Seattle Sun Newspaper - Vol. 8, Issue 7, July 2004

Copyright 2004 Seattle Sun. Please feel free to use the article below in your research. Be sure to cite the Seattle Sun as your source.

'Economics' biggest hurdle for South Lot, Lorig says

By CLAYTON PARK

When the City approached real estate developer Bruce Lorig a little over a year ago about the possibility of stepping in to develop a mixed-use complex on Northgate Mall's south parking lot, Lorig viewed it as both an "interesting opportunity" and a daunting challenge.

The opportunity, from a developer's standpoint, was in the South Lot's desirable location: right next to the heavily used Northgate Transit Center and Northgate Park 'N Ride Lot, a future Sound Transit light rail station, the mall itself, the I-5 freeway and, just up the street, a future Northgate Library, community center and neighborhood park.

The chief challenge to developing the property, as Lorig saw it at the time, would be in solving the several year legal battle between the mall's owners, the City and Northgate area community activists over what lay beneath the South Lot: an underground culvert containing a portion of Thornton Creek, which the activists wanted daylighted.

Enter Lorig, a longtime Seattle developer whose company, Lorig Associates LLC, counts among its past projects the recent completion of the Uwajimaya Village mixed-use retail/housing center in the International District, and in the 1980s the conversion of several historic buildings into new uses, including the former Interlake Elementary School in Wallingford, which was turned into a shopping center/condo complex now known as the Wallingford Center, the former Queen Anne High School, which is now a condo complex, and the former Lake City Elementary School, which is now an office complex known as the Lake City Professional Center.

"At first blush," Lorig told a recent lunchtime gathering of the Seattle chapter of Commercial Real Estate Women, "buying this (the Northgate South Lot) property looked like a fantastic opportunity: a large site, close to the mall, with good visibility, access to transportation, and a new community center. And with the land being offered (by the mall's owners, Simon Property Group) for only $45 a square foot, it looked like a slam dunk."

A slam dunk, that is, provided a solution could be found to end the litigation that caused another local developer, Seattle-based Security Properties, to abandon its efforts to build a mixed-use project on the site.

On June 7, that problem was finally resolved, thanks to a compromise solution agreed upon between the City, the community activists, Simon and Lorig (see related story on page 1).

But now, Lorig told his audience at the CREW luncheon, he is beginning to think that the political situation regarding the Northgate South Lot may not have been the biggest obstacle to developing the site after all.

It turns out that the real challenge, he said, has to do with economics: can a housing/retail complex be built on the South Lot property that will attract tenants who are willing to pay enough to allow his company to cover its development costs and turn a profit.

"We'd love to have a grocery store," for instance, said Lorig, but the grocers he has contacted thus far have balked at the potential cost, which is higher than building a supermarket in the suburbs because the South Lot site would require construction of a parking garage as opposed to less costly surface parking.

Lorig said he approached some "high-end grocers," whom he would not name, who turned him down, explaining "the education levels right around Northgate were not as high as they'd like."

With the likelihood diminished of attracting a grocer to be an anchor tenant, Lorig said he has had to rethink the project by decreasing the amount of space designated for retail development and increasing the amount of housing units.

The preliminary concept plan for the Northgate Commons project, as Lorig Associates is calling it, now calls for 60,000-square-feet of retail on the ground floor, with 4-500 housing units in the upper floors, and underground and surface parking for approximately 500 cars on the northwestern corner of the property. The southeastern-most corner of the project, on the other side of the daylighted creek, would be available for retail and/or office use.

Ideally, Lorig would like to partner with other developers who could assume responsibility for building the senior housing and affordable housing portions of the project. Lorig would then be left to develop the project's "market rate" housing units as well as the commercial portion of the project, which he would like to fill with "neighborhood-oriented retail," such as a deli and/or restaurant, a coffee shop, a bank, possibly a drugstore, and a dry-cleaner.

That is, if Lorig proceeds with the project at all.

Lorig said he likely will make a decision as to whether to proceed with the project by the end of July, although it isn't necessarily a hard deadline.

To date, Lorig Associates has sunk about $300,000 on the project. Lorig would need to pay Simon $100,000 by late August in order to exercise his option to purchase the 5.9-acre portion of the South Lot. He would then apply for a master-use permit from the City this fall and then pay Simon $11 million to complete the property purchase when he is ready to start construction, which he said might be in about two years. Construction would take roughly 18 to 24 months.

"We're not going to do it unless we can make it work," Lorig said of the Northgate Commons project, which is still very much n the feasibility review stage.

"We're still unsure about the economics," Lorig said, "but ... we have some confidence that we can make it work. If we can't, there would be a lot of disappointed people, including us."

* * *

For more information about Lorig Associates and its Northgate Commons project, visit the company's Web site at www.lorig.com.