma associates somewhere by then.

The other leading Tacoma option involves a proposal by German billionaire Erivan Haub to build Russell a headquarters tower on property he owns or controls at South 14th and A streets.

One thread left tying Russell to Tacoma comes from the company’s long history – started under the leadership of its previous owner, George Russell, and his late wife, Jane – of making corporate decisions to benefit its associates.

That principle has contributed to Russell’s perennial appearances on Fortune magazine’s list of “Best Companies to Work For.”

Most of Russell’s associates live in and around the Tacoma/Gig Harbor area, which would make relocation to Seattle a highly burdensome commute. Commuting to the WaMu Center, for example, could involve driving to the Tacoma transit center, taking a commuter train to King Street Station in Seattle, then hopping a bus the final mile to work. How many associates would revel in that?

Nevertheless, that thread has started to unravel.

In the last few days, several of Russell’s highest-ranking executives – some who helped build the company into the respected powerhouse it is – have announced they will leave by the end of the year.

The list includes: Mike Phillips, chairman of the board; Kelly Haughton, strategic director of global indexes; Tom Hanly, chief operating officer; Ernie Ankrim, chief market strategist; Randy Lert, chief investment strategist; David Grieger, director of marketing and product development; and Ann Watson, director of human resources.

Russell will rehire Ankrim in a consultant’s role to continue his work tracking markets and serving as a face of Russell for the financial media, two sources confirmed. Phillips, meanwhile, will continue as chairman of Russell 20-20, a nonprofit association of 20 large retirement plan sponsors and 20 major money managers who gather to explore worldwide economic and investment environments in emerging markets.

Sources inside and outside Russell link the departures to a lucrative equity incentive package that could mean hundreds of thousands of dollars if exercised by leaving the company before the end of the year – but far less if exercised next year.

Some executives own equity packages that grew as Russell grew. In a speech last year, then-CEO Craig Ueland told a group of financial analysts that over the previous 25 years, Russell’s foremost measurement of success – assets it manages for others – has grown at an average rate of 24 percent a year.

If executives cash in their equity before the end of the year, they can take the value of those equities as of last May, sources said. But if those executives don’t leave the company now, their next chance to cash in comes next May – at next May’s values, which project to a drastically lesser amount given the U.S. economy’s free fall into a recession.

Add to that the unknown – who will lead the company in the future. The acting president and CEO, John Schlifske, who came in from Northwestern Mutual after Ueland’s abrupt June resignation, has taken over the selection of a future corporate headquarters’ site and continues to search for the next permanent CEO.

Northwestern Mutual bought the company from George Russell in 1998 for $1.1 billion. The Milwaukee, Wisc.-based insurance giant had kept a relatively hands-off policy, but with Schlifske’s presence, it has taken stronger control internally and on the board of directors.

A source who spoke with Schlifske recently said the CEO claimed the interests of Russell’s associates would play a key role in the location decision, but the decision also had to make long-term sense for Northwestern Mutual’s shareholders.

The best shot left for Tacoma to keep Russell, I think, would result from a good news-bad news situation.

With the world economy in such flux, potentially Russell’s share of assets it manages would shrink – and the size of the workforce it needs to manage that money might once again all fit into 909 A Street in Tacoma.

That’s bad news for Russell, as a profit-making machine. But the company could wind up extending its lease beyond 2013.

How far we all have fallen from this time last year.

Dan Voelpel: 253-576-4201

dan.voelpel@thenewstribune.com