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January 12, 2017

City preparing to sell two properties in SLU

Seattle Daily Journal of Commerce

Lynn Porter

The city of Seattle wants to sell 2.5 blocks of prime real estate in the thriving South Lake Union neighborhood.

The two properties are zoned for high-rise construction. One at 800 Mercer St. covers two blocks, and is bounded by Mercer and Roy streets and Dexter and Ninth avenues north. The other at 615 Dexter Ave. N. is the north half of the block bounded by Roy, Mercer, Dexter and Aurora Avenue North.

The city is seeking qualifications by Jan. 17 from real estate consultants to help prepare a request for proposals for developing the properties.

According to the notice in the Dec. 1 DJC, the consultant will also assist the city with a marketing plan, evaluating proposals, negotiating the sale, and developing a disposition and development agreement.

The city would like to issue the RFP in spring, said Steven Shain, development manager with the Seattle Office of Planning & Community Development.

Seattle Department of Transportation acquired the land for transportation projects. About $26.2 million from selling the Mercer site will go toward paying for the Mercer West construction.

The mostly vacant site at 800 Mercer will be about 100,000 square feet, if the City Council agrees with SDOT's proposal to vacate remnants of Broad Street that run through it. The agency said the council is scheduled to consider the issue this quarter.

The remnants are part of Broad that was closed in connection with the realignment of state Route 99 and related Mercer Street improvements.

The 615 Dexter Ave. N. site is 24,000 square feet, and has a one-story office warehouse and parking on it.

The properties are zoned for residential construction to 240 feet and commercial construction to 160 feet. They are near the Allen Institute, Amazon.com and UW Medicine, and could have views of Lake Union.

"These are pretty amazing sites," said Richard Briscoe, a senior vice president at Kidder Mathews. There are not many big properties left in South Lake Union, said Briscoe, who provides valuation advisory services for the firm.

Briscoe said it takes at least four years to get a tower permitted and built in Seattle. In that time, he said, the recession economists are predicting could hit, which may drive down demand for housing or office space. Also, if interest rates rise, the cost of financing projects could go up.

"The financial aspects are becoming just more risky because of the (potential) looming slowdown," he said.

But he does not expect that to reduce the price for these properties because of the limited supply of land in SLU. He said that in the past three development cycles land values didn't decline. Developers would "just have to be more patient," he said.

According to the RFQ, the city wants to use its South Lake Union assets to help make the area a "neighborhood of opportunity."

Some ideas proposed are affordable housing, a childcare facility, pre-school, community or performing arts space, multi-modal transportation infrastructure and a training center for jobs in SLU industries.

Shain said development of the two SLU properties needs to be market rate, and provide public benefits. The developer could propose public benefits outlined in the RFQ or other ones, he said.

© 2017 Seattle Daily Journal of Commerce. All rights reserved.

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