The University of Washington owns an asset for which some schools might trade a Nobel Prize winner or two: about four blocks of prime downtown Seattle land that generate tens of millions of dollars in revenue.

For decades, however, the property known as the Metropolitan Tract has been locked up in arrangements that net the university relatively modest sums. But that’s about to change, and so could the landscape of those central downtown blocks.

Next month the university, one of downtown’s largest landowners, will select a proposal to redevelop Rainier Square, a low-slung, sleepy L-shaped retail complex spanning three-quarters of a block between Union and University streets. That site will likely be transformed into a mixed-use office tower, with possibly a hotel or apartments, experts say.

“It’s an unparalleled location,” said Bill Pollard, co-founder of Talon Private Capital in Seattle and a veteran commercial real estate broker. “It’s got every economic driver in its favor.”

That’s just the beginning. After 60 years with most of the Metropolitan Tract under a long-term ground lease to one company, Unico Properties, the university will get the land back — along with the buildings developed by Unico and others. Unico’s lease expires next year at the stroke of midnight on Halloween.

The tract stretches from Union Street to Spring Street and from Third Avenue to Fifth Avenue and, by the university’s estimate, has a market value of $634 million.

Under the lease arrangements, Unico keeps the majority of the rents from the buildings and gives the university the rest.

The UW grossed about $22.8 million in rent from tenants on the tract last year, according to a report to the Board of Regents. After paying for capital improvements and other expenses, the net cash it received was $13.1 million .

“We share in the cash flow, but we’re required to put in capital,” said Todd Timberlake, the university’s chief real-estate officer.

Over the past decade, the UW has put more than $78 million into capital improvements, such as replacing obsolete building systems, installing seismic reinforcement and converting the historic Cobb Building from medical offices into luxury apartments.

Quentin Kuhrau, CEO of Unico Properties, said the capital investments have kept buildings developed in the 1960s and 1970s competitive in today’s market.

“We take a lot of pride in what has been accomplished over the past 60 years for both the university and our company,” Kuhrau said.

The Unico lease expiring next year covers five office buildings totaling 1.6 million square feet: Rainier Tower, Skinner Building, IBM Building, Financial Center and Puget Sound Plaza. The lease also covers 744 parking stalls and about 140,000 square feet of retail space at Rainier Square.

The university also plans to pay Unico up to $40 million to buy out the ground lease on the Cobb Building, which otherwise extends to 2050 .

That will consolidate the university’s control over almost all of the tract and open the door to higher revenues, with firms competing to manage each building, officials said.

By 2016, the university forecasts its cash flow from the tract will be double what it received last year.

Gift established UW

The UW became one of downtown’s largest landowners because of a gift in 1861, almost 30 years before Washington joined the Union. Three Seattle pioneer families donated 10 acres for a school called the Territorial University — 8 acres from Arthur and Mary Denny, and 2 acres from Charles and Mary Terry and Edward Lander.

The university was built on the site of what is now the Fairmont Olympic Hotel on University Street. In 1895, it moved to its current 342-acre campus.

The Panic of 1893 derailed plans to sell the downtown land, and by 1907 the UW had leased the property to the Metropolitan Building Co. — hence the tract’s name.

Eight buildings were constructed between 1909 and 1926. Only the Cobb, Skinner and Olympic buildings survive today, thanks to tens of millions of dollars in capital improvements.

In 1954, the university signed a long-term ground lease with University Properties (now Unico), which was founded by Roger Stevens, better known for leading a syndicate that bought New York’s Empire State Building in 1951.

The UW acquired a parking garage south of Seneca Street in 1962, bringing the tract to almost 10.7 acres.

The Fairmont Olympic Hotel, built in 1924 and restored in 1980, is under a separate ground lease unaffected by the upcoming changes.

It’s rare for a university, excluding those with downtown campuses, to have such a large real-estate investment in the downtown of a major U.S. city, experts say.

One oft-cited comparison is Columbia University. In 1929, it leased land in midtown Manhattan to the Rockefeller family, which developed a complex of buildings called Rockefeller Center. By the mid-1980s, the university sold the land beneath the buildings to the Rockefellers’ investment company.

UW officials say that won’t be the case here.

“We have no interest in selling the tract,” said Norm Arkans, UW’s associate vice president for media relations and communications. “It’s our legacy.”

Rainier Square

Rainier Square accounts for just 5 percent of the tract’s total net operating income, but it has the most growth potential. The retail complex and the adjacent Rainier Tower, on its tapering pedestal, were built in 1978.

The retail space is now home to a smattering of eateries, clothing shops and luxury retailers, but across all three floors there are glaring empty spaces.

A study commissioned by the university offers two potential scenarios for how dramatically the block could change under existing zoning rules:

• A 40-story tower on the north side of the block with 955,000 square feet of office space and an apartment building with up to 115 units along Fourth Avenue. This design includes 30,000 square feet of ground-floor retail.

• A 50-story tower that wraps around Union Street and Fourth Avenue, with about 1.2 million square feet of office and 35,000 square feet of ground-floor retail.

Creating a great street experience for pedestrians will be key to attracting more people to the retail shops, said Diane Sugimura, director of Seattle’s Department of Planning and Development.

“You’ve got an iconic building on the block with the Rainier Tower,” she added. “How do you design something that complements that tower?”

The redevelopment could give Seattle the chance to land some big new retail tenants, said Kate Joncas, president and CEO of the Downtown Seattle Association.

“I hear from brokers that there are great retailers that would love to be here but they just can’t find the right space,” she said.

The university’s call for proposals on Rainier Square included this carrot: The chosen developer may get to manage and redevelop other properties in the Metropolitan Tract.

At least four developers have been asked to submit proposals for redeveloping Rainier Square, according to real-estate sources who spoke on condition of anonymity.

They include two Seattle-based developers — Wright Runstad and Pine Street Group — and two national companies — Houston-based Hines and Tishman Speyer of New York, these sources said.

All four developers declined to comment.

Developers’ proposals are due by the end of the month, and the university will select one in November.

Only after a developer is selected will the university’s process become open to public scrutiny. For now it remains under wraps, though watched with great interest.

“This is the heart of the center city,” Sugimura said. “We’ve got an opportunity to do something better than we have there.”

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com On Twitter @sbhatt