December 2, 2010

Real Estate Buzz: Talk of a high rise gets people chattering

There was some chatter, complete with annoying exclamation points!!!, yesterday about a 40-story project in downtown Seattle. It began on SkyscraperCity, a discussion board for high-rise aficionados. A participant who goes by “cpm_seattle” posted this rendering of The 815 Pine Tower and this comment: “A reliable source tells me this apartment project may be starting soon.”

“...i miss threads like this, 40 stories! thats beautiful,” responded Bmac.

The Darkhyperchaso added: “Finally some new project with some respectable height. This looks amazing! Proud to be a Seattleite!”

The back-and-forth shows that height still impresses, but is the report true? An official with the project developer, Seattle-based Security Properties, wouldn't say.

Image from Skyscraper City [enlarge]

City officials say Security Properties has applied for a permit to do excavation, shoring and foundation work for The 815 Pine Tower.

“Unfortunately there is nothing to report,” said Ed McGovern. “Nice rendering though!”

Security does have a master-use permit. According to city officials, a construction application for the excavation, shoring and foundation was submitted to the Department of Planning and Development at the end of September and is under review.

Bumgardner, the project architect, says on its website that 325 apartments and 276 parking stalls are planned on six levels: three below ground and three above. There will he a street-level restaurant catering to patrons from the Paramount Theatre across the street.

Security's Managing Director of Development John Marasco said about a year and a half ago that JE Dunn was providing pre-construction services and likely would be the contractor. He said the company planned to start construction this year, if the national economy improved and demand picked up locally.

The national economy has improved some, but the regional apartment market and downtown Seattle in particular are a mixed bag.

According to Tom Cain of Apartment Insights, King County's apartment vacancy rate was 5.4 percent in the third quarter. The rate in downtown Seattle for stabilized projects, or those not in the lease-up phase, was just over 5.1 percent, and the submarket's average per square foot rent of $1.87 is the region's highest. Yet the gross vacancy rate, which takes into account all properties including those in lease up, might cause a developer to hold off on new construction. It was nearly 13.9 percent.

Northwestern Mutual Life Insurance Co. is Security's project partner, providing the debt and the bulk of the investment equity. Nineteen months ago, Marasco said construction financing was basically impossible, even if a developer had the equity. Yesterday, a Security spokesperson said she couldn't comment on construction financing.

So at this point all we can say is: Stay tuned!

‘We hit this at the perfect time'

Two and a half years ago, just at the Great Recession getting a grip on Seattle, people told Chris Garvin and Barrett Johnston they were nuts to quit their days jobs and go into multi-family investing.

Garvin

Johnston

Tomorrow, two 28-year-old Seattle investors expect to close their sixth apartment deal: a 53-unit property on Capitol Hill they're buying for $8 million. That will bring their portfolio to $15 million and 93 units.

The two were childhood friends in Bellevue. After graduating from Newport High they followed the typical path, going to college and then to work for other people. Against the advice of what seemed like everyone, they started Cadence Capital, a redevelopment, management and construction company. Today, Garvin says, it's one of the most competitive real estate syndication companies in Seattle.

Cadence combines the real estate knowledge of Garvin, who worked for Gibraltar, a Seattle commercial real estate company, and the construction experience of Johnston, who worked for the Bellevue general contractor Foushee & Associates.

Garvin grew weary of pitching investment opportunities to others.

“One of the biggest frustrations with being a broker is you are not in control,” he said. He decided that the next good deal he found he was going to do it himself. When he found a small Capitol Hill apartment building — Crest on Belmont — he pitched it to Johnston.

“I don't think he believed me,” said Garvin.

They took the plunge but continued working for others, and renovating the units at night. This allowed them to raise rents from $1 a square foot to between $1.80 and $2.

Today, they're on their own, working in a sparse office with a view of the Aurora Bridge. They raise money from investors and invest their own cash to buy well-located properties, fix them up and raise rents. Cadence also does single-family remodels and light commercial construction work.

It was a slog at first. Hours were long and the two men went about nine months without making any money.

“We had no lives whatsoever,” Johnston said. They found tenants were scared to “spend one more dollar on rent. This year you definitely don't feel that fear,” Garvin said. “We kind of hit this at the perfect time.”

The keys, Garvin says, are maintaining relationships with apartment brokers, executing deals and having your own construction arm. The last piece allows them to control costs.

Cadence has about five dozen private investors and two institutional investors. The company has one construction employee and engages two others as independent contractors. Garvin and Johnston plan to hire more laborers as well as an office employee. Over the next 18 months, they want to expand their network of investors and make bigger investments.

‘The Freak' buys Escala penthouse

Pitching sensation Tim “The Freak” Lincecum, who helped lead the Giants to their first World Series win since the franchise moved to San Francisco, made a major purchase in Seattle: a penthouse at Escala.

Lincecum on Tuesday paid just over $1.57 million for the condo, according to public records. The three-bedroom unit, which had been listed for just under $1.65 million, totals nearly 2,450 square feet. It is described on the Northwest Multiple Listing Service as “a perfect place to enjoy scenery and entertain.” It has “warm, cherry hardwood flooring, dark zebrano high gloss caninetry by Pedini, slab granite and marble.” Outside is a “huge wraparound deck.”

Not bad for a 26-year-old who started at Renton's Liberty High as an 85-pounder and went on to go 4-1 with a 2.43 ERA in this year's post season.

Got a Buzz tip? Send it to marc@djc.com or call (206) 219-6517.

Got a tip? Contact DJC real estate editor Brian Miller at brian.miller@djc.com or call him at (206) 219-6517.

Previous columns:

• Real Estate Buzz: Matt Griffin eager to start apartment towers, 11-18-2010
• Real Estate Buzz: 'Dirt' is starting to move on First Hill, 11-12-2010
• Real Estate Buzz: No comment on 7th & Madison buyer, 11-04-2010
• Real Estate Buzz: The warts-and-all story of Mosler Lofts, 10-28-2010
• Real Estate Buzz: Selling local retail as an amenity, 10-21-2010
• Real Estate Buzz: Sabey wanted Fed building, but not now, 10-14-2010
• Real Estate Buzz: HomeStreet prepares to sell Cascadia, 10-07-2010
• Real Estate Buzz: Two groceries for downtown Tacoma?, 09-30-2010