The acquisition expands the company’s Capitol Hill-area holdings after it paid $36.1 million for the Three20 apartment building on Pine and bought the Piecora’s property for $10.3 million in the spring of 2014.
Equity Residential and architects at Ankrom Moisan showed off their plans this summer to replace the old Piecora’s building with a 140-unit, six-story development that includes parking for 140 cars. The planned development will stand within view of the newly acquired Pearl.
Cashing in on the deal is Jeffrey Brotman, co-founder and chairman of Costco, after acquiring the property for $899,000 in 2006 and working with Maria Barrientos to develop the property.
Meanwhile, the days leading up to Christmas also brought a $25.1 million deal for the 19th and Mercer building to the Capitol Hill apartment real estate market.
The acquisitions cap a busy 2015 for rental housing development on Capitol Hill. At least 600 new apartment units were expected to open around greater Capitol Hill with nearly three times more on the way in 2016, according to analysis from Dupre+Scott Apartment Advisors.
The construction boom has enriched City Hall’s coffers thanks to a 77% leap in taxable activity in Seattle’s construction sector from 2010 to 2014.
In the short term, the continued housing boom seems to have had little effect on demand. Vacancy rates in the region were still declining to historical lows and rents throughout the region rose by 7.4%. Rents in the nearly 10-year-old Pearl range from around $1,500 for a studio to 700-square-foot one-bedrooms for around $2 grand.
See ya, suburbs
The Equity Residential move comes just weeks after a massive $5.4 billion deal by the company to sell a large group of its properties in a move interpreted by the Wall Street Journal as a sign the company run by real estate investing legend Sam Zell was moving away from the frothy apartment market. Equity reportedly shed a quarter of its holdings in the deal:
Most of the 23,300 apartment units in the deal, roughly a quarter of Equity Residential’s total, are low-rise and mid-rise units in suburban markets in and around southern Florida, Denver, Seattle, Washington, D.C., and Southern California. Analysts expect a significant amount of new supply to be concentrated in those markets in coming years.
“There’s an awful lot of apartments under construction,” Mr. Zell said, “and the majority of them are garden apartments in suburban areas.”
As it apparently shifts away from its suburban holdings — and, apparently, adds strategic properties in sure bets like Capitol Hill — Equity Residential reported more than $2.7 billion in revenue last fiscal year. Its presence on Capitol Hill has been mostly behind the scenes to date but Equity has a new connection in the neighborhood as newly hired Capitol Hill Chamber of Commerce director Sierra Hansen counted the company as a client in her work doing public relations for The Fearey Group.
In addition to its 80 apartment units, The Pearl is also home to longtime Ethan Stowell concern Anchovies and Olives, its more recently spawned sibling Bar Cotto, a Seattle Yoga Arts studio, and “neighborhood nutrition bar” Healeo.
The latter is part of a small sidebar in the big $33.5 million deal. Healeo is owned by Jeffrey Brotman’s son Justin Brotman who started the shop in 2009.