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Alexandria Real Estate Equities won the Mercer Mega Block bid earlier this month. This rendering shows what the developer could build on the site. The design process is just beginning, so the image is not meant to show what the campus will actually look like. (City of Seattle Rendering)

More than 500 units of affordable housing, a community center, a performing arts theater, a festival street for farmers markets, an elementary school. These were linchpins of proposals from a group of global real estate developers competing to secure one of the last big chunks of available land in Seattle’s South Lake Union tech hub.

RELATED: ‘Mega Block’ in Amazon’s backyard will become a life sciences campus following $143.5M deal; proceeds to fund affordable housing

Earlier this month, the city of Seattle chose Alexandria Real Estate Equities, a developer of biotech and life sciences spaces with roots in the region, as the winner of a long bidding process to purchase the so-called Mercer Mega Block just down the road from Amazon’s headquarters, the Bill & Melinda Gates Foundation and the new Google Cloud campus. Alexandria beat out five other bidders with its plan for a life sciences campus, a community center and an affordable housing tower.

Through a public records request, GeekWire obtained all the responses to a City of Seattle request for proposals to develop the block. The documents show that the city, which is using the proceeds from the sale to fund affordable housing and homelessness projects, chose the highest bidder in Alexandria over other proposals that featured more affordable housing space and intriguing public benefits.

“Our basic goal was to maximize the number of affordable housing units we could produce as a result of the transaction,” Ben Noble, the city’s budget director, said in an interview with GeekWire. “Between what they’re providing on site and the cash resources they’re paying us, it’s a slam dunk that Alexandria was the best offer.”

The Mercer Mega Block is right next to Amazon’s campus and close to downtown. (JLL Image)

Public records, first obtained by Seattle journalist Erica Barnett, show that Alexandria bested bids from Vulcan, the real estate arm of the late Paul Allen, another biotech-focused developer in BioMed Realty, as well as more traditional real estate developers Kilroy Realty Corp., Touchstone and Tishman Speyer.

Alexandria is paying $138.5 million for the 2.86-acre site, which includes two full city blocks along the busy Mercer Street corridor and part of a third. It is also making a one-time $5 million contribution to help the city address homelessness.

“This was a generational opportunity to take an underutilized city-owned property and to make a real transformational investment to create jobs, to create more affordable and mixed income housing, and to build more safe transportation connections,” Mayor Jenny Durkan said of the Mega Block Deal earlier this month.

Durkan called it “one of the most consequential property deals the City of Seattle has ever done.”

Vulcan’s plan for the Mercer Mega Block area. (Vulcan Rendering)

Vulcan’s bid is notable given the company’s influence on the rise of South Lake Union. It developed Amazon’s original campus in the neighborhood, before selling the buildings to the tech giant in 2012 for $1.16 billion. In the following years, Vulcan put up additional buildings for Amazon and is currently finishing off the new Google Cloud campus.

Vulcan offered the lowest price for the land at $50 million though it proposed to balance the offer by transferring 1.2 acres of land it owns elsewhere in South Lake Union to affordable housing developers Plymouth Housing and Bellwether Housing. When combined with some adjacent land owned by the city and other sites the city would acquire, the area could support up to 535 units of affordable housing.

Vulcan proposed to build two office towers on the Mega Block sites, similar to structures it has developed in the past for Amazon, Google and Facebook. The proposal featured an additional $24 million in public benefits, including space for a daycare, “micro-retail” spots, arts and culture space and a festival/outdoor performance space.

While the Vulcan proposal provided more affordable housing than any of the others, the low purchase price along with the complicated series of land transfers would have left the city “in the hole,” said Steven Shain of Seattle’s budget office.

“We were of course disappointed and felt our focus on providing affordable housing options would have produced substantial benefit for the city, but we wish the city and the buyer best of luck in the development of the Mercer Blocks,” Vulcan said in a statement.

Touchstone planned two office buildings and an affordable housing complex with a theater. (Touchstone Rendering)

Public benefits were a key part of the bidding process, and developers went above and beyond to present the most unique set of amenities. A community center space was an integral piece of Alexandria’s winning bid.

But perhaps the most intriguing set of goodies came from Touchstone, a Seattle-based developer that built one of Amazon’s signature South Lake Union buildings and Tableau Software’s headquarters in the nearby Fremont neighborhood. In addition to two office towers, Touchstone offered to build an affordable housing tower that would include a 27,390-square-foot performing arts space. Touchstone’s proposals included letters of support from Seattle-based arts organizations who said the theater would alleviate a scarcity of performance space in the city.

Touchstone offered to dedicate space in the office towers to both a daycare and an elementary school. In recent years, influential players in Seattle have called for new schools in and around downtown.

The proposal was “probably a strong second or third” choice, Noble said. However, it didn’t have a school operator attached to its bid, and there was concern that Touchstone wouldn’t be able to follow through on that part of the plan.

Its proposal included several offers, including a $140 million price for the blocks for a plan without affordable housing. For proposals with affordable units, Touchstone offered to pay $90 million for the blocks.

