As Condo Projects Hit Snags, Seattle’s $350M Escala Bucks Trend

Condominium developments across the country have fallen prey to severe drops in demand and financing challenges, but there are exceptions, like the $350 million Escala in Downtown Seattle. Developer LEXAS Cos. has just topped off the 30-story luxury condominium, and is progressing right on schedule with its completion. Rising 330 feet above Fourth Ave. and Virginia St. in the city’s Midtown district, Escala will ultimately feature 270 residences and a 25,000-square-foot private club. Ground broke on the building in summer 2007 when the national condo craze was still in full swing. The marketplace has since turned 180 degrees, yet those drastic changes have not hindered the project’s advancement. Favorable demographics and solid partnerships appear to be the recipe for success. Escala’s unimpeded progress is partially due to Seattle-based LEXAS’ relationship with its financial team. RREEF is the developer’s equity partner and iStar Financial is providing construction financing. “We’re so impressed with both of these companies,” Eric Midby, LEXAS principal & development manager, told CPN. “When we were first looking for financing we had a few options and some were cheaper, but we had to ask ourselves, ‘are they really going to be there when things get tight?’ RREEF and iStar haven’t taken any government assistance to keep their businesses going. They positioned themselves all along to weather the storm.” In addition to reliable financial backing, the relatively strong rudiments of the Seattle market are keeping the project afloat. “Seattle just has good fundamental economics,” he said. “The local economy has diversified itself quite a bit. It’s a strong economy that is suffering from the nationwide economic downturn, but not as much as everywhere else, and it will probably recover faster than everywhere else. And with the timing of when we’ll have the units delivered, we’ll bridge the worst part of the nationwide economic downturn.” The city’s housing market is also unusual. “It’s different from the rest of the country because we didn’t see a huge spike in prices since it is so difficult to get product built; we didn’t see overbuilding like in Las Vegas or parts of California,” Midby noted. “In Downtown Seattle there is still strong demand because the supply of condos has gotten smaller due to issues with other companies getting financing.” Escala is on target to deliver this fall, and the company is conducting an extended sell-out period. “In the market there’s reduced demand for pre-sales, but when people see the product in real life, they’re jumping on them.” LEXAS’ faith in the Seattle condominium market extends beyond Escala. The company has a project in the works that is currently going through the design and review process with the city. Construction could get underway in 2010. In the meantime, Escala is somewhat in a class by itself. “We see ourselves as being the last of this cycle,” Midby said. “Any other projects have been put on hold for the foreseeable future. We’re the last option available–and we’re happy to be.”