After months of working out deals after a $9 million construction loan gone bad, The Sanctuary development at 16th Ave and E Denny is again moving forward — but at a  steep discount:

The senior development loan on The Sanctuary — a century-old church in Seattle’s Capitol Hill neighborhood that was converted into a 12-unit multifamily community — has been sold by a syndicate of lenders to Pathfinder Pollin Sanctuary Holdings, LLC, an affiliate of San Diego-based Pathfinder Partners, LLC, a leading acquirer of loans and properties from financial institutions.

According to Robert Nall, managing member of Resource Transition Consultants, LLC (RTC), which has served as the court-appointed receiver for the lender syndicate since September 2010, the loan sale is a key step toward rejuvenating the long-stalled development and reintroducing The Sanctuary to the market at dramatically reduced prices.

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Guardian Real Estate Services, a national real estate investment bank, represented the selling lenders. RTC will remain in place and oversee remaining construction and sales activities. Seattle-based Realogics Sotheby’s International Realty has been appointed the exclusive listing broker.

Originally built in 1908 as The First Church of Christ the Scientist, The Sanctuary was redeveloped a century later, as 12, fee simple concrete and steel townhomes within the historic structure. The original borrower defaulted on the development loan in August 2010 and construction and marketing has been halted for more than a year, Nall said. “With the support of our new lender, we can now complete construction and sell the individual residences,” Nall added.

We detailed the default on the $9 million+ construction loan here.

The landmark First Church of Christ Scientist was gutted and sub-divided into a dozen units — no two featuring the same floor plan — after it was acquired for development in 2006. Units span from three to five levels and retain many of the building’s original features, most noticeably its stained glass windows, ornate columns, and dome. The project sought to reuse as much of the original church as possible; church pews and wooden support columns, for instance, were converted into stairs. The dedication to reuse can be a blessing and a curse, however. Check out the rooms where the only windows are stained glass to see what we mean. You can read more in a write-up on the amazing project we posted in 2010.

Urbnlivn sounds excited about the details of the discount described by Pathfinder:

“While the original developer had an incredible vision that we intend to fully realize, we also recognize that values must be recalibrated for today’s homebuyer,” Nall said. “We anticipate our prices will start at below $600,000.” Additionally, new homeowners will enjoy a 10-year property tax abatement, with a special assessment designation for historic structures.

We’ll watch as the new sales effort kicks in to see if the Sanctuary’s ambition has appeal even after all the drama. You can learn more at www.liveatsanctuary.com.