In spring 2018, developer Gerding Edlen will finally break ground on the 100,000-square-foot Capitol Hill Station commercial, housing, and community space project. To do it, the developer needs to sign a land lease for the Sound Transit-owned property.
On Thursday, the Sound Transit board will vote on three 99-year lease agreements to hand over control of Sites A, B-South, and C — the paved over, fenced off parcels along Broadway between E Denny Way and E John. If approved, it would put Gerding on track to finish the project in fall 2019.
UPDATE (3:20 PM): The Sound Transit board unanimously approved the lease agreements Thursday afternoon, paving they way for Gerding Edlen to dive into the design phase of the project. “Today is a really exciting day,” said Sarah Lovell, a member of Sound Transit’s “transit oriented development” staff.
In addition to some 400 apartments, the project will include a retail “bazaar” anchored by a grocery store. Portland-based New Seasons Market and Capitol Hill’s Central Co-op are currently vying to take over the space. The project is also slated to include a daycare, community space, and permanent home for the Broadway Farmers Market.
Board members said the project would be an example for all future TOD projects along the expanding light rail system. Sound Transit CEO Peter Rogoff praised his staff following the vote, saying many had lived and breathed the deal for the past six months. “It’s easily the most ambitious TOD action the agency has ever taken,” he said.
While Capitol Hill Station has been a massive success from a ridership standpoint, it could be argued that the success of the “transit oriented development” destined to surround the station is of equal or greater importance to the business and residential future around this stretch of central Broadway.
Unlike last month’s $2.65 million property sale for Capitol Hill Housing to build an all-affordable housing project, the agreements hammered out in July are technically leases as Sound Transit will retain ownership of the property.
Instead of paying a regular rent for the duration of the lease, Gerding will pay a lump sum of $17,435,000 after it sells the project or no later than 2033. Until then, Gerding will pay an annual rent of $222,350. In 2015, Sound Transit estimated all four properties to be worth $25 million. As part of the deal, Sound Transit will retain a $4.8 million stake in the three properties, which roughly adds up to the property valuation when combined with the value of Thursday’s lease and last month’s sale.
If Gerding does decide to sell the project, it can only do so after construction is complete and at the approval of Sound Transit. If Sound Transit ever decides to sell the property, whoever holds the land lease will have the right of first refusal to purchase it.
Gerding has partnered with Multi-Employer Property Trust to help finance the land lease. In all likelihood, MEPT will be the longterm lease holder of the property, according to Sound Transit. MEPT is “an open-end commingled real estate equity fund” that claims over $6.3 billion in net assets. The lease will be taken out by a joint venture setup by the two companies.
No underground garage is planned for the affordable housing site, but Gerding may elect to build one for Sites A, B-South, and C. In that case, CHH’s sale price will be reduced and Sound Transit will enter into a lease agreement with Gerding Edlen for the underground space.
Last year, Gerding was selected as “master developer” for all properties. Plans call for more than 400 apartments with more than 150 units to rent for below market rate for 12 years and 86 units designated for “permanent affordable housing.” A third of the units will have at least two bedrooms. Gerding estimated the project to cost $124 million for three sites, not including the affordable housing site.
Seattle Central College has been given a right of first refusal to develop a fifth parcel, Site D, due to the site’s location directly next to the school’s Broadway promenade. The school has previously said it was considering building student or faculty housing on the site.
A Gerding representative told CHS the developer plans to start the design and entitlement process in August. Gerding will then begin the process of taking its projects through an expedited design and environmental review. Prior to getting to design review, Gerding has also agreed to hold two community input meetings sometime this fall.
In the meantime, the Capitol Hill Champion group is looking for community feedback about the development through a series of focus groups. The Champion has worked for years to insert community priorities into the TOD project, including affordable housing and space for the Broadway farmers market.