Thursday, March 15, 2012
|Seattle Times||Daily Journal of Commerce Headline|
|Longtime developer Harbor Properties sold||
Real Estate Buzz: Still waiting at The Station at Othello Park
|New Nordstrom Rack opens at Westlake Center||Last spring, The Station at Othello Park opened next to the Othello light rail station in the Rainier Valley.
The mixed-use complex was Rainier Valley’s first big market rate apartment project in 40 years, and also the first time investors gambled on a sizeable transit-oriented development on the Central Link line.
The big question was how would the market respond.
Almost a year later, 54 percent of the 351 units are leased for about $1.80 per square foot, according to Steve Rauf, CEO and president of Othello Partners, the developer. USAA Real Estate Co. is an investor.
The project also has 18,000 square feet of retail and 320 parking stalls. About 12 percent of the retail has been leased, and letters of intent are out for two restaurant spaces totaling 4,300 square feet.
Other businesses are interested, Rauf said. “I feel like we are getting some real momentum going.”
It’s still early, but one market analyst,Tom Cain of Apartment Insights Washington, says the lease-up is “a little slow, but not too bad.”
Cain said when he was a broker the industry rule-of-thumb for new lease-ups was 20 units a month. “This is going to vary,” he said, depending on market conditions and project size. Larger properties tend to lease faster on a monthly basis, but they take a while because of the sheer number of units to rent.
Last September, The Station at Othello Park leased 28 units, but then winter hit. Rauf said 16 units were leased in February.
One of the project’s biggest challenges for both investors and would-be residents is the location. With trains running every seven to 10 minutes during much of the day you can get downtown in about 20 minutes and to the airport in 15, but South Seattle is not Capitol Hill.
Investors tend to stay “in their hoods [and] stick with what is familiar,” said Rauf, a South Seattle resident. He says investors nationally believe in light rail, but you have to prove it in each market.
The Station at Othello Park is unlike downtown properties that have thousands of people passing by every day on their way between work and home. More than 7.8 million people traveled on Central Link last year, but riders likely were focused on getting to Sea-Tac Airport or downtown, not looking for a new place to live.
“We are more of a destination property,” Rauf said. “We have to reach out more than traditional properties.” You can see that at the airport light rail stop, which is plastered with ads for people to live at The Station at Othello.
One thing Rauf is banking on is higher fuel costs. When gas hits $5 a gallon, “this asset will be that much more valuable.”
Other factors to consider when trying to gauge how the project is faring are the opening and lower-than-anticipated construction costs.
When it opened in April, only about 35 units were ready and most were studios. Some customers had to be turned away. “We had some real product availability issues,” Rauf said.
The effective rents are less than the $1.90 a square foot the team was targeting, but this was offset by lower-than-anticipated construction costs. The overall development was expected to cost $75 million, but Rauf said it ended up in “the low $60s.” The per-door cost was around $170,000, according to Rauf.
This compares to around $380,000 per door for Viktoria Apartments, a new downtown project that is about to start construction.
Much is riding on the success of The Station At Othello Park — for Rauf, who is trying to sell other large development sites in the area, and for another nearby property owner: the Seattle Housing Authority, which owns property just west of The Station at Othello Park.
One of Rauf’s sites is just north of The Station at Othello Park. He said a buyer had it under contract last summer but the deal didn’t go through. Rauf said he and brokers Kenny Dudunakis andMarty Leith of Hendricks & Partners are talking to another group.
Rauf’s second property is near the Rainier Beach light rail station, one stop south of Othello. Jay Miller of Alchemy Real Estate is marketing that site.
SHA spokesperson Virginia Felton said there has been interest in the agency’s land over time. “It’s a gem of a property for the right developer,” she said. How long it takes to sell depends on how things pan out across the street at The Station at Othello Park.
Still on hold for Hole Foods update
We’ve gotten calls from brokers and others interested in what Madison Development Group wants to do with the “Hole Foods” project in West Seattle.
The site was excavated in 2008, but plans fizzled for housing, a Whole Foods store and other retail.
Last fall, MDG acquired the property at 39th Avenue Southwest and Southwest Alaska Street for $32.4 million at a foreclosure auction. At the time, a spokesperson for MDG said it probably would have something to say in three or four months, which would be about now.
We’ll have to wait.
“There will be news,” the spokesperson said, “but not for another 45 to 60 days.”
Happy trails, Mike
We interrupt this multifamily update for an important personnel announcement: Michal Makar, one of the region’s foremost experts on commercial real estate finance, has retired from CBRE|Capital Markets.
In an email with the subject line “Finally retiring,” Makar wrote that it has been a great ride and thanked the lenders and borrowers who made it possible.
His plans? Lose 20 pounds, babysit grandchildren, golf, bike and work on a few transactions.
“All but the first of these seem to be realistic,” he said.
Thailand or Belltown tonight?
What’s up with the Viktoria Apartments name? As noted earlier, construction is about to start on the 24-story tower in Belltown.
A spokesman for the development group — Harbor Urban Limited Liability Co. and Goodman Real Estate — sheds some light on the name and the world of branding.
Here’s what he said:
“We wanted something with a worldly elegance; subtle and feminine yet masculine and whimsical.” The project will cater to “the urbane adventurer, one who has a passion for exploring all the world has to offer, whether that’s spending a spontaneous weekend in Thailand or a Friday night at a new hidden bar in Belltown.”
Sounds like we’ll see residents traipsing around the Vik in pith helmets.
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