By Meghan Hall
Seattle’s condominium market is tough on developers, with liability laws and the expense of development making construction almost infeasible over the course of the last market cycle. However, a rare condominium project will be coming to market in the near future: Seattle-based Vekst Development LLC recently broke ground on 323 Bellevue Ave. E., a 43-unit multifamily structure in Seattle’s hot Capitol Hill neighborhood.
“Condos are an answer to affordability, and they’re a product that is in demand,” said Mike Incrocci, of Pyatt Broadmark Management LLC, who provided financing for the development. “We think it’s a great project, and the location is A-plus from an underwriting perspective.”
Located at 323 Bellevue Ave. E., the six-story, 7,200 square foot development will also include 14 below-grade parking stalls, a ground level amenity space — which could include a gym and wine cellar — and a rooftop deck. The property can be developed into either rental apartments or condominiums, although Vekst Development has chosen the latter. The units will range from studios to two-bedrooms and average about 420 square feet. Western-facing units will have views of Elliott Bay, Lake Union and downtown Seattle.
“It’s the most central spot,” said Thor Hatton, CEO of Vekst Development. “The view from the ground floor was tremendous. [The design] will highlight what it is you can see out of your unit.”
The building will be mostly black with white accents and Scandinavian in its design, building off of the heritage of Vekst. Picture windows and updated appliances are also included in the plans.
Despite the costs and liability associated with pursuing a condominium development, Incrocci said the development team is taking careful steps to alleviate that risk in a market where liability laws make it easy for buyers to sue.
“It is a bear,” said Incrocci of the state’s existing condo liability legislation. “The builders are mitigating the risk by having condo wrap insurance, which at one time was so expensive it was prohibitive to condo projects. It’s gotten more affordable now because nobody was buying the policy, so the price found its equilibrium.”
In addition to insurance, Incrocci said the development team is working to create a solid product.
“You do excellent work, and you’re thorough in hiring engineers,” Incrocci added. “You have to assume liability.”
The site is walking distance from major employment centers in Seattle, including South Lake Union, where companies such as Amazon, Facebook and Google reside, as well as the Central Business District. The Link Light Rail Capitol Hill Station is within walking distance, and the site is adjacent to Interstate 5. Shops and amenities such as Lunchbox Lab, Funhouse and 24-Hour Fitness are also all located nearby.
Vekst Development bought the property for $3.725 million from Mercer Island, Wash.-based Sunrise D C LLC at the end of 2018, who had already procured entitlements from the City for the development of the property. A team comprised of Tim McKay, Dan Chhan and Sam Wayne of Colliers International represented the seller, and financing was provided by Pyatt Broadmark Management LLC. According to Incrocci, Pyatt will also be financing construction, bringing the total loan to $13 million. Incrocci estimates that the total construction cost is closer to $15 million. Hatton said that Vekst hopes to partner with Pyatt on future projects.
Incrocci said that working with Vekst to secure the property was appealing because it was already entitled, allowing the developer to break ground the day after the sale closed.
“So often with acquisition, there’s risk in the form of permits,” explained Incrocci. “We didn’t have that risk; this was mitigated by entitlements already being in place. Land is always the trickiest for lenders to put their first dollar into because you never really know what you can do. Until you have the permits, you may just have land.”
Construction is slated to take between 18 to 20 months before it is complete. How quickly the condos will sell, and at what rate, Incrocci could only guess.
“We’re optimistic the units will move in pre-sales, but it’s hard to say,” said Incrocci. “We underwrite with a lens of pessimism, because that’s the safest way to do it. If they take a year to sell out, we’re prepared.”
As for Vekst, which is only in its second year in business, 323 Bellevue is just the beginning, and the young firm has more projects, including a student housing project in Queen Anne, in the pipeline.
“We have the privilege to work and be a developer here,” said Hatton. “Everything we do, we’re trying to cement a legacy. We’re thinking long-term on everything.”