A Dramatic Entrance: New Seattle Mixed-Use Project Will Feature Theaters, Offices, Apartments
By Glenn Petherick
5 min read
In Seattle’s Pike/Pine neighborhood, Capitol Hill Housing is developing a mixed-use real estate project that will truly have a touch of drama.
12th Avenue Arts, as the 152,645-square-foot development is called, will actually be three projects in one building: a low-income housing tax credit (LIHTC) piece with 88 affordable apartments on the third through sixth floors; a new markets tax credit (NMTC) component with theater, nonprofit office, and retail space on the ground and second floors; and a two-level underground parking garage for the Seattle Police Department.
“12th Avenue Arts shows the arts working as both placemaking and economic development,” said Capitol Hill Housing CEO Christopher Persons recently.
Built on Former Parking Lot
The $47 million complex, which began construction in March, is rising on a site contributed by the city that was once an underutilized surface parking lot for a police precinct office building across the street. The new underground parking facility will consolidate parking spaces that the police department previously had on the lot and rented in the neighborhood.
“We’re roughly 25% complete now and will open in October 2014,” says David Dologite, Director of Real Estate & Sustainable Development at Capitol Hill Housing, a public development authority chartered by the city that develops, owns, and operates affordable housing and community development projects primarily in the Capitol Hill section of Seattle.
The 12th Avenue Arts site is in a trendy area that decades ago was light industrial. It is an historic center of Seattle’s gay community as well as a popular place for artists and musicians to live and work. Over the past decade, though, its growing popularity and surging real estate development have pushed up commercial and apartment rents, creating a shortage of affordable rental housing and squeezing struggling community theater groups, artists, and musicians in the neighborhood.
“It’s rapidly gentrified over the last 10 years and a lot of affordable art space has gotten squeezed out,” says Dologite.
“There was a neighborhood planning process that took place about five years ago to look at what the city could do to try to retain some art space in the neighborhood,” he says. “And this project was a product of that community-driven process.”
Dologite said 12th Avenue Arts has been structured as three separate condominiums for legal and ownership purposes: the housing; the parking garage; and the theater/nonprofit office/retail component. One reason for the separation is the federal tax law prohibition against combining new markets tax credits with low-income housing tax credits in the same project.
Housing Portion
The 88 apartments will include studio, one-bedroom, and two-bedroom units rented to households earning 60% or less of the area median income. This income cap is $36,420 per year currently for an individual and $41,640 for a two-person household.
“Our rents will easily be 50% below market rents,” says Dologite.
Funding sources for the housing component include proceeds from $12 million in tax-exempt private activity bonds issued by Capitol Hill Housing, which has authority under state law to float bonds; and tax credit equity from National Development Council, which syndicated the 4% housing tax credits. KeyBank is the construction lender.
New Markets Component
Dologite said 12th Avenue Arts represents Capitol Hill Housing’s first use of the new markets tax credit. “We wouldn’t be able to do this without it,” he said.
In addition to the underground parking, the new markets component will include two “black box” theaters (simple and flexible theater or performance space), back office space, and ground floor retail businesses. “We’re trying to get a restaurant and café – uses that might be able to pick up some on the theater crowd,” says Dologite.
There will also be office space for Capitol Hill Housing and for other nonprofit organizations on the second floor. “We’re giving first crack at the space to performing arts-related nonprofit organizations,” says Dologite, expressing hope that the space will be filled with tenants such as theater or dance groups, acting studios, or film festival organizations. If space remains, the organization will offer leases to other types of local community-oriented nonprofits.
About a third of the office space is already under agreement and another third is under negotiation.
Community development entities (CDEs) affiliated with KeyBank and the National Development Council provided allocations of new markets tax credits, funding a qualified equity investment (QEI) totaling $18.2 million.
Other funding sources were new markets tax credit equity and a commercial loan from KeyBank, plus a leverage loan. Sources for the latter included proceeds from the sale of the housing condominium to the LIHTC partnership and dollars raised by Capitol Hill Housing from a capital campaign. These charitable donations included cash in hand plus pledges – the latter bridged by another loan from KeyBank.
One unusual feature of 12th Avenue Arts is that there will be no dedicated parking for apartment residents or for tenants or customers of the performing arts, office, and retail facilities. But Dologite indicated that the site is close to downtown and multiple bus lines and there are many new apartments and condos in the neighborhood. In addition, the project will be a short walk from a new streetcar line opening in 2014 and a new light rail stop opening in 2016, he said.
