Wednesday, November 23, 2011
|Seattle Times||Daily Journal of Commerce Headline|
|Vintage apartment building on First Hill sells at a premium||High-rise idea shelved; new plan is self-storage|
|King County’s unemployment rate edged down in October||In 2007, two local firms bought a building at 1800 Terry Ave., near the growing South Lake Union neighborhood and in the path of future high-rise development.
Had the economy continued on its 2007 course, the buyers likely would have built a 33-story hotel or housing project on the site.
But the economy tanked, so now Seawest Investment Associates, a Kirkland real estate firm, and Insignia 2006, a company owned by Leisure Care CEO Dan Madsen, will open a different kind of business there next week: 638 units of heated, secure storage in an old office building that was to be razed for the tower. There will be 4,000 square feet of retail space.
The owners are banking that the same attributes that spurred their $15.6 million purchase will translate into success for this venture.
Seawest managing member Matt Aatai touts the proximity to Interstate 5, growing neighborhoods and downtown.
“Capitol Hill is on fire with apartments, South Lake Union with business,” he said, “(and) obviously downtown in the past few years they built all those residences and businesses.”
Market studies indicate the owners should expect demand for storage from businesses, medical facilities, restaurants and residents, Aatai said. Wine storage will be offered, too.
The owners spent more than $2 million renovating the 90,000-square-foot building that was constructed in 1968 and expanded in 1973-74. It had been home to Regence Group.
Converting the five floors and basement level was difficult, largely because it is all concrete, and was filled with computer and electrical wiring, and HVAC equipment that had to be removed.
“I’ve been in this business for 30 years and I’ve built many projects, but I’ll tell you this is one of the most complicated,” Aatai said.
The building was gutted and an estimated 3 million pounds of concrete flooring removed. Workers took out four inches of concrete over the metal decking of false floors to get to the original concrete, which then had to be smoothed and finished.
“We had large grinding machines here literally for (weeks) grinding that floor before we could epoxy it,” said Aatai. “Those are not things you do in a new building.”
Atcon Construction Co., an arm of Seawest, did the work, including repairing and painting the exterior, installing a new fire system and alarms, and adding a heating system for the storage and HVAC for the retail.
Atcon refurbished two elevators, added indoor ramps and exterior lighting, created loading areas outside and raised the parking lot for drive-up access. It also enclosed a first-floor overhang to add more retail space.
Lots of things were removed, besides the concrete and wiring. There were false floors, partitions, duct work, plumbing fixtures, a water feature, and 30 or 40 electrical boxes that would cost $1,500 new, Aatai said.
Some items were reused, including glass blocks that are now part of the storage manager’s station, but the owners found few takers in this down economy.
Thieves also removed items. About $500,000 of copper wire was stolen late at night by two men posing as contractors working for the owners, Aatai said. “I am talking literally thousands of feet of copper wire.”
Insurance covered part of the loss, he said, and a tip led to arrests.
Workers also found squatters had moved in mattresses. “They had set up temporary apartments essentially,” said Aatai, and there was evidence of drug use around the building.
Atcon devised ways to keep costs down. One firm wanted $30,000 to make each elevator level with the concrete floors, but Atcon created platforms and ramps to avoid that cost.
The owners had put it up for sale in 2009 when they saw the market changing, and later tried to lease it but found it wasn’t cost-effective to reconfigure for a new tenant, Aatai said.
He said the occupancy rate for downtown storage tops 90 percent in the summer, but drops somewhat in winter.
Spaces in his facility range from 5 feet by 4 feet to 10 feet by 40 feet. Asking rents will average $2.50 per square foot.
The building sold a number of times in the last real estate cycle. In 2004 an investment group bought it for $4.55 million. That group’s managing member, Joe Brotherton, dubbed it The Big House for its “prison-style” architecture. They sold it in 2005 for $7.6 million to Bosa Properties, which planned a high-rise condo.
Bosa sold it in 2007 to Leisure Care and Seawest, garnering one of the highest prices for land in Seattle that year: $722 a square foot.
Aatai said the price was justified by the high-rise Seawest and Insignia 2006 planned there.
“I wish we could have got it for half the price, but the market dictates what the price of land is,” he said. “We’re happy because we’re in this business for the long term. The ultimate use will be a high-rise. That’s the best use and the highest use.
“Would we have paid $16 million for land that we were going to do self storage on? No.”
Heated, secure storage units will open next week in this old office building that was to be razed for a tower.
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