Downtown Tacoma’s biggest private employer has decided to move away, and with it goes one of the city’s crown jewels.

And across the South Sound region, most of the 900 employees of Russell Investments now face major life decisions or a grinding daily commute to and from Seattle.

Russell Investments, born and raised in Tacoma since 1936, will move its headquarters to the former WaMu Center on Second Avenue in downtown Seattle, the company announced Wednesday. It plans to move into its new location by the end of 2010.

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 under and JPMorgan Chase bought the remains.

The emotions of the day were strong and varied, but one word came up the most.

“We’re deeply disappointed in the decision on their part to move,” Mayor Bill Baarsma said Wednesday.

“We’re disappointed that they walked away from an unprecedented opportunity to grow in the city where they’ve spent their history,” said Bruce Kendall, president and CEO of the Economic Development Board for Tacoma-Pierce County.

“We are disappointed,” said Ryan Petty, Tacoma’s economic development director. “We think there was a lot of value in our package and beyond our package that wasn’t really counted in the end.”

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 has 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 to the Port of Tacoma taking on some of the clients that the Port of Seattle once had,” he said. “Private businesses make decisions. These things happen.”

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

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.

A spokeswoman for Milwaukee-based Northwestern Mutual said the company’s purchase of the Chase Center and Russell’s decision to relocate there were separate events.

“This wasn’t forced on Russell in any way,” said Jean Towell.

Russell spokeswoman Jennifer Tice said associates learned about the move in an e-mail Wednesday morning and through group meetings with executive committee members and other top company leaders. CEO Andrew Doman also met with some work groups throughout the day.

In the lengthy e-mail to employees, Doman wrote: “I acknowledge that the move will be difficult for some associates. We have put a great deal of thought into how we can mitigate the impact of the move, and you’ll hear more about that soon. It is very much my hope that associates will rally around this growth opportunity for Russell and choose to stay with us as we make this transition.”

Tice declined to comment on the details of the company’s transition. Doman’s e-mail said the company has hired a commute management firm to develop “transportation options,” including direct shuttles to rail or bus services. The e-mail also said it was developing a “resource center” containing information about Seattle-area neighborhoods for employees who wish to move.

Tice declined to comment on whether the company would offer financial help for relocation.

Baarsma said Doman called him Wednesday morning to inform him of the decision, and that U.S. Rep. Norm Dicks, D-Belfair, also received a phone call.

Russell’s decision to move was “painful” and a “bit surprising,” he said. “Russell has been a big leader in Tacoma,” Dicks 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 significantly less than what it cost WaMu to build the center, said Jeff Lyon, the CEO of commercial real estate firm GVA Kidder Mathews. He estimated that the 863,000-square-foot building cost $350-$400 a square foot to build.

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

She said that Chase has about 400 people working in the building now but that it has a capacity for 4,000. Russell’s 900 won’t come close to filling that space, so a search for more tenants is likely.

The property effort in Tacoma was led by a team representing German billionaire Erivan Haub, who owns downtown’s “superblock” on South 14th and A streets. John Barline, a Tacoma attorney who represents Haub, declined to comment on any of the details of their offer citing a confidentiality agreement with Russell.

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

“We gave it our very best effort,” Baarsma said. “I didn’t lose a wink of sleep over the effort that we made.

“It’s obviously greatly disappointing that a 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.”

A woman who has worked for Russell for more than 20 years said the move presented a lot of difficult choices.

“There are still things I like about my job, but I’m moving from a 10-minute commute to basically a 50-minute commute on a good day,” said the woman, who requested that her name not be used out of concern for her job. “That’s two additional hours out of my day.

“Russell has always been about health and wellness, and this move reduces people’s ability to do those sorts of things,” she said.

Moving north is a possibility, she said, but “my family’s here. My spouse works here. I think it would be difficult.”

The longtime employee said one of the positives in the company’s move to Seattle is the networking opportunities it opens up.

“If I’m going to make the commute (anyway) it doesn’t prevent me from looking at other (jobs),” she said.

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 time frame 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 Investments also leases two full floors – 29,000 square feet – in the Wells Fargo Plaza building at 1201 Pacific Ave. The company’s lease with Seattle-based Unico Properties, the building’s owner, expires in January 2012.

John Lamb, senior vice president with Unico, said that gives the company a good amount of time to find a new tenant.

“We haven’t had any inquiries recently for full floors of that size with the economy the way it is, but hopefully things will change for the better,” Lamb said.

Baarsma said he was optimistic about the future of downtown.

“There are problems and opportunities,” he said. Because of the effort to keep Russell, the city has incentives in place to attract new business. “Prior to the economic decline, three rather major businesses approached the city looking for (office) space we just didn’t have,” Baarsma said. Economic development director Petty said those companies were conducting site searches that have been completed.

“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.

Despite the united front put on by Tacoma’s officials, losing the city’s iconic firm still stings.

“There may be some wonderful financial deal,” said Kelly Haughton, who worked for Russell for 26 years and led the creation of the Russell Indexes for which the firm is most widely known. “What’s hard for me to understand is, 75 to 80 percent of the people live in Pierce County or Kitsap County or Thurston County and for all of them, this is going to be a financial hardship.

“For most associates,” he said, “it’s a slap in the face.”

Staff writers Kelly Kearsley and Lewis Kamb contributed to this report.

Kathleen Cooper: 253-597-8546

kathleen.cooper@thenewstribune.com

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Where they live

The vast majority of Russell employees live in Pierce County, at least according to an analysis done by the City of Tacoma printed in The News Tribune two years ago.

The survey was done before the company let go about 20 percent of its staff last spring. The city used records that Russell submitted to the state Department of Transportation in 2005 for its analysis. (More up-to-date information was not available Wednesday.)

WHERE THEY LIVE

Here’s where Russell employees working at the company’s Tacoma headquarters building lived at the time: Tacoma/Lakewood/University Place Puyallup/Sumner Gig Harbor/Peninsula Seattle/Edmonds Kent/Eastside Federal Way Southeast: Spanaway/Graham South: Olympia/Steilacoom/DuPont Vashon Island

WHO THEY HELP

The loss of the company could also pose a problem for the many nonprofit and charitable organizations that benefit from Russell volunteers.

In 2007 – the most current data we have – Russell employees served on at least 22 local boards, including the American Red Cross, Cascade Land Conservancy, Downtown Tacoma Local Development Council, Economic Development Board of Tacoma-Pierce County, Foss Waterway Development Authority, Grand Cinema, Greater Tacoma Community Foundation, LeMay Museum, Metro Parks Business Advisory Council, Museum of Glass, Tacoma Area Coalition for Individuals with Disabilities, Tacoma Art Museum, Tacoma Opera, Tacoma Philharmonic, Tacoma-Pierce County Chamber of Commerce, Thrive By Five, United Way of Tacoma-Pierce County, University of Washington Tacoma Advisory Board, UWT Milgard School Advisory Board, Washington Women’s Employment and Education, World Trade Center, Zoo Society.