(Image: 1711apartments.com)
The former Olympic athlete who developed a 12th Ave property into this four-story, 37-unit apartment building appears to have produced a gold medal-worthy return on the investment.
According to King County Property Records, the recently completed 1711 12th Ave building has sold for $9.9 million. Gramor Development CEO John Graham, “a three time Olympian competing in both track and field, and bobsleigh,” according to his Linked In profile, purchased the property just above Cal Anderson Park for $850,000 in July 2011.
Calculating costs based on one CHS source’s estimates of $160,000 per unit, Gramor would have spent around $5.9 million on the construction. The $3.15 million or so profit sketches out to a 370% return on the initial purchase of the property, by the way. Olympian performance!
Like 11th Ave south of the park where a sixth new building is planned, 12th Ave has been a hot bed for new apartment and microhousing projects large and small.
The happy new owner of 1711 — the entity paid $268,000 per unit for the building — is listed in county records as Capitol Park, LLC. A check of state records reveals no governing persons listed for the recently formed limited liability corporation. If you’re the proud new owner, let us know.
The high-end Gatsby Apartments on 10th Ave E would have cost you an even larger arm and a leg. The project sold this week for $35.5 million — $507,000 per unit. Of course, the buyer also gets to own one of the most notorious building brands in the new wave of Capitol Hill development.
All in all, owning multifamily properties on Capitol Hill seems like a pretty profitable venture. Though, during this latest boom, owning Hill real estate of any type might make you a buck or two.
Wow, $507k per unit for the Gatsby? That is an awful ROI. Well we have no worries about them converting to condos anytime soon.
I should say ROI for the buyer. Great for the seller.
I looked at renting at the property on 12th. The interior and views were great but the exterior is atrocious.
[…] $9.9M. Gramor Development CEO John Graham bought the property in 2011 for $850K and, after costs, CHS figures that, after costs, he made around $3M on the deal. Not too shabby.· High price paid for […]
You really need to find a source who knows something about development. Your 370% return estimate doesn’t really help inform anyone and just makes you look ignorant.
While $160,000 sounds reasonable for a hard construction cost per unit, it completely ignores soft costs. Soft costs include things such as design (architecture, engineering, geotech, interior, etc), loan fees and interest, permitting, environmental, taxes, management, commissions, lease-up, etc. A very rough rule of thumb is that a development’s soft costs are going to be in the neighborhood of 35% of the hard costs. If hard costs were $5.9m, soft costs were probably around $2m.
A realistic total cost for the project is $8.75m ($850k land + $5.9m hard cost + $2m soft cost). Of that total, you can assume that the developer could get a construction loan of 75%, meaning that their equity needed (or their “initial investment”) would be $2,187,500 (not simply the $850k purchase price for the property.
A sale price of $9.9m would need to be netted down for the cost of sale. King County gets 1.78% right off the top in the form of Real Estate Excise Tax, plus the listing and selling brokers each receive fat commissions and the seller pays for things like legal, title and escrow. A realistic cost of sale for a transaction of this size is around 8%, meaning that the net sale price is more like $9.1m.
So instead of the $3.15m profit that you cite above, the real number was probably closer to $400,000 ($9.1m net sale price less $8.7m cost).
Instead of the 370% return figure that you trumpet, the actual return was probably closer to 18% ($400k divided by $2.187m invested). Not a horrible return, and within shooting distance of the 20% to 30% return that most developers target.
By all means, you can publish wild numbers that play into the “greedy” developers making money hand over fist at the expense of the neighborhood. I’m sure it generates lots of clicks. But if you’re interested in how things work in the real world, you’d find that it is very different than you claim in your article.
Thanks — making a spreadsheet now with your ‘Econ 101’ calculator for the next sale :)
Nicely said Econ 101. I think it’s time we start reporting on home sales on Capitol Hill and figure out how much profit these homeowners make when they sell. Apparently making a profit in Seattle is a bad thing, and anyone who does is demonized for it. I agree however that the building is an ugly POS.
Let’s not be angry victims! I’ve been thinking the same thing about looking at the recovery (and then some!) of the Hill’s housing market.
At over $500K a unit selling price, that’s one HELL of a return on their investment. The land cost was $5 million. Hard and Soft costs would likely put the cost per unit at or around $200K at the most given the actual quality of the finishes.
I work for an apartment developer. If somebody allowed the cost per unit on our apartment complexes to top $200K for the quality of Gatsby, they’d be out of a job.
Good informative post. Thanks for taking the time to write it.
[…] the First Hill McDonald’s. Another type of sale was the apartment project flip as developers sold off recently completed Capitol Hill projects to the highest bidders. Here’s a $36.1 million flip on E Pine. Other times, the deals […]
[…] Recently constructed 12th Ave condo task offers regarding.9 thousand, Gatsby offers … the previous Olympic sportsman who created a twelfth Ave home into this several-tale, 37-device condo making seems to have created a gold-medal-deserving reunite about the expense. Based on Full County Home Information, the finished nbsp & 1711;… Read more on CHS Capitol Hill Dallas […]