Reprinted (with permission) from the Daily Journal of Commerce
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October 03, 2002

Central Area grocery site may become new apartments
By JOE NABBEFELD
Journal Real Estate Editor


Rendering courtesy Sclater Partners
Redevelopment of the Deano's property at 22nd Avenue and Madison would change a key corner in the neighborhood.
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The owner of Deano's grocery and an adjoining night club on East Madison Street in Seattle's Central District has begun the long application process to replace those with nearly 200 apartments, new retail and underground parking.

The project faces large obstacles, particularly the difficulty of arranging equity and debt financing during a bad economy and competition from 250 apartments that are already planned to start construction soon across the street on the former Planned Parenthood site.

It's also being shepherded by a novice developer, businessman Meriland Dillard, a long-time friend of owner Dean Falls.

But neighborhood leaders say that if the proposal becomes reality it would change a key corner that for decades has been a problem by attracting loiterers and others at all hours of the day and night.

With Sclater Partners as the project architect, Dillard and Falls recently applied both to vacate an east-west alley dissecting the half-block site at Madison and 22nd Avenue and to go through design review hearings.

Carlos de la Torre of Sclater said design review will be on hold until the city tackles the alley vacation.

The design for now is a six-story, U-shaped building, with balconies for each apartment. About 9,000 square feet of ground-floor retail would front Madison. The opening of the U would face west, onto a north-south alley that also dissects the large block.

The Deano's project would occupy the eastern half of the large block, which a couple of run-down houses also now stand on. A new four-story office building, a Mexican restaurant, an apartment building and some houses occupy the west half of the large block.

The design review application says the project would total 187 apartments and 312 underground parking spaces. Dillard said, however, that the number of apartments may reach 205. At least a third of the units would be priced as "affordable" and two-thirds as market rate.

Miller Park Neighborhood Association President Andrew Taylor said Dillard initially wanted as many as 215 apartments and said such a large number would be needed to make the proposal work financially. The neighborhood wants the project to happen but doesn't want that much density, Taylor said, so it bargained Dillard down.

Even 187 apartments would exceed the amount allowed under the site's NC-3-65 zoning, Taylor said, so Dillard will have to convince the city to grant a variance.

Dillard estimated the project would cost about $26 million to construct. He said the recession has decreased the cost of construction labor, reducing the estimated project cost from $30 million.

Dillard said he has discussed the project with some of the area's leading apartment development firms, all of which say they're interested and will grow more interested after he pushes it through permitting and other stages of development.

He said he has also talked to a variety of retailers, including former basketball star Magic Johnson, who played a role in placing Starbucks outlets and other retail in minority neighborhoods in various big cities.

Dillard, 49, owns and operates LNI/LAN Network Infrastructure, which he said serves as general contractor in building cellular telephone towers for Qwest and VoiceStream Wireless, and installs security camera systems for the federal government and other clients.

His company installed security systems in Safeco Field and the new Seahawks Stadium, he said.

Dillard's businesses also included owning and operating a nightclub in Belltown for nearly three years in the mid-1990s called Neko's.

Dillard said he met Falls, who is in his late 50s, about 20 years ago when Dillard looked at buying the Deano's night club from Falls. A sale never came together, but Dillard and Falls stayed in touch. Dillard said he holds an 18-month option to buy a significant interest in the Deano's site from Falls if the project moves through permitting.

Dillard said his development background consists of building and selling three houses in Kent. He has a fourth one, a ranch house on 5 acres, in construction, he said.

Local developer Tom Lee and Cressey Development of Vancouver, B.C., have made it through permitting and are shooting to start 15 months of construction soon on 250 market-rate apartments, a large Safeway store and other retail over underground parking on the former Planned Parenthood site at Madison and 23rd, kitty-corner from the Deano's site.

Development experts said financing sources would likely want to see evidence that Cressey's apartments will lease before they invest in the Deano's proposal.

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Joe Nabbefeld can be reached at (206) 219-6518 or by e-mail at
joe@djc.com.

 

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