by Carolyn Bick
The Rainier Valley Community Development Fund will no longer be a partial owner in HomeSight's Othello Square Project.
Though the Rainier Valley Community Development Fund (RVCDF) originally signed a letter of interest with HomeSight to become a partial owner of Building A in the mixed-use development, when it came to the capital call, RVCDF Board President Doug Cargill said that they "couldn't square the circle," and had to prioritize the nonprofit lending firm's capacity to continue serving clients.
"We never budgeted for the building. We signed a letter of interest. We were interested in it, and we are still interested in going into the building," Cargill said. "What we had to grapple with is, we had a significant capital call, which would diminish our lending capacity. And, so, we had to balance those two priorities, and we sided more on the enhanced lending capabilities, as opposed to the purchasing of a building."
He declined to comment on other reasons behind the Board's decision, saying that it was Board discussion he would rather not make public.
The RVCDF delivered its decision to HomeSight's Director Emeritus and Othello Square's Project Director Tony To right before the holidays in December 21019. To said the fund's decision is "obviously disappointing."
"They do have the capital, but they chose it to deploy loans, instead of investing it in the project," To said.
To views the RVCDF's decision as "a problem we have to deal," rather than an obstacle. To said the relationship between HomeSight and the RVCDF remains intact, but the RVCDF has to decide that "it is worth it for them to be there." He hopes that the RVCDF will decide to become a tenant there, an idea Cargill did not rule out, or that it could be a lender down the line.
The Othello Square Project has been in the works since 2015. In 2018, the community development group HomeSight announced it had purchased 3.2 acres of land along Martin Luther King Jr. Way from the Seattle Housing Authority near the Othello Light Rail Station for $14.2 million.
The project has four planned buildings. Building A is the HomeSight Opportunity Center, a seven-story building with 40,000 square feet of commercial space meant "to increase access to economic opportunity, STEM education, small business incubation, cultural celebration and preservation, and financial services," and 213 "step-up" apartments affordable for families at between 60 percent and 120 percent area median income.
Building B will house the charter school. The school was originally going to be a Green Dot Public Schools charter school, but the Green Dot board pulled out of that commitment last summer, after voting to shutter two other Washington State-based Green Dot schools, following declining enrollment. It currently still operates two schools, both of which are in South Seattle. To said HomeSight is hoping to close the deal soon with another charter school, Impact Public Schools.
Named, "The Orenda," Building C will house the second Seattle Children's Hospital Odessa Brown Children's Clinic, which held a celebration to mark its future opening in September 2019. It will also be home to a Tiny Tots Early Learning Center and will serve as workforce housing. Building D will be the HomeSight Affordable Homeownership Co-operative.
To said RVDCF's decision not to become a partial owner will not affect business tenants' rent, but what will affect business tenants' rent, To said, is the cost of production. Since the project started, production costs have increased 25 percent, due to increased land, construction costs, new structural and energy codes, increasing regulatory costs, and the nonprofit's desire to try to be more responsive to climate change and create more resilient, environmentally friendly buildings. Still, To said, HomeSight will try to keep rents "reasonable" for Othello Square business tenants.
The RCVDF's decision has also not yet affected the project's timeline. At the time of this writing, it is still on track for completion in 2023, with the last building slated to open in 2021.
But without the RCVDF, HomeSight is still searching for an investor to contribute the $2 million it had expected the community development fund to pitch in. In total, the project has raised $13 million of the $22 million it needs through grants, other equity partners, and fundraising. It will continue to fundraise and seek grants to raise the rest of the money, in addition to looking for new equity partners.
To also admitted that the project isn't a very cost efficient one for investors, because it isn't a single-use commercial building with little public open space, as that isn't what the community wanted. Community stakeholders expressed a desire for an institutional building with a large, central, public plaza space meant for activities and events, and to facilitate a flow-like feel and encourage interaction amongst those who use the development. However, this adds to the cost.
"Typically, many projects have as little public open space as possible, because that doesn't bring them return. There is no rent on a public open space. So, we have a plaza that everyone has to share in paying for," To said. "Because we have a very clear vision and mission that is related to our project, we are putting some constraints on ourselves, in terms of the level of rents, and so it makes it tougher to find investors. But, then, it also makes it easier for us to raise money, because people understand that we are trying to do something for the community."
Featured Image Carolyn Bick