SRM Development picks up affordable apartments in Seattle for $84M

SRM Development has bought a block-size, postwar apartment complex in Seattle for $84 million, tapping into an Amazon.com housing fund to make it permanently affordable.

The Spokane-based investor purchased the 358-unit Mill at First Hill at 1000 8th Avenue, in First Hill, the Puget Sound Business Journal reported. The sellers were three affiliates of Sequoia Equities, based in Walnut Creek, Calif.

The deal works out to $234,637 per unit.

The Sequoia affiliates bought the two-tower, 14-story complex in 2015 for $93 million, or $259,777 per unit. Sequoia then poured $14.5 million into building upgrades.

The assessed value of the two H-shaped buildings, built in 1949, is $113.7 million.

Marketing for the complex billed it as a “value-add opportunity,” allowing a new owner to upgrade the building and jack up rents. 

But because of $34 million in affordability housing financing from Amazon’s Housing Equity Fund, in addition to other sources, SRM will keep the complex 100-percent affordable. 

Half of the units will be for renters with incomes that are below 60 percent of area median income and the other half will be for households with incomes under 80 percent of the median. 

Rents at Mill at First Hill range from $1,453 for a studio to $2,524 for a two-bedroom apartment, according to Redfin.

SRM paired the Amazon financing with $6.8 million in recycled bonds. The Washington State Housing Finance Commission applied tax-exempt bonds to lower interest rates. A partial property tax abatement also contributed to the financing.

“I can’t emphasize enough how rare it is to coordinate and execute a capital stack like this, especially in today’s challenging real estate market,” said SRM Affordable Housing Managing Principal Conor Hansen.

“Recycling tax exempt bond capacity is difficult, it takes the right sponsor, the right deal and allows for a very narrow opportunity window,” added WSHFC Executive Director Steve Walker. “The Mill at First Hill threaded it all together.”

Brokers Philip Assouad, Giovanni Napoli, Nick Ruggiero, Ryan Harmon, and Anthony Palladino at Institutional Property Advisors represented the seller. Also working on the deal was Shelter America Group, a nonprofit partner.

In the past  two years, SRM has partnered with Amazon’s Housing Equity Fund and Microsoft’s Affordable Housing Initiative to create more than 1,000 units of affordable and workforce housing in King County, home of greater Seattle.

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SRM Development, founded in 1999, focuses on multi-family, senior housing, affordable and mixed-use development and construction in high-barrier urban markets across the West, according to its website. It has built more than 5,000 apartments and 750,000 square feet of commercial space in greater Seattle, the Tri-Cities, San Francisco, Los Angeles and San Diego.

This month, Amazon.com committed to spend $1.4 billion to help pay for up to 14,000 affordable homes near its corporate hubs in Seattle; Arlington, Va.; and Nashville, Tenn. 

The Seattle-based e-commerce giant expanded its commitment to create and preserve affordable housing with new funding for the Housing Equity Fund, a $2 billion initiative launched in 2021 to support 20,000 affordable homes over five years.

— Dana Bartholomew