The Sound Transit Board including King County Executive Dow Constantine and Seattle Mayor Ed Murray voted Thursday to approve Motion No. M2015-34 authorizing the start of negotiations with Gerding Edlen for the Portland-based developer to lease or purchase — and then develop — the transit agency’s two acres of land surrounding Capitol Hill Station.

But the process still has some negotiation to shake out before all is said and done on the selection of the “master developer.”

According to the Sound Transit board memorandum on the motion, “a protest has been submitted that relates solely to Site B-North. Staff will evaluate the protest and will issue a written decision consistent with Sound Transit’s protest procedures.”

Nonprofit developer Capitol Hill Housing sent the letter of protest over the selection, CHS has learned. CEO Chris Persons confirmed the protest but told CHS he couldn’t discuss details until talks with Gerding Edlen were wrapped up in coming weeks. Capitol Hill Housing had been part of a proposal with the Jonathan Rose Companies to develop the properties.

In an email sent from Capitol Hill Housing to Sound Transit, Persons wrote that the nonprofit developers would file “a formal protest regarding Sound Transit’s determination to enter into negotiations with an organization other than a qualified not-for-profit for the acquisition and development of site B-North at the Capitol Hill Redevelopment site.”

“We sincerely believe that an honest mistake has been made,” Persons writes, adding that CHH holds Gerding Edlen “in the highest regard.”

In its protest, Capitol Hill Housing argues that Gerding Edlen is not eligible to purchase the site lined up to be 100% affordable units:

According to Sound Transit, Gerding Edlen is aiming for a 75-year deal to lease three of the Broadway properties from Sound Transit. The transit agency’s analysis “indicates that the proposed lease structure on Sites A, B-South, and C is financially more beneficial to Sound Transit than the sale of the properties,” the motion reads. According to Sound Transit, those three properties are worth $25.1 million combined. “The net present value (NPV) of a 50 year lease is $29,551,920,” the Sound Transit analysis concludes. Gerding Edlen would have an option to stretch the deal to 75 years.

Meanwhile, the price tag for the outright purchase of Site B-North is $2,847,000, Sound Transit said. A big chunk of the cash, by the way, will be owed back to the feds: “Sound Transit will be required to reimburse the federal share of 41.7% or reduce the gross project cost of another FTA eligible capital project by the amount of the federal share.”

Sound Transit officials said negotiations over the deal will continue through the year.

According to Gerding Edlen’s 262-page bid document, construction is slated to start around summer 2016 and last through August 2017. The $1.8 billion light rail extension connecting downtown to the University of Washington under Capitol Hill is expected to open for service by early 2016. Sound Transit forecasts that by 2030, there will be 14,000 boardings a day at Capitol Hill Station.

Meanwhile, by the language of the motion approved Thursday, Gerding Edlen has 60 days to select “a development partner” for Site B North, where all 86 units are required to be affordable under the Sound Transit framework for the site.

D. Motion No. M2015-34:  Authorizing the chief executive officer to begin negotiations with Gerding Edlen for (1) a purchase and sale agreement for the parcel referred to as Site B-North located at 923 East John Street, Seattle, WA for a mixed-use affordable housing transit-oriented development project and (2) a long-term ground lease on the parcels referred to as Sites A, B-South and C, located at 118 Broadway East, 123 10th Avenue East and 1830 Broadway respectively for a mixed-use market rate housing transit-oriented development project that includes a 20 percent affordable housing requirement, a public plaza and other amenity spaces

During the public comment before the board’s vote, Gerding Edlen partner Jill Sherman said her firm is “thrilled and honored and humbled” to have been selected for the project and that the company is looking forward to the “opportunity to roll up our sleeves” and begin the “real work” of developing the prime real estate on Broadway between John and Denny just across the street from Cal Anderson Park.

The community group Capitol Hill Champion — representing the Capitol Hill Community Council and the Capitol Hill Chamber of Commerce — also had a say in the public comments thanking the selection committee for its work and vowing to continue to represent the community through design review and construction. Representative Tim Farrell, who described himself as a “Capitol Hill real estate professional,” reminded the board and audience of the Champion’s planned May 16th “Meet the Developers” event at the Century Ballroom. He also alluded to the challenges the group faced over the years in dealing with the massive project adding his hope that other communities can benefit from “the process Capitol Hill went through.”

Earlier this week, CHS reported on the fruition of a five-year fight to shape the bidding process for the developments with community priorities including affordable housing and a market plaza as Sound Transit announced Gerding Edlen’s selection as the “master developer” for four project areas around the future light rail station.

Here is Sound Transit’s summary of the Gerding Edlen proposal.

• 34% of all units are family sized (2-bdrm+)
• 38% of units are affordable for 12 years and 86 (21% overall) units in Site B-North
  designated affordable on deed.
• All buildings will be built to a minimum of Leadership in Energy and Environmental Design
• (LEED) Gold standards, with a goal of all buildings having net-zero energy consumption by 2030
• The parking to unit ratio is set at .5 (parking spaces to residential units)
• The retail strategy anticipates a grocer to anchor Site A and a market hall concept with opportunities for small, local retailers on Site C.
• The developer will enter into an agreement with the Broadway Farmers Market to operate at the public plaza.
• A community center and a daycare with subsidized care for low-income residents will be located on the first floor of Site B-North. The community center will be cross-subsidized by the other market rate sites.
• The affordable housing on Site B-North will be operated by a development partner and project financing will be pursued in tandem with their developer selection process.

Developers were allowed to plan for 85-foot tall buildings along Broadway in exchange for going above the minimum affordable housing requirements.

Meanwhile, though the board never broached the topic, Gerding Edlen representatives present at Thursday’s meeting got a small taste of some of the issues — and opportunities! — yet to come. Neighborhood activist and frequent critic of development projects Dennis Saxman said he was “happy” with the selection of Gerding Edlen but that he was concerned about conflicts of interest in the development process for companies and organizations like the Capitol Hill Chamber of Commerce and the potential involvement of “a global corporation” like Bright Horizons. A letter of intent from the national provider of daycare services was included in Gerding Edlen’s proposal. Saxman was also critical of Sound Transit’s decision regarding the affordable housing development of Site B North.

During her public comments, Gerding Edlen’s Sherman said the company was bringing “an affordable housing nonprofit onboard” and that Capitol Hill Housing would be one of the organizations that “we would certainly speak to.”

Meet the Capitol Hill Station TOD developers
Saturday, May 16, 2015 – 1:00 PM – 4:00 PM
Century Ballroom
More information

UPDATE: We have updated this post to more accurately reflect Saxman’s comments regarding Site B North.