Kenedix, Hulic Team With Kennedy Wilson to Buy Seattle Apartment Block for $173M

Fund manager Kenedix has partnered with fellow Japanese property player Hulic and US investment firm Kennedy Wilson to acquire a Seattle multi-family property for $173 million.

The 265-unit apartment complex, known as The Danforth, is in the densely populated First Hill neighbourhood just east of downtown Seattle. Beverly Hills-based Kennedy Wilson will invest $6.6 million of equity for a 10 percent interest and serve as asset manager for the partnership, earning the customary fees, the companies said Friday in a release.

Anchored by a Whole Foods supermarket as the sole ground-floor tenant, The Danforth presents an opportunity to acquire a recently built community at a discount to replacement cost, said William McMorrow, chairman and CEO of Kennedy Wilson, which had set up Kenedix as the firm’s Japanese arm in 1995 before spinning it off into a Tokyo-listed group in 2002.

“Given our 30-year history in Japan, we are proud to continue the growth of our investment management platform alongside these two prestigious companies that are aligned with our investment strategy and our focus on delivering quality housing within growing Pacific Northwest markets,” McMorrow said.

New Supply Tight

The Danforth was built in 2018 by Seattle’s Columbia Pacific Advisors and sold for $209.2 million in late 2019 to Manhattan-based investment manager Vanbarton Group, which held the 16-storey development for five years before putting the property on the market in 2024.

The complex offers rental units of one, two or three bedrooms, ranging in size from 582 to 2,503 square feet (54 to 233 square metres), with the 41,606 square foot retail podium fully leased to Whole Foods, an organic grocery chain with more than 500 stores in North America and Britain.

Amenities include a fitness centre, a rooftop solarium and a dog run. The location at the juncture of Seattle’s First Hill and Capitol Hill areas is experiencing limited new construction and strong absorption driven by return-to-office initiatives at tech employers, according to Kennedy Wilson, whose portfolio includes 13,000 rental units across the Pacific Northwest.

The Japanese partners’ equity stakes weren’t disclosed. Kenedix, which was bought out by Sumitomo Mitsui and ARA Asset Management in 2020, is “actively expanding” its presence in the US real estate market, the group said in a stock filing.

“We appreciate the opportunity to participate in this joint investment,” said Kenedix president and COO Hikaru Teramoto. “With continued population growth and the potential for attractive returns, we are strengthening our initiatives in the US real estate market.”

Tokyo-listed Hulic, which acquired Japanese rival Raysum last year in a $1.2 billion deal, is also ramping up international investment via partnerships in markets where continued population and economic growth are expected.

“We believe this investment satisfies our criteria,” said Sohei Okuno, general manager of the global investment department at Hulic, one of Japan’s top 10 real estate groups by market cap.

Japanese Tie-Ups Flourish

The acquisition of The Danforth marks Kennedy Wilson’s latest tie-up with Japanese capital after the California firm recently announced a $200 million US real estate debt platform with partner Tokyu Land Corporation.

The venture focuses on preferred equity investments and mezzanine loans to high-quality sponsors of multi-family and industrial projects across the US, targeting deals of $10 million to $50 million, the companies said in April.

Kennedy Wilson has more than 60,000 rental housing units either owned or financed through its credit platform, as well as 12.4 million square feet of industrial space under management.

In Seattle, Washington state’s most populous city, Japanese builder Sekisui House sold a luxury apartment complex to the group’s sponsored REIT in May of last year for $328 million.

The trade of the 406-unit Ivey on Boren, located less than a mile (1.6 kilometres) to the northwest of The Danforth, came just a few months after Sekisui House announced its $4.95 billion buyout of Colorado-based MDC Holdings to create the No.5 US homebuilder by sales.