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Brian Miller
Real Estate Reporter

February 2, 2017

On the Block: Old Samis building may return to its hotel roots

Until the 1980s, the Gatewood Hotel at First and Pine was a busy if seedy SRO hotel next to the Pike Place Market.

After spending the past 25 years as low-income apartments, the Gatewood is now poised to return to its original use — though in a much more polished form.

Los Angeles-based Lighthouse Investments is working with architect Gensler to convert the building at 107 Pine St. into a 96-room boutique hotel.

Adam Hasson of building owner Samis Land Co. confirms that it is negotiating a long-term ground lease with Lighthouse.

Image by Brian Miller [enlarge]
The Gatewood’s upper floors are vacant again, and awaiting hotel guests.

Image by UW Special Collections [enlarge]
The Gatewood as it looked in 1905. Count the windows and compare them to today’s image to see how the north facade was trimmed in 1910 when Pine Street was widened.

Documents on file with the city list Lighthouse as the financially responsible party for renovations to the Gatewood. Lighthouse principal Ramin Kolahi said that more details would be forthcoming in two months, but he declined to comment further.

The four-story building was developed in 1900 as the Colonnade Hotel by brothers Charles D. and Frederick S. Stimson, who famously created timber and real estate fortunes in Seattle. By the time Sam Israel (1899-1994) acquired the rundown hotel in 1975, it was known as the Gatewood. Israel's legacy is the nonprofit Samis Foundation, which was established in 1987 to support Jewish education.

In 1991, Samis signed a 25-year lease with Plymouth Housing Group to operate the Gatewood as low-income apartments. The building also received a seismic upgrade and other renovations. The deal originated after squatters took residence in the building, whose upper three floors had been vacant since the early 1980s. PHG vacated the Gatewood last year.

Plans filed with the city show that the 7,600-square-foot retail area on the ground floor would be reconfigured. The building footprint is about 12,500 square feet.

Current tenants include Alchemy Goods, Alhambra and Eco-Elements, but it's not known whether they would remain beyond the duration of their leases. Lighthouse would become their new landlord if it assumes a ground lease.

At least two storefronts are now vacant.

The entire 50,000-square-foot building will be renovated, and the mechanical system will be replaced.

The Gatewood lies outside the Pike Place Market Historical District. An effort last fall to have it designated a landmark was not successful.

Photos in the landmark nomination report show small kitchens in the units that would presumably be removed to create larger hotel rooms. The current unit count is reported variously as 96 and 98 rooms.

A light well gives the building a U-shape above the ground floor. Like all buildings of its age, the Gatewood has no parking.

Public records list the Gatewood team as JTM Construction, Coughlin Porter Lundeen (structural engineer) and Holmberg Mechanical Co. (mechanical systems).



***

The Gatewood is one of several small old buildings being converted to boutique hotels in downtown Seattle. Others include the Seven Seas Building (the former Lusty Lady) at 1315 First Ave., with 43 rooms; J&M Hotel at 201 First Ave. S., with 25 rooms; Metropole Building at 423 Second Ave. Ext. S., with 36 rooms; and the Eitel Building at 1501 Second Ave., with 90 rooms.

No major permit applications have been filed yet for the Gatewood, which may not need a master use permit since it was a hotel in the past. (This is the same argument being made by Revolve, which is developing the Seven Seas Building.) No design review is required.

All this comes as Seattle is entering a cycle of remarkable hotel-room growth.

Chris Burdett, senior vice president of CBRE Hotels, said there are about 4,000 hotel rooms in the pipeline, of which about 2,000 are under construction. But the market is split between big — like R.C. Hedreen Co.'s 1,260-room Hyatt Regency — and smaller operators, with projects between 100 and 300 rooms.

“Under 65 rooms,” says Burdett, “it's very difficult to make money” without ancillary income. Bars and restaurants can supply such cash, but they also require the fixed costs of staffing and supplies.

“They're outliers. They're interesting. They're cool,” he says of such boutique hotel renovation projects, but “Nobody's going to pay $400 per night to stay at a J&M.”

***

Everyone would like to emulate the trendy model of the Ace Hotel Group, established here in 1999, but Burdett cautions that “Ace did it, but they went from that 18-room hotel to mainstream.” Ace is now in 10 markets with over 1,000 rooms.

Burdett says of Seattle's aspiring boutique hotel developers, “They're really smart, but they're not hoteliers.”

Knowing how to build a hotel, versus knowing how to operate one, are two different skills. “Finding an operator isn't hard,” he says, but that's another cost on the ledger.

Investors prefer traditional hotels that are larger and new, says Burdett. Small boutique projects may cost less to develop, but they carry plenty of risk. One way to mitigate that risk, he says, is to cluster boutique hotels with shared services. Local examples include the MarQueen Hotel and Inn at Queen Anne in the Uptown neighborhood.

Following the same strategy, Jim Riggle is planning to add two more hotels near his Hotel Ballard. And the owner of the Metropole and J&M also intends to operate those two hotels as one.

All of which begs the question: Might one operator gain efficiency by running the Eitel, Seven Seas and Gatewood jointly? Together they'd have 229 rooms — more the size of a conventional hotel.

The privately held Lighthouse has ample experience with hotel projects — from Hollywood, Florida to Beverly Hills — though most have been built new or acquired. The firm also develops residential and commercial properties.

If successfully realized, the Gatewood would be the firm's first investment in the Northwest.


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


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