Alley24

PROJECT TYPE

Alley24 is a full-block, mixed-use development in the emerging Cascade neighborhood on the edge of South Lake Union in Seattle. The western half of the block is devoted to multifamily residential, featuring 172 apartments and ground-level townhouses. It also includes two street-level restaurants that together total 5,000 square feet (464.5 square meters). On the eastern half, a commercial building with 185,000 square feet (17,187 square meters) of rentable space was built over underground parking. It comprises 23,000 square feet (2,137 square meters) of retail at the base.

The project creates a pedestrian environment that is part of an overall redevelopment strategy for the neighborhood. In addition to preserving the existing alley right-of-way, the design of the block opens up a second public pedestrian throughway, crossing in the middle of the block. The residential complex incorporates the partial shell of a historic industrial building, combining it with mid-rise, modernist architecture designed for long-term energy efficiency.

THE SITE

Located west of Interstate 5 and at the eastern edge of the rapidly redeveloping South Lake Union area, the Cascade neighborhood is one of Seattle’s oldest communities. It comprises a mix of historic and contemporary industrial uses with modest residential and warehouse structures.

Alley24 is divided by a north-south alleyway, and the west side of the block was originally occupied by the landmark New Richmond Laundry building, which was constructed in three phases between 1917 and 1944. An office building owned by PEMCO Insurance, co-owner of the project, was located on the eastern half.

Seattle’s large (360-by-256-foot/109.7-by-78-meter) block dimension lends itself to further divisions that mimic a smaller city grid. The design of Alley24 follows suit with crossing through-block alleys, one of which was added with the redevelopment. The site on which Alley24 sits is zoned SM for Seattle Mixed—a new zoning designation intended to foster mixed-use and pedestrian-friendly development as well as transparent street-level facades and upper-level setbacks along a mapped network of streets.

Across Pontius Avenue North and to the northwest of Alley24 lies Cascade Park, which includes a neighborhood “pea patch” public garden. The south side contains a mix of new and old retail and commercial structures. Across Yale Avenue North on the east side of the site is the flagship store of REI, a Seattle-based outdoor wear retailer. Occupying a full block, the store’s site features a waterfall, a test hiking trail, mature trees, and understory plantings.

FINANCING

The owners of the project, Vulcan Real Estate and PEMCO Insurance, each owned one half of the Alley24 block prior to development. As equity partners in Alley24, Vulcan owned two-thirds of the project and PEMCO owned the remainder; they divided project costs accordingly. The partners expect an 18 percent leveraged return on equity on a total project cost of $92 million.

The partners leveraged 25 percent equity with two construction loans set to convert, upon project stabilization, to permanent, fixed-rate loans at less than 7 percent. Separate loans were packaged for each half of the block. At the time of development, this was necessary in order to get competitive loan pricing and also to preserve flexibility for future disposition.

The loan for the residential part of the project was for $22.5 million and came from Mutual of New York. The other loan, from Washington Capital, financed the commercial portion of the project and was for $45 million.

DEVELOPMENT AND APPROVALS

Vulcan Real Estate purchased the western half of the Alley24 block in 2000, at a time when the company had already acquired a number of parcels in the larger South Lake Union area. The company’s long-term goals for the area include creating a vital, mixed-use, mixed-income neighborhood base for the evolving biotechnology industry in Seattle.

PEMCO Insurance, longtime owner of the eastern half of the block, continues as partner in the project. The Seattle-based underwriter had little prior experience as developer except for company facilities. A reciprocal easement was recorded between the two half-blocks to ensure pedestrian access and preserve parking, mailroom, and leasing office access onto the east half-block by residents in the west half-block.

As the decision to divide the block between commercial and residential uses emerged, Vulcan sought and found a key commercial tenant in NBBJ, a locally based international architecture and design firm. As talks progressed, NBBJ made plans to move its home office, along with hundreds of its employees, from Pioneer Square in downtown Seattle to the emerging neighborhood. The company also committed to designing the mixed-use complex.

