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Real Estate Editor
March 14, 2019
The name Potala Tower has been scrubbed from the memory banks, and that of disgraced/imprisoned EB-5 developer Lobsang Dargey was never mentioned at the ceremonial opening of the Arrive hotel-apartment tower in Belltown last month. Arrive — imagine the accent mark on the “e” — became the project's new name after construction had restarted under different management and ownership in 2016.
At the time, recalls The Molasky Group's Rich Worthington, “I think that project was frozen for a while. We inherited a seven-story hole in the ground.” The 43-story tower that filled that pit is at 2116 Fourth Ave., just north of the Cinerama.
Worthington and other executives from partner Binjiang Real Estate Group were on hand for the ribbon snipping; and so, too, was former governor Gary Locke, who delivered brief remarks.
“It's about job creation. That's what we want: job-creating investment,” said Locke with the practiced repetition of a professional pol. Jobs, jobs, jobs. No teleprompter required. (Presidential aspirants for 2020 take note.)
Tours, snacks and interviews followed the ribbon cutting. The tower includes the Sound Hotel (a Hilton Tapestry brand) on floors two through 10. Apartments run from 11 through 41. The roof deck and amenities, dubbed Apex Terrace and Apex Lounge, are intended for residents, but the hotel can reserve those spaces, too, for events. There's also underground parking for 177 vehicles.
Weber Thompson designed the tower, and PCL Construction Services built it. After Dargey's construction was paused (also using PCL), said Molasky, “The project was completed on time and on budget … 27 months and three labor strikes later.”
Local firm The Hotel Group is managing the 142-room hotel. The 344 luxury apartments are managed by Blanton Turner. Both are quite nice, as you'd expect from a brand-new development. There's a seventh-floor lounge open to both guests and residents. The wraparound terrace has views for now, but vistas to the north and east will surely be blocked by future developments.
Off-season rates for hotel rooms are now in the mid $200s; by summer they'll rise to the $400s. Rooms average between 400 and 475 square feet, large for new construction downtown. Hilton wasn't the original hotel partner; IHG was originally planning an Indigo Hotel with Dargey. Hilton came on board after the project went into federal receivership.
Apartments rent from about $1,800 to over $11,000 for a penthouse unit (there are five on the 41st floor). Units are about 20 percent leased, said Molasky. Blanton Turner said that initial concessions are still in force, with up to eight weeks of free rent. Unit run from about 475 to 1,800 square feet.
Back downstairs in the Currant Bistro, wine in hand, Worthington recalls of the project origins, “We had the benefit of timing.” The permits and team were in place when construction was paused — along with Dargey's other projects, none of which had broken ground — in 2015. (Dargey acquired the site in 2013 for $11.5 million.)
Binjiang, making its first U.S. investment, was an original partner with Dargey. “They found themselves at risk,” says Worthington. Yet Binjiang decided to maintain its stake, even up it, after the project went into receivership.
The federal judge overseeing that process considered five bidders, including Vulcan Real Estate, who submitted proposals to the receiver. But “Binjiang liked our plan,” says Worthington. Also, “There was a pathway for all the EB-5 investors to get their money back.”
However, whether those 150 investors, who contributed about $75 million to Dargey's company Path America, get U.S. citizenship is still being litigated in federal court.
Molasky also has experience with EB-5 investors via its affiliate, EB5 Group, which also probably helped it win the job.
Publicly traded Binjiang remains majority owner in the venture, says Worthington, who estimates an overall investment of around $230 million. (Back in 2017 Newmark announced a $325 million refinancing deal that included a $100 million construction loan.)
The private, family-owned Molasky is based in Las Vegas. It generally keeps its real estate investments instead of selling. “We're a small company. We don't aspire to be a big developer.” Worthington describes Arrive/Sound Hotel as “a long-term hold” both for Molasky and Binjiang.
That means being choosy about Molasky's future apartment projects. “We have deals brought to us all the time,” he says. “We have a possibility of another project in Seattle. I like gateway markets,” including Seattle, Portland, New York, San Francisco and Los Angeles.
But those are also the premium, high-cost markets, he acknowledges. There, “it's like an arms race for amenities and finishes.” Indeed, part of the collaboration with Binjiang meant upgrading Dargey's original, cheaper specs with interiors designer Hirsch Bedner Associates.
“The project didn't reflect our values — or Binjiang's,” he says. Now there's “a very timeless, elegant and rich palette of materials. I think we have a very sophisticated product.”
Referring to Seattle's construction costs, especially for Type I construction with a lot of steel, he says, “That price per foot is out of sight right now.”
Without specifying the address, Worthington said that Molasky purchased a Seattle property, prepared redevelopment plans, then walked away from the project because construction costs had risen 30 percent over three years. (It's apparently now back on the market.)
Because of all the other projects competing for cranes and contractors, “You get the pig going through the python,” he says. He sees a multifamily market sweet spot for the company at around 150 units; though in pricey, congested Seattle, that often means midrise projects outside the urban core. “Suburban is a lot easier.”
Founded in 1951, Molasky Group has experience with retail, commercial and government work. “We've been in and out of multifamily,” says Worthington. The company has other apartment projects underway in Los Angeles and Portland. “And we have others in predevelopment.” So remember the name.
Finally, by way of a postscript, let's survey what else became of Dargey's fleeting real estate empire:
Shoreline: Trammell Crow Residential paid $11.5 in December for the triangular site at 15500 Westminster Way, which will become the six-story, 330-unit Alexan Shoreline. Construction is now underway. Dargey acquired the land in 2015 for over $6.4 million.
Othello Square: Nonprofit developer HomeSight is planning a phased redevelopment of the L-shaped, 3.2-acre site at and around 3939 S. Othello St., near Othello Station. Seattle Housing Authority still owns it, since Dargey never closed the sale for his proposed plan for around 500 units. Othello Square could eventually have five buildings with affordable housing, a school, local retail and affordable condominiums.
Kirkland: Aegis Living paid $10.1 million in 2017 for the site at 1002 Lake St. S. Dargey originally assembled the 1.2 acres during 2011-2014 for about $8.3 million. His plan was for 58 condos and retail. Aegis is planning a three-story facility with 73 assisted living units and 33 memory care units. The project is still in city review. Completion is scheduled for 2021.
Got a tip? Contact DJC real estate reporter Brian Miller at email@example.com or call him at (206) 219-6517.