Mayor Ed Murray announced today he is sending legislation to the Seattle City Council to authorize the sale of Pacific Place Garage to MPH PP Garage LLC, at a purchase price of $87 million.
City ownership of the Pacific Place Garage, built in 1998, was key to the redevelopment of a three-block area of downtown at a time when boarded-up, graffiti-covered buildings were prevalent in Seattle’s commercial core. The redevelopment also included moving Nordstrom to the vacant Frederick & Nelson Building, constructing the Pacific Place retail mall and redeveloping the former Nordstrom properties for additional new retail, office and other commercial uses. These efforts inspired a wave of development that led to the vibrant downtown residents and visitors enjoy today.
“The Pacific Place Garage has contributed to the success of downtown, bringing more people to shop and eat in the city, supporting a vibrant business district and improving public safety,” said Mayor Murray. “We will use the proceeds to support other public priorities, including the new North Precinct building when Council approves the final design, rather than asking residents to pay more taxes.”
Over the years, the garage’s operating revenue could not keep up with escalating debt payments, due to the original agreement structure, and the City relied on interfund loans to supplement operating costs. Proceeds from the sale will retire the remaining debt and allow the City to fully repay the interfund loan.
The sale will result in proceeds of at least $15 million, which Mayor Murray has proposed to go toward the new North Precinct Police Station project. The new precinct facility is expected to break ground in 2017 at the corner of Aurora Avenue North and North 130th Street.
The City previously considered selling the garage in 2013, after receiving an unsolicited, above-market offer. But the offer would not have completely covered what the City owed, and ultimately, the City Council decided not to sell, to instead see if market conditions would improve. Seeking to take advantage of an improving commercial real estate market, last summer the Department of Finance and Administrative Services (FAS) hired a broker to market the garage to potential investors. Following a competitive process that resulted in multiple bids, MPH PP Garage LLC, an affiliate of Pacific Place mall owner Madison Marquette, emerged as the successful bidder.
“The $87 million sale price validates the Council’s decision to put the brakes on the $55 million offer in 2013,” said Councilmember Tim Burgess. “By waiting just three more years, the City will receive $22 million more for this property. Despite years of doubt, the City’s investment in this public-private partnership has paid off, both earning the City a net profit and revitalizing our downtown.”
“Waiting for the market to improve was the right move,” said Fred Podesta, FAS director. “This agreement covers the City’s obligations related to the garage and offers unexpected funding for an essential public safety project, which is a core City function. The agreement also preserves the public benefit of below-market parking rates in the downtown core.”
Per the purchase and sale agreement, MPH PP Garage LLC will continue to limit short-term parking rates to 80 percent of market and has agreed to not increase those rates at all for at least the remainder of 2016.
“There are many components to keeping our downtown healthy, and available parking for the community and visitors to access businesses, retail, restaurants, entertainment, sports venues and the convention center is absolutely key to long-term success,” said Blake Nordstrom, co-president, Nordstrom, Inc. “The Pacific Place garage has proven to be well-received and beneficial to the Greater Downtown area.”
“The sale of the City-owned garage at Pacific Place will ensure that motivated private operators will continue to run this facility efficiently and maintain a pleasant, cost-effective parking experience for shoppers and visitors to Downtown Seattle,” said Jon Scholes, Downtown Seattle Association President & CEO.
The City was represented by Craig Kinzer, Dugan Earl and Kris Ritchey Curtis of Kinzer Partners, and by Nick Kucha of HFF. Closing is scheduled for this summer.