Along with planning for Alley24, Vulcan was engaged in the construction of Alcyone, a nearby sustainable mixed-use project consisting of 162 apartments. In 2004, the same year that Alcyone opened, Alley24 broke ground. The rental market was rebounding from a slump in the wake of the tech bust of three years before, and projections for the apartment market were optimistic. However, Alley24 was also the first speculative office development in the emerging neighborhood and therefore it entailed financial risk.

In anticipation of approvals, Vulcan participated in an extensive, proactive public involvement process. A series of well-attended neighborhood meetings was widely promoted and advertised. For the purposes of constructing a narrative that engaged the community, the property was called the Richmond Laundry Block. Input from community stakeholders and exchanges with the design and development team was synthesized in a report that was distributed to participants.

Ultimately, the project took its name from the alley-based design concept and from Local 24, the laundry workers’ union responsible for what is believed to be the only all-woman labor strike in U.S. history, in 1917.

Because of its size and the complexity of the approval process, Alley24 was subject to review by three independent boards: the Landmark Commission for the adaptive use of a designated landmark (New Richmond Laundry Building); the neighborhood Design Review Board for the land use permit; and the Seattle Design Commission for approval of a skybridge connecting the third level of the office building with a private roof deck on the west side of the block.

The project takes advantage of the city of Seattle’s multifamily tax exemption program, designed to promote the development of affordable housing. In exchange for setting aside, for ten years, 20 percent of its units to tenants who qualify at 60 percent of the area median income, property tax on residential improvements is exempt for the same ten-year period.

DESIGN AND SUSTAINABLE SYSTEMS

As mentioned earlier, the architect of Alley24 was the Seattle office of NBBJ, a firm with over 750 employees in ten offices around the world. NBBJ is also one of the three major office tenants at the project. The design team was led by Scott Wyatt, the firm’s managing partner, and design principal Brent Rogers.

The concept combines historic preservation with sustainable design and a modernist aesthetic. Intensive urban design was at the center of all decisions. The designers and owners were inspired by the redeveloped blocks of the Pearl District in Portland, Oregon, and by Post Alley—a pedestrian-friendly alley that is lined with shops and located in downtown Seattle near the Pike Place Market.

Occupied by a laundry until 2000, the old brick shell of the industrial building is revealed and reused as a multiheight base for the west half of the block. On each corner of that side, a five-story, light-gauge steel structure rises over the two-level base, which contains loft townhouses with individual entrances on the street. In all, there are 172 units, including one- and two-bedroom apartments, studios, and ground-floor townhouses.

Lying between the two halves, the old one-block-long, north-south alley corridor is preserved, and joined by a second east-west pedestrian “alley.” The crossing creates an intersection in the center of the block, which is enhanced with transparent glass walls and entry doors, paving, and public art.

To draw a steady stream of people through, entrances to commercial buildings, residential lobbies, and the leasing office were placed inside the block. To further enhance the pedestrian activity around the alley, the garage elevator was placed in a common lobby. From there, office workers go to an adjacent elevator lobby and residents and retail customers walk out and around to their destinations.

Lined with retail storefronts on the commercial side and with private residential entrances on the other, the street perimeter is also designed for activity. On three sides, ground-level apartments put eyes and feet on the street and are intended to give the neighborhood a lived-in look. These entrances continue on both sides of the pedestrian cross-alley on the west side of the block. This street-level strategy is similar to that employed in newer developments in Vancouver and Portland, where multilevel units with stoops on the sidewalk have proven very popular.

Standing mid-block in the residential portion of the project, a two-story building contains ten one-bedroom apartments and supports a rooftop deck for NBBJ that can be accessed via the aforementioned skybridge from the commercial side of the block. With five ground-level doors on each side, these ten back-to-back units have a “scissor” plan that affords views on each side of the building for every apartment unit. The upper level of each is located above the ground floor of the one behind it, and stairways cross in between. The roof is designed to maximize light exposure, and a courtyard on one side brings more light and greenery to other apartments that face the center of the block.

