Building 11 is an old Navy public works building that sits on Lake Washington at the north end of Magnuson Park. For 12 years, it has been home to Sail Sand Point (SSP), a non-profit that encourages kids and grown-ups to sail. Since 2004, it has also housed a number of artists. The building generates roughly $240,000 in rent each year for Parks. Overall, it has been underused, and is in poor condition.
Following up on a strategic planning process for Magnuson Park, in 2005 Parks solicited proposals to redevelop Building 11. In 2008, the City entered an agreement with a private developer, Building 11 LLC Investors, to renovate and lease out the building over a 45-year term. The lease also defined public benefits to ensure that the public got enough in return to justify the agreement.
The basic understanding was that higher rents from commercial space in part of the building would not only make the proposal viable from a business perspective, but would also make lower rents possible for recreational and water-related uses in part of the building. The agreement included a commitment to keep Sail Sand Point as a tenant. Parks also made a commitment to try to find the artists alternate space somewhere else in Magnuson Park.
The developer also committed to invest $9 million to upgrade the building and to deal with basic maintenance issues, code requirements and tenant improvements. In exchange, the City agreed to give the developer a credit on their lease payments for at least 30 years. These rent credits could be extended if the developer makes additional capital investments in any part of the building.
At the time the agreement was adopted, a number of stakeholders, including Sail Sand Point and resident artists, supported the proposal. Their support was instrumental in the City Council’s final approval. Since then, there has been a steady erosion of trust between these and other key stakeholders, and the developer.
This has to do with strained communications between the parties over the past three years as the developer has worked to sign up tenants, execute leases, line up financing, and make plans to redevelop the building. But there are also legitimate concerns that have been raised by stakeholders and the community about the adequacy of the public benefits of the deal.
These concerns include:
- Whether Sail Sand Point will be able to get fair enough terms to be able to call Building 11 home for the long term
- That the artists will be displaced without an alternate home for them in Magnuson Park
- That a provision in the agreement could allow space meant for water related uses to be leased instead to a non-water related tenant
- That this is a bad deal financially for the City.
Now, these concerns are really about the existing deal, not about the proposed amendments. The amendment to this lease agreement is not directly implicated here except that it has become a lightning rod to air these issues, and has also turned into a mechanism to help address at least some of them.
The developer has agreed to include language in the lease amendment that will:
- Set aside enough space in the building to accommodate the artists for the duration of the agreement at a rent that is comparable with other artist space in Seattle;
- Ensure that there are water related tenant spaces for the life of the agreement
- Allow Parks to capture $1 million in additional rent over the term of the agreement through historic tax credits.
In addition to these improvements that are now embedded in the lease amendment, we have also worked with the developer to address concerns raised by Sail Sand Point. The developer has now agreed to:
- Let Sail Sand Point keep all of its dry boat storage revenues;
- Remove restrictions on Sail Sand Point kayak rentals;
- Provide free shower tokens for Sail Sand Point;
- Pay all Sail Sand Point utilities; and
- Conduct more extensive improvements to the Sail Sand Point space.
In addition, Parks just signed a 5-year agreement with Sail Sand Point that guarantees them 69,000 square feet of outdoor boat storage and the use of three small adjacent buildings for just $1 per year. This is a clear sign that the City is committed to keeping them as a long-term tenant in their current location.
The concerns that have been raised about the finances of the deal are legitimate. The City’s budget office has concluded that Parks could generate between $1 and $4 million more over the 45 year term if we developed the building ourselves. That is not insignificant, but it needs to be considered alongside the $9 million the developers are investing in the building. The City has limited capacity to cover debt on capital projects and a very long list of critical needs. It would be difficult to place this project ahead of other priority projects when a private party is willing to make the investment themselves.
The community has rightly raised concerns with Parks’ role in allowing the developer to miss certain timelines and performance milestones; some have even argued that this was grounds to terminate the original lease. However, our broader goal has always been to negotiate in good faith with the developer in order to get the project completed successfully within the constraints of the lease agrement.
And the plan that the developer has put together has promise. Right now, it includes a day care center and a pediatric facility. Both will bring in kids and families. These uses are consistent with the spirit of the original agreement. The activity they will generate is far better than many other clearly allowable commercial uses and will contribute to an atmosphere where Sail Sand Point and other recreation uses can thrive.
So, the commercial space can work. Artists have been offered permanent space with a reasonable rent. Parks and recreation uses will have 16,890 square feet of guaranteed space that we hope will be anchored by SSP. The needed building improvements will be privately financed and will ensure that Building 11, unlike Building 30, will remain active, bringing a range of people and activities to the park.