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September 02, 2014

Weyerhaeuser announces move; now what?

Business Examiner

Arnie Aurellano

The Aug. 26 announcement that Weyerhaeuser - the timberlands titan that started in Tacoma more than a century ago and has called Federal Way home since 1971 - was moving its headquarters to Seattle wasn't exactly a shock.

Federal Way Mayor Jim Ferrell admitted as much after saying he heard about six weeks ago that the firm was pondering relocation.

The late afternoon statement from Weyerhaeuser President and CEO Doyle E. Simons, who took the post last summer, only confirmed the rumors. The move from Federal Way to Seattle's Pioneer Square, Simons said, will occur in mid- to late 2016, after a new building for the company is completed.

"There are two main drivers for this decision, which we made after thorough analysis of various options for the location of our headquarters," he added.

"First, our 430-acre campus in Federal Way is costly and too large for our needs. Second, moving our headquarters to Seattle will give us access to a larger talent pool to meet future recruiting needs, not just in this region, but from across the country."

Indeed, the move is probably a prudent one for the company. Weyerhaeuser's business model has changed sharply over the course of the last several decades, eschewing its paper and pulp mill operation in 2010 for status as a real estate investment trust, more tied to its landholdings than its manufacturing brawn.

With that change in focus, the firm has been jettisoning assets for years, downsizing by closing factories while selling harvesting rights and lumber mills. And just this summer, Weyerhaeuser sold its homebuilding subsidiary, WRECO aka Quadrant Homes, to California-based TRI Pointe Homes.

The firm's workforce, too, has dwindled. Ending 2007 at under 38,000 employees, it was down closer to 22,400 two years later, including a mass layoff of 1,500 corporate-level jobs from the Federal Way facility announced in the fall of 2008. The 800 remaining employees to make the move from the current headquarters to Pioneer Square, noted City of Federal Way Chief of Staff Brian Wilson, is a fraction of the corporation's local white-collar workforce in previous years.

Still, Weyerhaeuser remains a player in the state's large corporation roster, sandwiched between Paccar and Nordstrom - and above Starbucks - in terms of market value among the largest publicly traded companies. And loss of its presence among Federal Way and South Sound economic footprints will be profoundly felt.

"Weyerhaeuser has long been a big corporate presence in Federal Way, even before the city was incorporated," said Wilson. "Certainly, their image has been linked with Federal Way for many years. They've certainly been a tremendous corporate partner. It's a big change."

The company's intention is to sell the Federal Way campus, which encompasses some 750,000 square feet of office and industrial space. Wilson said the City itself likely doesn't have financial resources to buy it, but with the importance of the property to the local economy, they will be proactive in promoting the space.

"With change comes opportunity," he said. "They (Weyerhaeuser) have reached out to us about working together to market, with their real estate division, in terms of the property. That's phenomenal property - well-positioned between I-5 and Highway 18."

The announcement, of course, has caught the attention of other economy and development types within the region. In an email to stakeholders of the Economic Development Board for Tacoma-Pierce County, President and CEO Bruce Kendall noted that the "site in Federal Way - the building and the land - will now come into play as we work together to grow the economy here.

"This does not make our job any easier, but we have never backed away from a challenge," Kendall added. He also noted that, as rumors have swirled over the last five years about a Weyerhaeuser move, "the EDB has approached the company about its plans to ensure that the company had the best information possible about its options in the South Sound."

Weyerhaeuser's presence in the South Sound won't dissolve completely; the company still moves logs through Port of Olympia, and, as Wilson pointed out, its technology center in Federal Way will continue to house over 120 research and development workers. The firm intends to lease that building after it sells the overall property.

Mark Clirehugh, senior vice president at commercial real estate services firm Kidder Mathews and an active commercial office broker in the Federal Way market for some 35 years, is optimistic about the campus' prospects on the market.

"It's one of the absolutely classic buildings built in the United States in its era," Clirehugh said. If you've been in that building, you would know it stands the test of time. It's built with open concepts in mind, and it's a stunning building yet today."

While Kidder Mathews doesn't represent Weyerhaeuser with regards to the property - and hasn't, with regards to any property, in the last decade, Clirehugh confirmed - he remains high on the property's desirability.

"It's a very unique piece of property. There's not a lot of these up and down the West Coast where a full campus is available. Do I think it will become a Fortune 1000 headquarters again? Possibly not, but I think it might become regional offices for a larger company.

"Health care is growing. It might be a health care company. I'm just speculating at the point. But it's a stunning piece of real estate. It will sell, and there will be a replacement tenant."

As for Weyerhaeuser's soon-to-be new home, Seattle sustainable real estate firm Urban Visions has been contracted to build a headquarters suited to the company's needs: a seven-story, 200,000-square-foot building overlooking Occidental Park in Pioneer Square. The space is currently occupied by parking lots, with Urban Visions waiting for building permits to be approved by City of Seattle.

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