The complex has a total of four rooftop gardens: the deck accessed by the cross-alley skybridge, an additional deck on top of the commercial structure, and two separate decks on the taller apartment buildings. To add to the activity of the block, the east-west alley passes through breezeways at the street edge, with partially transparent walls overhead.

The custom wall system consists of precast concrete panels. These elements are deployed alternately in floor-to-ceiling panels, in a repetitive pattern that is intended to break away from the overwhelming tendency of modern offices to have continuous horizontal bands of window openings.

The sustainable features of Alley24 have earned the commercial portion of the project a LEED (Leadership in Energy and Environmental Design) Silver rating for its core and shell and LEED Gold rating for the commercial interiors of NBBJ and Skanska. The residential part of the project is expected to receive LEED certification.

Unlike most office buildings in which windows are fixed, 40 percent of the windows in the office space at Alley24 are operable. The openings are both high and low, so as to release warm air and increase flow-through. To enhance this natural cooling effect, the operable window panels are topped with fixed steel brises soleil—architectural features that provide shade from the sun. On alternate panels, supershades, or motorized exterior steel blinds, are programmed to open and close slowly during the course of the day, alternately admitting light and closing to prevent heat gain. They are electronically adjusted and fine-tuned for each side of the building, according to the position of the sun.

All the concrete is composed of a high fly ash mix for sustainability. An abundant waste product from coal-fired power production, fly ash strengthens concrete in lieu of mined aggregate. Concrete adds a measure of thermal mass, which means it tends to mitigate the highs and lows of daily temperature swings, reducing loads on the mechanical system.

Inside, the development team incorporated the latest trends in heating and cooling. Hot and cold air is delivered as needed through the floor, in a 14-inch (35.6-centimeter) plenum. Tiles with individually controllable louvered openings are movable and interchangeable to suit each employee’s comfort.

Electronic cabling runs through the same under-floor space. It can be deployed in an almost infinite number of ways to suit desk arrangements, reducing tenant improvement costs and adding flexibility for all tenants and long-term value to the building. The flexibility in this structure is attributable to long spans and few columns. Meeting rooms are strategically located throughout the open-plan office floors. In the NBBJ office, a multistory atrium-auditorium serves as an everyday meeting space for large groups and presentations.

The wall system on the upper floors of the residential side is also a distinctive element of the complex. Eight-foot (2.4-meter), one-quarter-inch-thick (0.635-centimeter-thick) panels of Richlite, a paper resin composite material traditionally used for countertops and baking surfaces, are used to clad the building’s rainscreen wall system.

The dimensions of the window openings were determined by the energy code, which limits them to a certain size and coverage area on the building. White resin panels extend and incorporate the material properties of the vinyl window frames, avoiding the “punched” look in favor of a modern one.

Horizontal bands of custom extruded aluminum trim further organize the facade at each floor level. These bands are functional, catching the small amount of water that collects on the moisture barrier behind the exterior rainscreen. Subtle fittings on the bands contain vents for dryer and stovetop exhaust for each unit.

MARKETING AND MANAGEMENT

During the time leading up to the opening of Alley24, a growing number of amenities in the neighborhood made it more attractive to renters. Major tenants—NBBJ (architecture), Skanska (construction), and Cole & Weber (advertising and public relations) filled 90 percent of the 185,000 square feet (17,187 square meters) of office space available. The remaining space has been leased to the Northwest Lions Foundation.

Espresso Vivace, the project’s first retail tenant, moved in when the office buildings opened in February 2006. Storefront spaces filled over the next year, encouraged by the thriving businesses already in the South Lake Union neighborhood. In accordance with neighborhood preference, all are local or regional businesses.

