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COVID-19 made Bay Area real estate startup miss out on Capitol Hill — for now – CHS Capitol Hill Seattle News

Marketing for Starcity Los Angeles

By Jethro Swain

The COVID-19 crisis has churned up the waves of redevelopment hitting Capitol Hill and the Central District in ways we’ll be sorting out for your years.

If one planned 11th Ave development two blocks north of Cal Anderson is an indicator, the health and financial crisis may have snuffed out ambitious early plans from a roster of real estate startups looking to create projects in the neighborhood and change the way the country builds new housing.

The property, home to a three-story, 1963-built, nine-unit apartment building, was lined up to be the site of a Seattle project for Starcity, a San Francisco based co-living development firm.

Founded in the Bay Area, Starcity has developed properties in San Francisco, Los Angeles, and Barcelona. Their focus as a company is “to build affordable-by-design rental housing in cities that are experiencing a missing middle class,” and where rents exceed 30% of the area’s median income, according to Starcity representative Mo Sakrani.

The company fashions itself in the mold of WeWork and other new era real estate startups. It touts its co-living setups — familiar here in the Hill’s many microhousing developments — as benefits to be passed along to renters:

By expanding the communal areas and reducing the size of the units, Starcity is able to offer residents a discount of 20-30% on new apartments, which amounts to a monthly rent that ranges between $1,000 and $2,000. Another perk is Starcity’s app, which allows residents to connect with their neighbors — a hyperlocalized form of Nextdoor, if you will. Dishotsky wants Starcity to become a lifestyle brand residents love.

Starcity was the prospective buyer for the nine-unit apartment complex, built in 1963, originally listed at $3.9 million.

The layout of Starcity’s property in SF’s Mission District

As a city where rent has been consistently increasing, Seattle has been a target of expansion for Starcity for some time now. The company ended up making an offer for the Capitol Hill property in May of last year, but had to pause their expansion due to COVID-19.

“The pandemic-induced restrictions resulted in an inability to actively engage with the local community, which we believe is an imperative step before getting too far in the development process,” said Sakrani on why Starcity had to back out of the project. “The lockdown also made it difficult to forecast timelines for permitting and forecast where rents for efficiency units were going in the marketplace.”

Starcity’s original plan was to turn the 7,680-square-foot building into a 34,210-square-foot, 86 unit complex.

The property with the three-story apartment building at 228 11th Ave E is instead on a different course. Like many of the remaining small apartment buildings on the Hill, it is now owned by a small, local investor after being purchased for $3.3 million by Cohen Properties and Alex Cohen, a real estate investor born and raised on Capitol Hill. He purchased it from the Tobin family, another small-scale owner.

As the pandemic worsened across the country, the 228 11th Ave. E. apartment building sat on the market for the remainder of the year. It wasn’t until the beginning of 2021 that Cohen made his offer and closed the deal on the sale. Cohen’s current plan is to turn the property into an eight-story building, permits show.

“I focus on small apartment buildings with a little bit of commercial space,” Cohen told CHS. “I look for small infill lots with easy access to transit, amenities, and jobs.” For Cohen, this project is particularly impactful because he’s been looking to develop a property on Capitol Hill for a while now.

“I grew up here. It’s an amazing neighborhood,” said Cohen of Capitol Hill. “It has everything that makes living in a city work…we are very excited about the neighborhood and are working hard to add something of value to it.”

Cohen Properties has developed properties all over Seattle including in Ballard, Fremont, and Beacon Hill. For this specific project in Capitol Hill, Cohen will be working with CA Family Properties, the real estate company of former Seattle Seahawks Defensive End Cliff Avril. “Cliff and I were looking for a project to work on together for some time when we came across this,” said Cohen.

The project itself will take some time to get underway, since Cohen is currently working on permitting for construction which can take 18 to 20 months. Once construction begins, Cohen estimates that it will take about 18 months to finish.

While Cohen’s purchase of the property and new plans to build fit into ongoing patterns of smaller scale redevelopment on Capitol Hill, some new players with efforts in motion from before the start of the pandemic are continuing to make progress here. Juno Residential, a San Francisco real estate startup launched last summer with Apple and Tesla pedigree that is seeking to change the residential development market with mass production and pre-fabrication techniques is the developer on the mixed-use project being planned to create new housing and a new home for City Market just off E Olive Way.

As for Starcity and companies like it, they will continue to have their eyes on Capitol Hill and could be back sooner than later as the economy stabilizes. “We are actively seeking opportunities to re-engage in Seattle now, and hope to find our first site for expansion later this year,” the company spokesperson said.

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