Here are some highlights from the other projects (see the full documents below):

  • Kilroy Realty, the company building the 333 Dexter project that Apple recently swallowed up, offered three proposals with price ranges of $80 million to $120.6 million. The proposals included 785,000 square feet of office and a mixture of affordable and market-rate housing. Kilroy’s proposed public benefits included an art lab and performance space within the affordable housing structures, a pedestrian friendly “festival street” along Eighth Avenue and retail space for local businesses.
  • BioMed Realty is building the Dexter Yard project just down the street from the Mega Block. It offered between $55 million and $65 million for the land and planned to build 718,000 square feet of office space and 175 affordable units, or 911,000 square feet of office space without affordable housing. BioMed’s public benefits include an “Activity Pavilion” that could be used for concerts, a pool, daycare or other events, and outdoor spaces with rain covers that could be used for seasonal activities like movie nights and farmer’s markets.
  • Tishman Speyer offered $106 million with affordable housing included in the proposal and $163 million without. The New York-based developer, which owns the 520 Pike Tower in downtown Seattle, proposed 488,000 square feet of office space to go along with 290,000 square feet of lab space and 175 affordable housing units. Tishman Speyer planned to offer half the retail space in the project at a 50 percent discount from the market rate for nonprofits, small, local retailers and makers. For public space, Tishman Speyer referenced Rockefeller Center in New York City, which it redeveloped in the late 1990s, as a model for what it wanted to do with the Mercer Mega Block.
A look at what Biomed Realty Trust proposed for its ground floor plans. (Biomed Realty Rendering)

The city of Seattle plans to use the bulk of the sale proceeds to address affordable housing and homelessness issues, which have been inflamed by the recent tech boom. It will spend $78.2 million toward housing and $25.9 million on transit improvements. The city previously borrowed against the sale proceeds to pay for work along the Mercer corridor, so $29.1 million will be used to pay back that loan.

Seattle’s City Council will now have to approve the deal; a vote is expected in September. Seattle officials estimate the transaction could close in 2020 to pave the way for construction to start soon after or in 2021.

Alexandria owns a cluster of life science projects in the Eastlake neighborhood, just down the road from the Mercer Mega Block site. One of those buildings will be home to a new headquarters for newly-public company Adaptive Biotechnologies, which recently inked a lease to triple the size of its main office.

Alexandria first came to Seattle back in 1996 when it bought the original Fred Hutchinson Cancer Research Center campus on Seattle’s First Hill, renovated it and leased it back to Fred Hutch. The proceeds of that deal helped Fred Hutch build out its campus in South Lake Union, which served as a catalyst for the neighborhood’s development in future years.

According to its proposal, Alexandria plans to build 740,000 square feet of office and lab space. As part of the deal Alexandria pledged to build an affordable housing tower on one of the sites with at least 175 units and dedicate a portion of the campus to a city-run 30,000 square-foot community center.

RELATED: Alexandria doubles down on decades-long Seattle biotech bet with Mercer ‘Mega Block’ deal

Alexandria’s proposal also includes 5,000 square feet for a “learning lab and skills center,” a farm-to-table restaurant with an on-site farm and outdoor space for gatherings. City officials estimate that Alexandria’s bid includes public benefits of $275 million to $305 million.

During the highly competitive bidding process, the city asked contenders to sweeten their offers, and Alexandria upped its price by roughly 40 percent. The company was willing to pay a steep price for the critical site.

“We feel it’s really the heart of the heart, and this is the last large block of land left to develop,” Joel Marcus, Alexandria’s co-founder and executive chairman, said about the block in an interview with GeekWire earlier this month.

Shain, with the city of Seattle, said the deal represents a “new benchmark” in terms of the price per square foot of area that can be developed. Alexandria paid about $175 per developable square foot, and Shain said a typical price in South Lake Union is about $150 per developable square foot.

Ross Kilinger, an executive vice president at Kidder Mathews whose focus includes land sales, said the city landed a top tier buyer in Alexandria. Looking at the price alone, the deal represents a “market-rate purchase,” Klinger said. And that’s without factoring in the additional benefits of affordable housing and the community center.

According to its bid, Alexandria aims to “bring together Seattle’s life science ecosystem in a manner never accomplished before,” with the campus. Seattle has long been a strong life sciences market, per the bid, but it has lacked “development capabilities, strategic risk capital and seasoned life science management.”

Seattle has lagged behind other top biotech markets, per Alexandria, such as San Francisco, Boston and New York. The combination of an “ecosystem builder” in Alexandria, a new ground zero for life sciences in Seattle in the Mercer Mega Block campus and support from city and state government has a chance to bring Seattle up into that top tier of hubs, according to the bid.

“The Mercer Mega Block would provide the critical foundation for the future of Seattle’s life sciences industry and represents the last meaningful opportunity in Seattle to create a fully integrated life science campus ecosystem with companies of all stages of development, co-located and adjacent to South Lake Union’s leading academic and medical research institutions, to make Seattle a major participant in this revolution,” the bid reads.

Check out the bids from Alexandria and all the other suitors below:

Alexandria RFP Response by Nat Levy on Scribd

Vulcan RFP Reponse by Nat Levy on Scribd

Touchstone RFP Reponse by Nat Levy on Scribd

Kilroy RFP Response by Nat Levy on Scribd

BioMed Realty RFP Response by Nat Levy on Scribd

Tishman Speyer RFP Response by Nat Levy on Scribd

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