Alexandria Real Estate to Develop Seattle Mega-Block
- Sep 18, 2019
Alexandria Real Estate Equities Inc. has been selected by the City of Seattle to develop an 800,000-square-foot, mixed-use innovation campus slated to include two office and laboratory towers, affordable housing, retail and a community center. City officials accepted Alexandria’s offer of $143.5 million in cash—a 40 percent increase over its first bid—for the nearly 3-acre site in the South Lake Union submarket, known as the Mercer Mega Block.
Alexandria, which already has nearly 1.5 million square feet of office and lab space in Seattle, plans to develop two 13-story state-of-the-art office/lab towers, known for now as the Mercer East and West Towers. The urban office REIT also envisions a chef-driven farm-to-table restaurant, ground-floor retail and a pedestrian walkway on Eighth Avenue surrounded by open and activated public spaces with outdoor seating and gathering areas.
The deal includes a $5 million contribution to initiatives to address homelessness in Seattle and a total of nearly $300 million in public benefits, according to Mayor Jenny Durkan’s office. Key aspects of the negotiated plan include:
- 175 affordable housing units for families earning up to 60 percent of the area median income of $66,400 for a family of four. The units would remain affordable for 50 years without any public subsidy.
- A 30,000-square-foot community center, run by the Seattle Parks & Recreation department with rent waived for up to 40 years.
- Transportation improvements including the extension of Eighth Avenue as a pedestrian right-of-way through the site between Mercer and Roy streets, and the extension of the two-way protected bike lane on the north side of Mercer Street between Ninth Avenue and Dexter.
Durkan noted in a city news release that more than half of the proceeds of the sale would be used to address the city’s housing crisis. Her proposal includes putting $78.2 million toward affordable housing initiatives separate from what Alexandria would be required to provide. One of her concepts would be investing $6 million in a financing tool to create more affordable accessory dwelling units, such as backyard cottages and in-law apartments for low- and middle-income homeowners. The mayor also wants to use about $25.7 million for transportation projects.
Located near Amazon’s headquarters, the Mercer Mega Block consists of three separate parcels. The city issued a request for proposals in July 2018 and received seven bids, including an earlier one from Alexandria. The city asked for best and final offers and Alexandria increased its proposal by 40 percent, according to the Seattle Times. Other bidders for the project, which will be built on the last large, undeveloped site in South Lake Union, included Vulcan, BioMed Realty, Kilroy Realty Corp., Tishman Speyer and Touchstone, according to numerous Seattle media reports.
Alexandria said its current Seattle portfolio, combined with the Mercer Mega Block development and nearly 850,000 square feet in other development opportunities, will increase its Seattle asset base to more than 3 million square feet. The Pasadena, Calif.-based company has been in the Seattle market since 1996 and has helped grow the Lake Union life science cluster. Its Eastlake Life Science Campus includes 1150 Eastlake Ave. E., which will have 260,000 square feet of office and laboratory space. Pre-construction is slated to begin in 2020 and the building is expected to be significantly preleased before its projected completion in 2022.
In August, Adaptive Biotechnologies Corp. signed a 12-year, full-building lease for 1165 Eastlake Ave. E., a 100,000-square-foot office/lab building being developed by Alexandria and slated for completion in 2020. It will become Adaptive’s headquarters, allowing it to expand near its existing facility at 1551 Eastlake Ave. E., also owned and operated by Alexandria.
Overall, Alexandria has a North American asset base of 34.3 million square feet, which includes 23.6 million square feet of operating properties; 1.5 million square feet of construction projects expected to be occupied this year; and 9.2 million square feet of development and redevelopment projects in construction or planning stages. Other markets Alexandria is active in include the Greater Boston area, New York City, San Francisco, Seattle, Maryland and North Carolina’s Research Triangle.