A company source tells GlobeSt.com that locally based Fortune Group, heretofore the developer of the project, didn't fulfill its contractual obligation related to the partnership and "no longer has an equity interest in the project," but that the project is now 100%-owned and controlled by an entity of Hal Real Estate Investments and still moving forward. "We are still in the process of securing financing," he adds. "We hope to break ground in the next two months."
The Capitol Hill projects will be at the corner of 15th Avenue and Pine Street, on the site of a former grocery store on the north side of Pine Street and a surface parking lot on the south side. On the north side, Fortune will develop 153 entry-level condominiums that will average 700 sf and sell for an average of $235,000. The $32-million project (including land costs) will rise in two phases, with 89 units in the first phase. On the south side, a 59-unit apartment building will be constructed. That project is estimated at $9 million (including land costs).
Fortune Group, a merchant builder, took on Hal as an equity partner in 2001 and promptly exercised its option to acquire the property for $7.88 million. In addition to the Capitol Hill project, Fortune also was planning to break ground on a $19-million, 126-unit apartment development on two parcels that sit across an alley from each other at Second Avenue and Denny Way, near Seattle Center's Pacific Science Center. Prudential Life Insurance, which in December acquired three other completed Fortune Group multifamily developments, had a pre-sale agreement to acquire all of the apartment units in both projects upon their completion.
Local brokers tell GlobeSt.com that Fortune has cut back operations sharply and that Steve Smith, the only remaining principal, is now seeking someone to take the lead on the Second and Denny project, while Mark Raabe and Andy Loos, Fortune's president and vice president, have left and set up a new firm, Omega Development Services. None of the parties returned Tuesday phone calls seeking further comment.
In June, Raabe told GlobeSt.com said that both the Capitol Hill and Second & Denny projects are positioned to do well. He said the entry-level condominium market is underserved as a result of a drop in condo development, in part due to construction defect litigation, and that those condo developers that remain in urban areas are largely focused on higher-end product, leaving the entry-level market wide open and underserved. As for the apartments, Raabe acknowledged that the rental market is weak, but said in-city markets are the strongest. "Moreover, it takes at least 18 months to build," he said, "and we think ... we will be in a healthier overall apartment market when these are brought to market."
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