The fate of Building 11, a former naval facility at Magnuson Park, remains up in the air because a compromise between the city and a private developer has upset the building's current tenants — people the city had hoped it would please by striking the deal. The city also recently received a letter from the developer's attorney threatening legal action if the city insisted on accommodating the tenants.
The building has acted as a lightening rod for debate about the role of parks and public spaces, especially as the city looks to private investment as a solution to budget shortfalls.
A 2008 lease agreement gave control of the two-story, 58,000-square-foot lakeside building, sturdy but in disrepair, to a development group named Building 11 Investors. In exchange, the developers agreed to renovate the space, bringing the building up to code and lining up commercial clients. The company was promised rental credit from the city in exchange for its investment.
Some people criticized the deal, though, citing a lack of financial benefit to the public and questioning a plan to sublease the waterfront parkland to tenants like Virginia Mason and Bright Horizons, a high-end daycare center. The critics have resisted the idea of evicting the building’s current tenants, which include a cadre of artists, a non-profit sailing school, and retail boat shop. Current tenants pay the city about $240,000 a year, collectively, for the space.
Building 11 Investors submitted information about their financing to the city Monday (May 23), said Acting Parks Department Superintendent Christopher Williams. U.S. Bank is the primary lender, he said. A group of citizens critical of the project are filing a request for that information, said artist and current Building 11 tenant Perri Lynch. They hope to assess whether the financing is as solid as it has been portrayed.
"This is significant because [the developers] have missed several deadlines in the past, and it could give the city a chance to void the lease," Lynch said.
To go forward, the developer also will need to receive an exemption from the State Shoreline Board and the Seattle Department of Planning and Development, related to regulations banning medical facilities close to the shoreline, Williams said.
The proposed amendment to the deal came after the city received a letter from the developer's lawyer, threatening legal action.
"If Sail Sand Point and Hobie Cats Northwest do not sign leases thereby leaving their commitment in doubt, they can go someplace else. Your insistence that they be accommodated as a condition of the lease amendment is a breach that is immediately actionable if not unreservedly withdrawn," said the letter, dated May 12.
Sail Sand Point is a nonprofit that offers community sailing lessons at low cost, and Hobie Cats Northwest is a retail outfit that often works in tandem with Sail Sand Point.
The developer is clearly anxious to take possession of the property. In its letter to the city, dated May 12, the group claimed all its obligations had been met. “The only issue that the City has to confront is whether or not it will honor its contract; or whether, on the other hand, it wishes these matters to be resolved in court,” the developer wrote.
Written by Bruce B. Babbitt, of Jameson Babbitt Stites & Lombard, the letter on behalf of the developer also questioned whether the proposed changes even need a formal amendment, and pronounced both Hobie Cat Northwest and Sail Sound Point “incapable of satisfaction as long as my client is developing the project.”
It was shortly after the city received the letter that Williams released a statement outlining the terms of the proposed compromise. Released online Friday (May 20), it said the amendment includes language to:
- 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 the city parks department to capture $1 million in additional rent over the term of the agreement through historic tax credits.
The statement also outlined specific changes to the lease terms offered to Sail Sand Point, such as allowing that group to retain revenue from the dry-dock boat storage it provides.
The City Council received the draft compromise from Mayor McGinn's office Monday, and it likely won't be discussed in committee until mid-June, a staff member at Councilmember Sally Bagshaw’s office said.
The city wants to not only avoid litigation, but also send a message to other developers that the city is a good partner, Williams said: “We have a contractual relationship with Building 11, and our concern and their concern is breach of contract. We would rather not go there, mainly because the Parks Department is in this state where we need public-private partnerships,” he said.
The department's budget was cut by $11 million this year and must cover $250 million to $350 million in maintenance, he said.
Meanwhile, some of the building’s tenants, whom the amendment is presumably meant to accommodate, say the devil is in the details. Sail Sand Point declined to comment for this article, but artist Perri Lynch, who has created several public works for the park and who has advocated for the artists, said the proposed compromise was not beneficial.
For example, while some of the artists are being offered a total of about 5,000 square feet of space in the building, 3,000 square feet of water-recreation space is being lost in the compromise, Lynch said. The area the artists are being offered was at one point offered to Hobie Cats Northwest, which needs that corner of the building for safe access to the water, she said. "This puts us in a terrible position.”
Hobie Cats Northwest co-owner Dan Carpenter agreed with Lynch's assessment.
Back when the lease was signed, city representatives encouraged the artists to support it, and they were promised space within the park.
Now, of the 30 artists who once occupied the building, about 18 are left. (The city in March served eviction notices, which were later rescinded.) The proposed space could probably accommodate about 10, she said, however none have yet to sign a lease agreement, and now everyone is nervous about getting a letter like the ones served to their neighbors, Lynch said.
Additionally, rental rates would go up, Lynch said. The artists would be charged for hallway and connecting space, which would up the rents between 3 and 8 percent above what’s being quoted, she said.
A major partner in the development deal, Darrell Vange, with Ravenhurst, counters that rates offered to the artists are lower than in the city at large, and are going to be set at only 65 percent of the rates for his commercial clients.
Ravenhurst was associated with development at Westlake Center, as well as a recent stalled project to build a mall in Little Saigon. In the early '90s, the group was involved in a development debacle at Aurora Village.
A community member and outspoken advocate of the current tenants, Gail Chiarello, cited the exclusive nature of some of the incoming tenants as cause for complaint, including Virgina Mason and Bright Horizons, which is an enrollment-only, employer-funded operation, she said.
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