Residential leasing started in February 2006 and stabilized around 96 percent by July 2007. The 1,000-plus workers at Alley24 were an obvious market for the apartments on the other half of the block, and promotional efforts focused on these companies, as well as on other firms located in the area, including REI and large biotech companies like the Fred Hutchinson Cancer Research Center.

Outreach efforts also centered on community organizations like South Lake Union Friends & Neighbors. The rental units were advertised in For Rent magazine and online on apartments.com and forrent.com, and also on craigslist.org. Ultimately, craigslist generated more tenants than any other advertising medium.

As of March 2008, market-rate rents are well over $2 per square foot ($21.53 per square meter) per month, which reflects a 14 percent increase since opening.

EXPERIENCE GAINED

• A well-crafted and proactive neighborhood outreach program can a yield threefold benefit. At Alley24, it set the stage for larger community support of the ongoing retail and leasing activities on the block, eased the approval process, and enhanced the image of Vulcan—the developer that had become the largest landowner in a proudly marginal neighborhood.
• To make overall energy efficiency compatible with operable windows in an open office environment, tenants set their own temperature thresholds on a half-floor basis. Every 60 feet (18.3 meters) on interior walls, an LED light glows green or amber, suggesting when it may be time to open windows or keep them closed. As a result, professional workers in the building report high levels of comfort.
• Lenders found Alley24 challenging to underwrite, which tended to slow the project and raise the cost. In order to achieve more favorable financing terms and preserve flexibility for possible future disposition, the project financing was broken down into commercial and residential halves. Furthermore, the lender was concerned about the multifamily tax exemption program and its potential adverse impact on the value of the collateral. This resulted in an approximately six-month delay in occupancy of the 35 affordable units while the lender analyzed the issue and negotiated additional provisions with the developer and the city of Seattle.
• Historic preservation can present challenges for underground parking and other modern necessities. Because the western (residential) side of the site incorporated a historic masonry structure, all 364 parking stalls on site had to be placed in a three-level underground lot on the eastern (commercial) half of the block at Alley24, adding significantly to the cost of development. It also forces all users of on-site parking, both residents and daytime workers, to access parking on the commercial side. On the positive side, it created a mix of round-the-clock activity near the parking elevator lobby, inside the block. Also, parking revenues are maximized because peak hours for the residential and commercial users are at opposite times of the day—an ideal situation for shared parking.
• The combination of modern design and sustainable systems at Alley24 has helped set a standard for the neighborhood and the city. The 2030 Challenge, adopted by the U.S. Conference of Mayors, is a national initiative that calls for reducing energy consumption by 50 percent and making all buildings carbon neutral by the year 2030. Alley24 has been lauded by city of Seattle officials for proving that the 2030 Challenge is achievable.

DRIVING DIRECTIONS

From Seattle-Tacoma International Airport: Merge onto WA-518 heading east to Interstate 5. A mile and a half (2.4 kilometers) later, take the exit on the left and merge onto I-5 heading north toward Seattle. Stay on I-5 for a little more than 11.5 miles (18.5 kilometers) and then exit onto Olive Way. Follow Olive Way for 2.5 blocks and then turn left on Denny Way. Stay on Denny as it crosses over I-5. Two blocks after crossing I-5, turn right on Pontius Avenue, then take another right on John Street. Stay on John for only a block and then make a left on Yale Avenue. The REI flagship store will be on your right. One block later sits Alley 24 at the intersection of Yale Avenue and Thomas Street.

Driving time: 21 minutes in nonpeak traffic.

Clair Enlow, report author
Jason Scully, editor, Development Case Studies
David James Rose, copy editor
Joanne Nanez, online production manager

This Development Case Study is intended to serve as a resource for subscribers in improving the quality of future projects. Data contained herein were made available by the project’s development team and constitute a report on, not an endorsement of, the project by ULI–the Urban Land Institute.

Copyright © 2008 by ULI–the Urban Land Institute
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