Legacy Partners Commercial on Thursday sold Seattle Tower for $15.4 million less than it paid for the historic downtown Seattle office building in 2006.

The buyer is LaeRoc Funds of Hermosa Beach, Calif. Peter Morgan, LaeRoc's executive vice president of acquisitions and finance, said it purchased the 27-story building at 1218 Third Ave. on behalf of a California limited partnership that has investors from around the country.

The sale price is $20.7 million, Morgan said. That's $128.24 per square foot for the 161,412-square-foot building, which was constructed in 1928.

Morgan would not say why LaeRoc bought the building. When asked if he thought LaeRoc got a good price, he responded, “Yes we do.”

Seattle Tower is its first purchase here, and Morgan said LaeRoc is looking to buy other office buildings and shopping centers in this metropolitan area.

The building is 77 percent occupied. Asking rents are $24 to $26 per square foot, full service, according to OfficeSpace.com.

The office vacancy rate for all classes of space in downtown Seattle is 21.4 percent, according to Cushman & Wakefield-Commercial.

This is the first sale of a significant downtown Seattle office building since Milwaukee-based Northwestern Mutual purchased what was then Chase Center from JPMorgan Chase & Co. in September of 2009. Northwestern, the parent company of Russell Investments, paid $115 million for the 863,000-square-foot, 42-story building.

However, some in the industry said that was not a true investment sale because Russell is an owner-user and JPMorgan acquired the building in the collapse of Washington Mutual last year.

Steve Brunette, Cushman & Wakefield-Commerce director of investment sales, said the Seattle Tower sale price reflects the precipitous drop in rents since their pre-recession highs.

Also, he said, vacancies have risen and expectations of future rents are down. The price also reflects that banks are lending less and have more stringent underwriting, and that equity partners are less willing to take on risk, he said.

“This is inevitable,” said Brunette. “This is what has to happen. I also say that asset prices go up and down, and world doesn't have to end.”

Brunette estimates that the value of institutional-grade office buildings in the greater Seattle area has fallen 25 percent to 40 percent from the pre-recession peak.

Ann Chamberlin, a principal with Pacific Real Estate Partners, said she understands the Seattle Tower buyer and seller agreed to the price in 2009.

“For that quality of product in that location and for that particular building, I think that's a great price,” she said. “It a tremendous buy for the new owners.” Chamberlin said she believes the market has gotten stronger since the deal was agreed to, with more potential buyers and more capital.

Foster City, Calif.-based Legacy purchased Seattle Tower in 2006 for nearly $36.1 million from Seattle-based Trinity Real Estate and Helix Investment Partners of Chicago.

Trinity Principal Richard Leider said on Thursday the new price reflects “that vacancies have fallen dramatically and rents have dropped significantly (and) unfortunately right now we appear to be at the bottom of the current cycle.”

He said he doesn't know why Legacy chose to sell now.

“If you step back, at the bottom of the cycle usually is a good time to buy, but not a good time to be selling,” he said. “It just suggests that they must be fairly motivated as a seller to be selling at this point in the market.”

Among Legacy's other Seattle area holdings is the five-story P-I building at 101 Elliott Ave. W., which it bought for $40 million from the Sabey Corp. of Seattle in 2007. Legacy put it and Seattle Tower on the market, unpriced, more than a year ago.

Peter Llorente, a Legacy partner and senior vice president, said at the time the decision was made on a “portfolio basis.”

He didn't return a call for comment on Thursday.

Joe Lynch, a partner with GVA Kidder Mathews, which had the P-I listing, said, “We tried to sell it last year in 2009 and we didn't achieve the pricing we wanted so we took it off the market.”

Lynch said he thinks the market has since improved.

Kidder Mathews is the new property manager for Seattle Tower, he said.

Legacy Partners Commercial operates throughout the western United States. Its office investment funds have spent more than $350 million buying properties in the Puget Sound region since 2005.

Earlier this month, Legacy sold Legacy I-90 — a fully leased, two-building office property in Bellevue — for $27 million.

TA Associates Realty of Boston and Newport Beach, Calif., paid $300 per square foot for the 28-year-old buildings.

Legacy bought the property four years ago from Benaroya Co. for $22.44 million.