some free (but valuable) advice for the Missionary Sisters of the Sacred Heart of Jesus

Imagine finding 22 acres of the lakefront real estate in Seattle laying around that you have owned since 1914…what would you do with it?

Currently valued at $46,339,900, developers are probably already negotiating over it: what could it be worth to the Missionary Sisters of the Sacred Heart of Jesus?

The sale is part of “a global realigning of the Missionary Sisters’ assets to ensure they are serving those most in need,” according to the announcement. To that end, the Sisters are beginning a process that will look at different long-term uses for the property.

Keeping that in mind, let’s explore some options. They could sell it for a multiple of that valuation: 22 acres of 6000 square foot lots is about 7 per acre, so 154 homesites. Straight up, that’s about $300,000 per site…I expect the Sisters could ask $500,000 per site for that location and get it. That’s $75+ million, 50% over the assessed value. But is that the best option, especially given their stated goal? Why not keep the land and let it be developed under a leasehold?

Right now, King County collects $12,407.30 every six months in property tax on that land. That’s it, just $563/acre each year. A ground lease of $10,000 per homesite would be $1,540,000/year for the whole parcel. For the whole 22 acres that would be $258,417,158.15 over 99 years, $2,610,274.32 annualized over the 99 year term. And who knows what a developer would pay for a ground lease with a lot less upfront vs a fee simple sale? (The Mercer Megablock, even though it was a commercial property, would have paid more than $1 billion over 99 years, vs the $150 million Seattle settled for.)

I expect a charitable order could find uses for $2.6 million/year (or more) over 99 years. And it would still own the land, with the ability to sell at a later date or simply renew/renegotiate the lease. Even the Seattle School District doesn’t sell its surplussed land: it leases those parcels, unlike the city of Seattle. Those sites get developed and pay rent, rather than sit idle.

A $10,000 ground rent/lease on those homesites, assuming they are typical 6,000 square foot site, would pencil out like this:.

The Future Value function in any spreadsheet will let you make your own models. Not sure anyone in the City of Seattle budget office has ever heard of it…

But that parcel won’t be that densely populated, especially if it’s sold outright. It will all be mega-sites. The Sisters could direct its use if they kept it under a leasehold, and arrange for some of the 22 acres to be a more densely-designed development — maybe a village…cottages, terraced houses, small blocks (fourplexes), with the option to let Seattle’s monied class to splash out on a few acres. 22 acres is a large parcel of land: it’s one-third of a square mile, not much out of Seattle’s 84 square miles, but to have it as one well-sited contiguous parcel is something to consider the best use of. It may never have been used for anything since Seattle was chartered. A great opportunity, comparable to the 55 acres at Northgate that Mayor Teargas decided was more suited to a hockey training center than housing, as if the two were mutually exclusive.

I don’t expect any of this to come to pass, even though the Sisters and Villa Academy could make use of that income stream, either for charitable works or tuition for deserving but financially-challenged students. There are many opportunities here…