May 18, 2018

By: Marc Stiles
Staff Writer

The new 60-unit Cove apartments on Capitol Hill in Seattle has sold for $32.16 million, or $921 a square foot, which is a record, according to real estate company JLL. The apartments are 96 percent leased, but one of two retail spaces is available. Seattle architecture company Tiscareno Associates designed the building, which was completed in 2017. **Photo:** Cleary O’Farrell

A $32.16 million deal for a new apartment building on Seattle’s Capitol Hill has closed, concluding a transaction with a dozen moving parts.
A Seattle limited liability company sold 11 under-leveraged rental properties in a 1031 exchange to buy the 60-unit Cove apartments from developer James Wong’s Vibrant Cities, which previously operated as SolTerra.

A 1031 deal, named for a section of the federal internal revenue code, allows investors to postpone paying tax on the capital gain if they reinvest the proceeds in a similar property.

Such exchanges can be difficult to pull off due to their tight deadlines, and especially tough when juggling numerous deals.

Represented by Seattle-based investment firm, Pilot Ventures LLC, the buyer—Bellevue Ave Cove Holdings LLC—got the deal done in six months.

“Those guys are fast moving for sure,” said David Young, a managing director for JLL in Seattle.

He and colleagues Corey Marx, Matt Kemper and Don Flanigan represented Vibrant Cities, and are seeing a lot of investors swap out old buildings for new ones.

Demand for new product is driving up prices with The Cove (601 E. Pike St.) selling at $921 per square foot. Based on that metric, it’s the highest price per square foot ever paid for a Seattle residential community, according to JLL.

The Cove is a super-green building with solar panels that power the common areas. Young said the building is 96 percent occupied with one-bedroom rents averaging $3.85 per square foot.

Public records list Bellevue Ave Cove Holdings’ registered agent as Eleanor Freeman of Seattle.

Pilot Ventures Principal, Jason Kono, said Bellevue Ave Cove Holdings LLC decided to pay a small premium for The Cove, in exchange for a lengthy closing period to have time to sell the 11 older properties (ranging from starter homes to a small apartment building on Vashon Island).

The sale sheds light into what happened with SolTerra, a Seattle and Portland company that designs and builds environmentally sustainable buildings, solar systems and green roofs.

Wong founded co-founded SolTerra with Brian Heather, a 2012 Puget Sound Business Journal 40 Under 40 honoree.

The company reported two-year revenue growth of nearly 330 percent in 2016, and in 2017 split into two operating entities with Heather keeping SolTerra and Wong launching Vibrant Cities.

Vibrant Cities Vice President of Finance Ming Fung said Vibrant Cities focuses on development, while Heather’s attention at SolTerra is vegetated roofs and solar panels. SolTerra’s website says it also is developing real estate.

Complicated sale of new Capitol Hill apartment building sets Seattle record