Recession stalls building boom along South Seattle light-rail tracks

Less than a year ago, the blocks around three Sound Transit light-rail stations in Southeast Seattle were abuzz with real-estate deals and dreams.

Planners, politicians and developers anticipated the coming rail line would spark a redevelopment boom that would transform the long-neglected corridor along Martin Luther King Jr. Way South. For-profit developers proposed more than 1,500 condos and apartments within a 10-minute walk of a station.

Now, with the trains to carry their first paying passengers in three months, most of those deals are on hold.

Project after project has been delayed or derailed, victimized by tight credit and related economic woes.

Last year's big dreams for MLK haven't died. Developers still believe apartments or condos 15 or 20 minutes from downtown by train will appeal to commuters tired of traffic, rising gas prices and expensive parking.

But for now, with a handful of exceptions, "nobody's moving forward with anything," said Al Levine, deputy director of the Seattle Housing Authority, a major landowner in the MLK corridor.

His agency is a case in point. The housing authority last year agreed to sell Unico Properties two prominent corner properties just steps from the Columbia City rail station to build prefabricated apartments and shops.

Unico pulled out a few months ago. A Unico representative blamed "current economic conditions."

The housing authority still has a tentative deal to sell developer Opus Northwest a larger property near the Othello Street station for a 300-unit mixed-use project. But the sale is taking longer to close than either had anticipated.

"We're still in discussions," said Tom Parsons, Opus senior vice president. Considering the market, he added, "nobody's in a hurry to move it along right now."

The only project that seems reasonably likely to break ground this year is The Station at Othello Park, a six-story complex with 350 apartments and 20,000 square feet of ground-floor retail.

That project is moving forward because developer Othello Partners found a partner with deep pockets: Texas-based insurance and financial-services company USAA, which bought an equity stake in the project last year.

USAA also has an option to invest in a companion project across the street for which Othello Partners is seeking permits.

Mike Hlastala, Othello Partners' chief operating officer, said construction at The Station at Othello Park should start in June, once he lines up debt financing.

Others stalled

No other major project along MLK is nearly that far along:

• Safeway had a tentative deal last year to sell its aging supermarket near the Othello station, a first step toward redevelopment. But that fell through, said Gary Slabaugh, Safeway's vice president for real estate, and the property is no longer for sale.

• Sound Transit has long-range plans for transit-oriented development at three sites it owns near the Othello and Mount Baker stations, but doesn't expect to do anything soon. "Realistically, putting properties out on the market in the near term does not jibe with the financial situation for most builders," spokesman Geoff Patrick said in an e-mail.

• Harbor Properties still plans to build about 370 apartments with ground-floor retail on the former site of the St. Gobain plastics factory in Columbia City. But Denny Onslow, Harbor's chief development officer, acknowledged the economy has pushed back the timetable.

"We are looking at doing the project in phases and trying to put some of the existing buildings back into service as interim use," he said in an e-mail. "We are slowed down given the conditions of lenders and investors."

• Eagle Rock Ventures six months ago obtained permits to start building a 63-unit apartment or condo complex in Columbia City but hasn't broken ground. "We're just patiently waiting for the market to improve, which at some point it will," managing director Scott Shapirosaid.

• The University of Washington last year hired a consultant to explore the redevelopment potential of its property near the Mount Baker station, until recently home to a discount grocer.

The upshot? "We're open to something in the future," said Jeanette Henderson, the UW's real-estate director, "but I don't see us going into something soon."

• The Web site of nonprofit developer SEED (Southeast Effective Development) still says it plans to start building a five-story residential/retail project a few blocks from the Mount Baker station in 2008.

Turns out that was wishful thinking: The vacant Chubby & Tubby store on the site hasn't been torn down. SEED Executive Director Earl Richardson said he's searching "aggressively" for financing.

"It's just not a good business to be in right now," he lamented.

Commercial real-estate professionals counsel patience. "The market isn't going to be down forever," said Jason Rosauer, a senior vice president with brokerage GVA Kidder Mathews. "When it does turn around, that area's going to take off."

The project delays may serve a purpose, said Nora Liu, senior policy adviser in the city's Office of Policy and Management.

"What the economic situation is allowing us to do is take a breath and do some serious planning," she said.

The City Council in September authorized updates of the decade-old neighborhood plans for blocks surrounding the Othello, Mount Baker and Beacon Hill stations.

Kickoff meetings in all three neighborhoods were held last month.

Density is likely to be a hot topic: Zoning now limits building heights to six stories. Some say rail warrants — even requires — more.

But a bill to establish minimum densities around rail stations died in the Legislature this year, partly because of opposition from some Southeast Seattle residents.

City officials, residents and developers all say they're excited about light rail's potential to revitalize neighborhoods. But they don't want the line to force out people who live there now — many of them low income — or diminish the corridor's rich ethnic and cultural diversity.

Nonprofits move ahead

While most developers pause, a few nonprofit projects around the stations are nearing completion. Even they are feeling the recession's effects.

On South Othello Street, the first residents should move next month into Hope Place, the Union Gospel Mission's five-story complex for homeless women and their families.

But spokeswoman Sharon Thomas-Hearns said a fundraising shortfall has left 33 of the 98 rooms unfurnished. And none of the 8,300 square feet of ground-floor retail space has been leased.

A few blocks south, nonprofit developer Inter*Im expects to complete construction this summer, three or four months ahead of schedule, of Samaki Commons, a 40-unit complex initiated by Lao Highland community leaders.

With the economy so slow and little other work available, Inter*Im housing planner Leslie Morashita said, contractors have put all their employees to work on Samaki.

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

Information in this article, originally published April 6, 2009, was corrected April 8, 2009. A previous version of this story incorrectly referred to a development project as Othello Street Station; the project is now known as The Station at Othello Park. Also, Samaki Commons is a 40-unit complex initiated by Lao Highland community leaders; a previous version of this story incorrectly described it as a housing complex for low-income Lao Highland immigrants.