The headline Seattle developer lands financing to turn historic Labor Temple into offices caught my eye. I know that building from my time working down by the waterfront.
Columbia Pacific Advisors Bridge Lending is providing $14.3 million in financing to stabilize the redevelopment of the historic Labor Temple in Seattle’s Belltown district.
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That works out to just $430 a square foot for the land. The cost and challenge of preserving the landmarked asset likely suppressed the value.
62% of an acre, valued at $7,326,000 (the 1944 building, for all its historic significance, is valued at $500)…what if the developer didn’t have to borrow $14 million but could simply rent the land from the city? $74,000 in property taxes plus the debt service on $14 million looks like $70,000 a month in mortgage and interest. What if there was a way to get that project underway with less upfront cost?
If we use the $1,000,000/acre annual rent benchmark, that would put the annual rent at $620,000 — comparably, $70,000 * 12 months is $840,000 so a ground rent could be quite a bit less to come up with.
A ground rent — 99 years with a 2.5% annual increase — seems like a simpler way forward and represents $261,034,307.81 over a 99 year term, $2,636,710.18 annualized. This is $2.6 million of contractually guaranteed revenue Seattle could use to borrow against. The 500 acres set aside as “downtown” could yield quite a lot in revenue but also would represent a revenue stream the city could borrow against to fund some of the many needed improvements, from social housing to transportation.