Bellevue "superblock" developer seeks buyer or partner

The developer who has proposed a massive, multiple-high-rise development on downtown Bellevue's "superblock" is offering to sell all or part of the property to "a select group of local and national companies."

In an August letter to prospective buyers, brokers representing Wasatch Development Partners said the developer would consider a partnership deal for up to a 50 percent interest in the 6.4-acre site, or a sale with 50 percent down and seller financing of the balance.

The asking price: $113 million. The letter also indicated Wasatch wants any deal for the property, called Washington Square, to close by the end of the year.

Wasatch Chief Executive Dell Loy Hansen did not return several calls. But the brokers who signed the letter, Jason Rosauer and Dave Speers of GVA Kidder Mathews, said the Utah developer's commitment to Washington Square hasn't wavered.

Regardless of what form any deal takes, they said, Wasatch will remain involved and work to realize its vision for the property.

"They're not going to do it without strings attached," Rosauer said. Neither Wasatch nor the project is in financial trouble, he said.

Rosauer and Speers said they are negotiating with four national and local companies, and that a transaction still could be completed this year. The offering does not include two condo towers on the block that Wasatch finished earlier this year.

The block, bounded by Northeast Eighth and 10th streets and 108th and 106th avenues Northeast, has mostly low retail and office buildings. Wasatch bought most of it in 2002 and owns it all.

The company controls 12,000 apartment units and 2.5 million square feet of office and retail space in six Western states, its Web site says.

Washington Square is planned as a $1.6 billion phased development with four or five more residential, office and hotel towers and 120,000 square feet of retail space. The two condo towers in the block's northwest corner were intended as the project's first phase.

Mike Brennan, Bellevue's development-services director, said Wasatch has not applied for permits for additional phases or contacted the city recently about its plans.

Speers and Rosauer said discussions with potential buyers or partners began this spring. Wasatch is primarily a residential developer, the brokers said, and it wanted to involve other companies with capital and more expertise in office, retail and hotel development.

"They were willing to take a reduced role," Speers said.

More than two dozen companies received the August letter, he said.

Wasatch has a vested interest in building out Washington Square, Speers and Rosauer said. It sold its new condos on the block to buyers partly on the promise they eventually would be part of a bigger mixed-use community.

Several Wasatch officials have bought units in the condo towers, the brokers said. What's more, they said, the company has invested money in planning and infrastructure for the rest of the block.

It's highly likely that Wasatch will retain an equity interest in the property after any deal is done, Speers said. Even if it doesn't, he said, the transaction still would be structured to ensure Washington Square is built as Wasatch intends.

The developer wants a deal to close this year in part because it's concerned that tax laws, including the treatment of capital gains, could change soon, Rosauer said.

Despite the recent downturn, land values in downtown Bellevue have appreciated considerably in the past few years, said Scott Eaton, a principal with Gerding Edlen Development. Wasatch could be trying to realize some of that gain now.

"It's not a bad time to be selling a great piece of property," said Eaton, whose firm is building twin condo towers in downtown Bellevue.

But Tom Bohman, a senior director in brokerage Cushman & Wakefield's Bellevue office, said the sale terms outlined in Rosauer and Speers' August letter could be difficult for many prospective buyers to meet, especially in today's credit market.

"Fifty percent is a significant down payment," he said. "That's a pretty tough structure for anyone other than a developer with deep pockets and a lot of cash lying around."

Kemper Freeman Jr. of Kemper Development agreed. "They're discovering there's nothing easy here," he said of Wasatch.

Even if a deal is struck soon, construction of the next phase of Washington Square wouldn't start until at least mid-2010, Speers said.

The brokers' August letter indicated that condos in the two new Washington Square towers were "selling on schedule" and that 120 of the 379 units remained unsold. Sales of new in-city condos in Bellevue and Seattle have slowed dramatically this year.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com