In what one real-estate analyst labeled "an extraordinarily bold move," Bosa Development will break ground next week on the first phase of a project in Seattle's Denny Triangle that was approved in 2007 but went into hibernation when the real-estate crisis hit.
Why does Nat Bosa plan to break ground next week on a 41-story condo tower in Seattle’s Denny Triangle, when conventional wisdom suggests it’s a dubious proposition at best?
“The story of my life has always been to go against the grain,” the longtime Vancouver, B.C., developer said Thursday.
“In this business, if you are all brain and no guts, you are no good.”
In what one real-estate analyst labeled “an extraordinarily bold move” given the condo market’s current economics, Bosa said his company, Bosa Development, will start building a project that won city approval in 2007 but went into hibernation when the real-estate crisis hit.
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It’s been five years since a new condo tower broke ground in greater downtown. Bosa’s timetable calls for the project’s first phase to be finished by late 2014.
“I think it’s a good time to start because there will be some serious demand for condos,” Bosa said. “By the time we start selling in a year or a year-and-a-half, we’re going to do very well.”
His project, called Insignia, would fill the block bounded by Fifth and Sixth avenues and Bell and Battery streets, where Teatro ZinZanni’s big tent once stood.
Bosa has city approval for two 41-story towers with a total of 660 to 700 condos. He said he will start with the southern tower, but dig the foundation and do all the other underground work for both.
Insignia is just a block from the three-tower office campus Amazon.com proposed earlier this year. “Obviously that’s not bad news — that’s jobs,” Bosa said.
But the complex’s proximity wasn’t a deciding factor in his decision to start building, he added.
Construction of the second tower depends on the market, he said — but if demand and prices rebound as he’s anticipating, it may not be long.
Bosa’s announcement comes as other downtown developers are marketing the last few hundred of about 2,500 condos delivered in the recession’s depths.
Working through that inventory has taken years. While sales have picked up and some projects have recently raised prices a little, the increases pale in comparison to earlier cuts of 30 or 40 percent.
Most observers didn’t expect to see any new construction this soon — especially something this big — despite the shrinking inventory. Many had predicted developers would convert apartments to condos to meet any additional demand once the current crop of buildings sells out.
Yet now comes Insignia. “It’s a great surprise to me,” said Seattle real-estate economist Matthew Gardner, who analyzes projects for developers. “I haven’t been asked to look at a condo project in years.”
Overall, condo prices remain too low for a developer to make a profit on a new project, he said, especially downtown.
Glenn Crellin, associate director of the University of Washington’s Runstad Center for Real Estate Studies, agreed. “There may be some room for new construction, but this is more ambitious than I would have expected,” he said of Insignia.
But Matt Goyer, who blogs about in-city condos at Urbnlivn.com, said he expects Bosa’s trailblazing will pay off. “I expect most of the new-construction condos in the Seattle core will sell out this year,” he said. “After that, there’s nothing.”
While condo prices at Insignia haven’t been set, Bosa said, “they’ll be more than you can buy anything [downtown] for now.”
But he anticipates the market will rebound. He said he bases his optimism in part on his experience in San Francisco; last year, when the market was stagnant, he broke ground there on a big condo project that now is enjoying strong pre-sales.
Plus Bosa, 67, is bullish on Seattle and its prospects for growth. He spent Monday walking around downtown.
“I’ve got to tell you, that has all of a sudden become a very livable city,” he said. “It’s becoming more and more like San Francisco. … It’s maturing.”
And if he’s wrong about the condo market, Bosa said, he can always rent the units as apartments until it does bounce back.
But that, too, could be problematic, the UW’s Crellin said: Thousands of new apartments are expected to come on the market by 2014, and rents may dip.
In addition to San Francisco, Bosa Development also has built condos in the Vancouver area, Calgary and San Diego.
Another Vancouver company, Embassy Development, which is headed by Bosa’s son Ryan, bought the 1.9-acre Insignia property in 2007 from Seattle’s Clise Properties for $49.9 million and initially planned to develop it.
But Nat Bosa said Embassy is now focusing on Canadian projects, and his company acquired Embassy’s interest.
He said the first phase will cost $180 to $200 million, and for now he is financing it himself. But he said four banks that have loaned money for his San Francisco condo project have indicated they will provide money for Insignia “whenever we are ready.”
A meeting Monday with a major Seattle lender also went well, Bosa said, although the lender made no commitment.
He wouldn’t say how much equity he plans to invest in Insignia, “but it will be a lot …
“Obviously I’m excited about Seattle, and I’m excited to get started.”
As for the doubters, Bosa said, they’re looking back rather than forward.
“I have a philosophy: You plan to buy your summer hat in the winter. And then you sell it in the heat of summer.”
Eric Pryne: 206-464-2231 or firstname.lastname@example.org