Tag: South Lake Union

Development, Featured, homelessness, housing, Mayor Durkan

Mercer Megablock Sells to Real Estate Equity Firm for $143 Million

Mayor Jenny Durkan announced today that the city will sell the “Mercer Megablock” property—three parcels in South Lake Union totaling just under three acres—to Alexandria Real Estate for a total of $143 million. (I was first to report that the city had chosen Alexandria as the buyer last month.) The sale of the property, one of the largest undeveloped properties in South Lake Union, will net $78 million for various affordable housing uses (including both low-income and middle-income housing); pay back several loans the city took out against the future sale of the property; and provide $5 million for unspecified homelessness-related programs—including, perhaps, the restructure of the city and county’s homelessness response systems into one regional agency.

The $143 million price tag includes a $38 million “discount” in exchange for Alexandria’s guarantee to provide affordable housing; the price without affordable housing would have been just over $171 million. “It’s a new benchmark number in terms of price for square foot” on the portion of the property Alexandria plans to develop, Steven Shain, from the city budget office, told reporters during a briefing on the plan last week. “I think we did a great job negotiating. … I don’t want to characterize in the press that they’re overpaying [but] they are going way above to make sure that they won this project.”

During last week’s briefing, Mayor Jenny Durkan called the deal “one of the most consequential property deals the city of Seattle has ever done. … I think it will be one of those things that people look back and say, that really was a generational opportunity for the city of Seattle and they were able to seize it and make our city better because of it.”

Here’s a detailed look at what the project will look like and where the money from the sale will go.

What will be included on site:

The project will primarily be a life-sciences campus like the ones Alexandria has already developed in cities like San Francisco, San Diego, and in South Lake Union—”creating … hundreds of new jobs, if not thousands of new jobs, that will lead to our ability to be the city that cures cancer and other things like that,” Durkan said.

In addition to commercial space, the project will include a community center of up to 30,000 square feet, according to Shain, at no rent to the city, and will a single, large building (up to 12 stories tall) combining 175 units of low-income housing—the minimum number the city asked for in its original request for proposals—with about 38 moderate-income units built under the city’s Multifamily Tax Exemption (MFTE) program, which grants developers a property tax break if they keep units affordable to moderate-income households for 12 years. (City officials who briefed reporters on the plan last week said the developer could build as many as 190 units in addition to the affordable ones, but has not committed to a specific number, which will determine the exact number of MFTE units).

The affordable units, according to Shain , would be distributed throughout the same building as the market-rate apartments—”there wouldn’t be two separate doors”—and would be available to people making less than 60 percent of the Seattle area median income, or about $45,600 for a single person. The new units would mostly be studios and one-bedrooms, not the family-sized units that are most lacking in Seattle, particularly in the downtown core.

Alexandria would also be responsible for building two blocks of protected bike lane on Mercer St. and to open a pedestrian path through the campus on the block between Mercer and Roy. The company has agreed to pay for pay for environmental remediation on the site, which has been the site of a dry cleaner and a gas station, among other things; Shain said the cost would probably be a “significant eight-figure number.” Continue reading “Mercer Megablock Sells to Real Estate Equity Firm for $143 Million” →

Affordability, Bikes, campaign finance, Development, Elections, housing, Mayor Durkan, Morning Crank, Transportation, zoning

Afternoon Crank: Public Land Sale Materials Tout Restrictive Zoning, Barriers to Homeownership; Details on Bike Lane Mediator’s Campaign Contributions

1.The official request for proposals for developers interesting in buying the so-called Mercer Megablock—three sites that total three acres in the heart of South Lake Union—includes some revealing details about how the city is pitching itself (via JLL, its broker) to potential property buyers. Alongside standard marketing language about the city’s booming economy, growing tech base, and wealth of cultural and natural assets, the Megablock marketing materials tout the fact that Seattle has restrictive zoning and “high barriers to entry for homeownership,” along with some of the highest and fastest-rising rents in the nation, as positive assets that make the city a great place to build.

From the RFP:

This area is also one of the most dynamic real estate investment markets in the country, benefiting from a combination of strict land use planning, topographical constraints on supply, and employment growth that consistently ranks above the national average. Favorable “renter” demographics, positive job numbers, strong population projections and a low unemployment rate, together with high barriers for entry in home ownership, also position the region as a strategic market for multifamily investment gains.

 

What, exactly, constitutes “a strategic market for multifamily investment gains”? A pull quote in the RFP puts a finer point on it: “Housing prices have grown at the fastest rate in the country for the past 17-consecutive months. The 12.9% year-over-year growth is more than double the national growth rate. Multifamily rents increased by 3.1% year-over-year and vacancy is just 4.2%. ”

Obviously, when you put artificial constraints on housing supply (such as zoning laws that make multifamily housing illegal in most parts of a city), housing prices increase. Usually, we think of that as a bad thing, because it means that all but the wealthiest renters (and those who can afford to buy $800,000 houses) get priced out of neighborhoods near employment centers, transit, and other amenities. But the city’s marketing materials turn this idea on its head: Restrictive zoning, “high barriers” to homeownership, and spiraling rents make Seattle the perfect place to buy one of the city’s last large parcels of public land—a parcel which, if housing advocates had their way, would be used for affordable housing that might help address some of those very issues.

Support

2. After I reported yesterday on the city’s decision to hire a mediator with the Cedar River Group to facilitate a series of conversations  with groups that support and oppose a long-planned bike lane on 35th Ave. NE, architect/intrepid YIMBY Mike Eliason dug through the city’s elections website and discovered that the mediator, John Howell, has given money to both Mayor Jenny Durkan (who directed SDOT to initiate the mediation) and onetime city council candidate Jordan Royer (who, along with attorney Gabe Galanda, is representing the Save 35th Avenue NE anti-bike-lane group in mediation). Howell, who is a principal and founder of Cedar River Group, contributed $275 to Durkan last year and $250 to Royer in 2009.

Rules adopted after the passage of Initiative 122 in 2015 bar contributions from contractors who made more than $250,000 from city contracts over the last two years; according to the city’s contractor list, Cedar River Group made $399,757 from city contractors between 2016 and 2018. However, the Seattle Ethics and Elections Commission last year dismissed a similar case involving contributions from Paul Allen, who owns a large stake in City Investors (the real estate arm of Allen’s Vulcan Inc.) , concluding that restricting Allen’s ability to donate to local candidates would violate his right to free speech. The “rationale,” according to SEEC director Wayne Barnett, was that “giving a campaign contribution is protected speech under the First Amendment.”  I asked Barnett if that finding might also mean that (under Citizens United, the Supreme Court ruling that unleashed unlimited political spending by corporations) that the contractor contribution restrictions themselves were unconstitutional. Barnett said that was an interesting legal question but that it hasn’t been tested (yet).