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Nat Levy
Real Estate Reporter

June 2, 2016

Real Estate Buzz: Patience pays off for this SLU investor

Real Estate Reporter

Just about everyone wants a piece of South Lake Union today, but that wasn't always the case.

Almost 22 years ago, Rich Reel bought a small site at 820 John St., overlooking Denny Park, because he believed that eventually downtown Seattle would expand north of Denny Way — though he never expected that South Lake Union would become one of the country's hottest tech and life sciences centers.

“I did not predict Paul Allen would come in and Amazon would come in but they have, and the changes in South Lake Union have been phenomenal,” he said.

Reel is ready to get in on the action, so he is starting to get permits for an apartment tower with about 23 stories and 150 units. He wants the design to stand out and complement nearby Denny Park.

Reel's real estate experience involves mostly renovations so he is looking for a development partner. Reel said he is talking to one but declined to give a name.

Before the recession, Reel worked with Nitze-Stagen & Co. to assemble land at Eighth and Republican for future development. In 2013, they sold the land to The Wolff Co., which built an eight-story apartment complex.

Reel said he is talking to Ankrom Moisan Architects about designing his project.

Reel also owns another small site in the neighborhood at 312 Dexter Ave. N., just across from the former KING 5 headquarters, where Kilroy Realty Corp. will soon begin construction on a pair of 12-story office towers. He hasn't filed any plans for the site, but he said that's likely coming soon.

In the early years of the current boom Reel said he wasn't ready to do a project on the John Street site, but the strength of South Lake Union's market and new zoning that allows high rises have motivated him.

Reel also invested in Pioneer Square in the 1980s, and today owns two buildings on South Washington Street, near Alaskan Way South. Once Bertha is done and the Alaskan Way Viaduct comes down, Reel said he will look at repositioning his Pioneer Square holdings as workforce apartments.

Like South Lake Union, Pioneer Square has become a hot spot for companies big and small. Reel cited Stadium Place next to CenturyLink Field, the viaduct coming down and Weyerhaeuser's new headquarters as major forces in the neighborhood's rise.

“These are all going to be catalysts for continued change and improvement,” Reel said. “The more people we can get living and working here, the better it is for Pioneer Square and the city.”

Light rail driving deals in Bellevue

Light rail won't open in Bellevue for approximately seven years, but developers and investors are already jockeying for land near the stations.

In a post on LinkedIn, Colliers Senior Research Analyst Bobby Shanahan argues that light rail has sparked at least a dozen deals since the beginning of last year. They range from land deals in the 36-acre Spring District, to apartment and condo projects in downtown Bellevue, to hotel sales throughout the city. Many of these deals are on sites that developers and investors might not have considered previously.

“All of these deals reveal a real appetite for property near or close by future light rail stations,” Shanahan wrote. “There seems to be a feeling that the East Link will connect those stuck in the suburbs to the urban employment center of Seattle.”

One of the biggest and most intriguing deals is Vulcan Real Estate's purchase of more than three acres at 106th Avenue Northeast and Northeast Second Street for $45 million. Vulcan said last month it has no immediate plans for the site — its first in downtown Bellevue — but eventually it could build housing and retail there.

Shanahan wrote that Vulcan probably won't start construction until late 2018 or early 2019.

Light rail could shake up all sectors of the real estate market, he said. Quick connections will create more urban centers like the Spring District around this region. That raises some big questions: Will new centers disrupt downtown Bellevue's office market, which is already looking at 1 million square feet of new construction (only half of it leased so far) and the impending departure of Expedia for Seattle?

And will the more than 3,000 apartments set to open by 2019 in downtown Bellevue boost demand for office space there?

“Hope you can wait until 2023 to find out,” Shanahan wrote.

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

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