May 14, 2018

By: BRIAN MILLER
Journal Staff Reporter

Vibrant Cities developed and built the 60-unit Cove at 601 E. Pike St. on Capitol Hill. **Photo by:** JLL

The new 60-unit Cove apartments, at 601 E. Pike St. on Capitol Hill, sold for $32.16 million.

King County hasn’t yet recorded the sale, but the buyer’s broker, Pilot Ventures, said it closed on Friday.

Jones Lang LaSalle’s David Young, Cory Marx, Don Flanigan and Matt Kemper represented the seller, Vibrant Cities, which used SolTerra Pike LLC to acquire the 9,000-square-foot corner site for $6.1 million in 2015, then developed it. JLL also provided some transaction details.

Jason Kono led the Pilot Ventures team. Pilot Ventures said that its unnamed private client used a 1031 exchange for 11 smaller “underleveraged rental properties” that Pilot Ventures previously sold on its behalf. Those included starter homes, a Tacoma duplex, and apartments on Vashon Island and Capitol Hill.

The Pilot Ventures team also included Connor Freeman and Casey Zejdlik.

The Cove had been on the market for about eight months, unpriced, with offers due last October. It went under contract in November, according to Pilot Ventures. The 7-story building has 35,968 rentable square feet (both residential and retail), according to JLL, which said the sale represented a record price per rentable square foot. Pilot Ventures valued the deal at $894 per square foot—meaning both the net retail and residential space. JLL valued the deal at$921 per square foot, about 3 percent higher than Pilot Ventures, using only the residential space.

No cap rate is cited, since the Cove has been operating for less than a year. It opened last fall. The apartments are 96 percent leased, according to JLL. JLL’s Ray Allen and Seth Heikkila arranged long-term mortgage financing for the buyer from an unnamed life insurance company.

The Cove was designed to meet LEED platinum certification, with systems that allow residents to achieve energy savings of up to 30 percent.

It has a 3,000-square-foot green roof with solar panels. Sidewalk awnings direct storm water into plants beds that filter the water. Units have large, triple-paned operable windows. Efficient toilets, low-flow showerheads and faucets, and high-efficiency appliances help reduce indoor water use by 45 percent.

There are 19 structured parking spaces on two levels, accessed from Belmont Avenue, plus a large bike room and separate bike repair station.

About 500 square feet of the retail is leased to R&M Dessert Bar. Pilot Ventures said the larger 2,400-square-foot retail bay on the corner is still vacant, with Tiffini Connell of West Coast Commercial Realty representing it.

Pilot Ventures also said that, during the six-month closing period, it has converted 12 of The Cove’s 60 units to affordable rents, in order to use the city’s Multifamily Tax Exemption program.

Kono said in a statement, “While 1031 exchanges are something we have been specializing in for a long time, the magnitude of The Cove transaction is definitely on a new scale for us. We’ve worked with dozens of clients to exchange their smaller underperforming assets for larger and better performing ones.”

While Kono didn’t name his client, public records for recent related sales indicate that the Cove’s buyer is associated with West Freeman Properties. That longtime local family-run apartment manager and investor continues to own other small properties on Capitol Hill.

Connor Freeman signed the excise tax statement on behalf of 5 Freeman-related LLCs that acquired the Cove.

Vibrant Cities acted as its own general contractor for the Cove. The team also included Tiscareno Associates, architect; Bush, Roed, & Hitchings, civil engineer; YT Engineers, structural; McKinney & Assoc., electrical engineer; Terra Assoc., geotechnical engineer; Lando & Assoc., landscape architect; and RDH, building envelope.

James Wong leads Vibrant Cities, which also is planning 71 units at 1208 Pine St.; 229 units in two mixed-use buildings in Lower Queen Anne; and a 40-unit condominium on Alki. Wong also has projects underway in Portland. His company was previously known as SolTerra.

Cove’s platinum units on Pike sell for $894 per square foot