Developer acquires air rights to guard new condos' value

Developers of downtown Seattle's first high-rise condominium project in nearly a decade had to overcome historic preservationists, angry neighbors and a sour economy before finally starting construction of the 22-story Belltown tower this summer.

After all that, they weren't about to lose one of the building's biggest selling points — its views of Elliott Bay from the corner of Second Avenue and Lenora Street.

So Cristalla did something unusual for a residential developer in Seattle. The company bought the air rights above the neighboring property, essentially capping future development there to eight stories.

"It comes down to the fact that we have some pretty valuable units on that corner of the building, and they are worth a lot more when you can tell the buyer the views you see today are the views you will see tomorrow," said Leslie Williams, who is leading the sales effort at the Cristalla building.

Cristalla paid Teutsch $1.2 million for the space above his low-rise, 1918 office building.

City zoning would have allowed Teutsch to build a tower just as tall as Cristalla, blocking the western views from condos priced from $160,000 to $2.4 million. Now, if Teutsch ever replaces his three-story building, he can build only as high as 85 feet.

Few condo buildings can boast protected views in the city. That is a key selling point for the 197-unit Cristalla, which should be finished by spring 2005.

Williams said much of the marketing will target those who already live in downtown apartments or condos.

"To induce people to go from one condominium to another, you have to offer something more," Williams said.

Wright Runstad pioneered the purchase of air rights in Seattle in 1978 for its office building at 1111 Third Ave., said developer Matt Griffin, who helped negotiate the deal. Other commercial projects have done likewise since, including the recently completed IDX tower, which bought the air rights over the downtown YMCA.

But protecting views was not the driving concern in those deals. It was the transfer of development rights from one building to another, which allowed developers to build taller towers in exchange for limiting the height of the neighboring property.

And that's what makes this deal so interesting, Griffin said.

Teutsch was pleased with what he got.

His small office building is making a profit, and the small lot size would have made it difficult to build a much larger project, Teutsch said. But another reason made the deal most attractive — avoiding a headache.

"When the folks at Cristalla went for their permits, they had to run the gauntlet of public hearings and people in the neighborhood," Teutsch said. "They caught it from all sides. And if I decided to do something here, I would have caught it from all sides, too."

Preservationists howled when Cristalla proposed buying Bethel Temple at the corner of Second and Lenora and replacing most of it with an office and residential tower.

Cristalla recently closed the $3.4 million purchase, property records show.

The landmark 1915 terra-cotta building that housed the church had once been home to the saltwater baths of the Seattle Natatorium, or Crystal Pool.

When the temple bought the property, it tore down the building's domed entrance and covered the pool, both allowed because property owned by religious groups is exempt from landmark protection.

But Cristalla offered to save two of the landmark's exterior walls and recreate the dome.

Next, the building faced the wrath of neighbors in nearby high-rises, such as John Pehrson, who objected to the size and bulk of the new tower and to blocked views. The criticism led to a few design changes.

Developers had hoped to capitalize on the hot real-estate market in Seattle, but the project became a victim of the bust. The original project called for five to seven floors of office space. But when vacancy rates spiked in 2001, Cristalla was forced to rethink the plan.

The company eventually decided to scrap the office space and replace it with several levels of parking and more condominiums. But even that strategy depends on the Belltown market remaining strong over the next two years.

Much of the Seattle condo boom in recent years has been in low- and mid-rise buildings. The 26-story Meridian tower was completed last year on First Hill.

The last high-rise condo project downtown was One Pacific Tower, completed in 1995.

J. Martin McOmber: 206-464-2022 or mmcomber@seattletimes.com