Goodman Sues Seattle Over New Rules That “Destroyed” Profits

Goodman Real Estate has sued Seattle for allegedly blocking its ability to successfully operate an affordable apartment building by forcing it to take in criminals and roommates.

An affiliate of the locally based investor filed the 41-page complaint, alleging the city “destroyed” its chances of sustainably running the historic Addison on Fourth building at 308 Fourth Avenue South, in the Chinatown-International District, the Puget Sound Business Journal reported.

The City of Seattle has hired an outside law firm to defend itself in the case. Tim Robinson, a spokesman for the Seattle City Attorney’s Office, told the Business Journal that the office plans to defend the city’s tenant legislation, though it doesn’t comment on active litigation.

Goodman is seeking a jury trial and aims to recover an unspecified amount of financial damages. A court date hasn’t been set.

The landlord bought the nine-story, 254-unit building, built in 1910, in 2012 for $12.5 million, or $49,213 per unit. It then spent $26.5 million on renovations, seismic upgrades and solar panels.

By 2015, the Addison was stable. Its studio and one-bedroom apartments for households earning up to 60 percent of area median income were fully leased for the next three years, according to Goodman.

The city then passed several ordinances between 2018 and 2022 the company alleges hurt its business model, including a Fair Chance Housing Ordinance that requires landlords to accept residents with criminal backgrounds, or who may “pose a threat to others.”

Other recent measures include a “winter eviction ban,” a “COVID-19 eviction ban” and a “roommate ordinance” requiring landlords to accept additional roommates and immediate family members as tenants within existing rental agreements, according to the complaint.

“When we began this renovation project in 2013, it was a great public-private partnership providing much-needed low-income housing units,” George Petrie, CEO of Goodman, said in a statement. “But then the city started to change all the rules, and now the Addison, our residents and the city are the ones who suffer.

“It’s heartbreaking and devastating for all stakeholders.”

In 2018, Goodman said it had collected nearly 94 percent of the gross potential revenue for the Addison.

By last year, that figure dropped to 44.1 percent, according to the firm. The building now “hemorrhages” money, with a loss of $2.7 million last year, Goodman said. Occupancy is now at 60 percent, after falling to as low as 55 percent.

“The city can impose the ordinances, that’s fine,” Sean Flynn, president of Rental Housing Association of Washington, told the Business Times. “But those ordinances have diminished the Addison so much that it can’t function anymore due to the regulations that have been placed upon it.”

Goodman Real Estate, founded in 1990, has $3.2 billion in multifamily and commercial assets across the U.S., according to its website. It owns more than 100 apartment complexes, with 1,100 units in its construction pipeline in greater Seattle and Phoenix.

— Dana Bartholomew