Followup: Details on the school district’s Jefferson Square deal

A week and a half ago, a WSB’er tip pointed us to a fine-print public notice that Seattle Public Schools has scheduled a public hearing on a deal to sell part of the property it owns at Jefferson Square. As we noted in this April 27 report, the hearing had not been announced with a news release, nor could the notice (or any details of the deal) be found anywhere on the school district’s website, and as West Seattle’s school-board rep Steve Sundquist subsequently confirmed to WSB, the proposed deal itself hadn’t yet been discussed in an open meeting – only behind closed doors in an “executive session.” Nonetheless, it’s difficult to imagine a public hearing going well if the public has no advance information on what’s going to be discussed, so we pressed SPS for more details, to enable us to share them with you; it took a week, but we finally have those details, as forwarded by David Tucker from the SPS communications team:

The school was closed nearly 30 years ago. The District leased it for 99 years to a developer who built the existing complex on site.

In the year following the original lease, the developer asked for the lease to be split into two parts. One would be for the residential portion of the site and one for the commercial portion. All of the rental charges would apply to the commercial property, and we currently receive over $200,000 $173,226** annually.

The apartment building sits atop the commercial structure. Conceptually, the residential lease is for “air rights”, and not of the land itself. In addition, the residential tenant is entitled to “support” of the apartment structure.

The residential lease has been assigned several times, and is currently held by Jefferson Square LLC. The lease contains a provision that gives the tenant the right to purchase the residential area for $1. In 2007 the tenant sent the District a notice it was exercising the option.

Even though the lease still has 75 years to run, and the District will receive no rent for the residential portion during that time, the District refused to sell the property, believing the $1 amount to be inadequate compensation.

The tenant sued the District over the refusal to sell. In March 2009 the parties reached a tentative agreement to allow the sale to proceed, but at a price of $500,000. The agreement is subject to School Board approval, which has not yet been requested.

In accordance with state law, the District will hold a public hearing, which is scheduled for May 21. At that hearing the District will take public testimony on whether the sale should occur. The District must also obtain an appraisal of the fair market value of the property interest, which has been ordered but is not yet available.

Once these two items are completed, the proposed sale will be presented to the School Board for their consideration.

The May 21st hearing is at 5:30 pm in the cafeteria at Gatewood Elementary; if you’d like to sign up in advance to speak (the district says you also can sign up that night), call 206-252-0118. This would be one of two pending sales of district-owned property in West Seattle; the other is the Fauntleroy Schoolhouse deal (most recent WSB coverage here).

**12:49 PM UPDATE: SPS’s David Tucker sent a note updating the information he provided – he had said the rent was more than $200,000 but now says it’s actually $173,226. Also, we have found the original lawsuit, filed in 2007 as mentioned, online – it contains a copy of the original lease, for anyone interested – view the lawsuit here; the district’s original response can be viewed here. (Court documents do not include anything related to the proposed deal except a notice from late March asking that the case’s scheduled trial be put on hold because a settlement had been worked out and it was anticipated the School Board would approve it.)

8 Replies to "Followup: Details on the school district's Jefferson Square deal"

  • Mike May 6, 2009 (11:22 am)

    Maybe I’m confused but if you break a lease don’t you have to pay out the rest of it? That’s $15M for payoff at the current $200k/year.

  • AP May 6, 2009 (12:02 pm)

    The Seattle School District should not be in the commercial/residential real estate business. This lease is one of many that were written with no thought of future economic changes.

  • Mike May 6, 2009 (12:17 pm)

    Maybe this is why the school district is in trouble. Selling a piece of property that size in the junction for 500K, not the 1M as the contract states. Quite a job of negotiating!!

  • WSHC May 6, 2009 (12:57 pm)

    Dear WSB – did you guys cover this already? First I’ve heard of it:

  • WSB May 6, 2009 (1:04 pm)

    yes, covered it monday morning and it was in the headline digest at the upper right for the ensuing 24 hours or so
    also should add – that info came from the Land Use Information Bulletin, which the city issues every Monday and Thursday. Anything West Seattle of note that’s in the LUIB, you’ll see here as soon as we can pull it together. We also monitor other city websites and alerts every day to look for word of new development applications, hearings, what have you. Anyone who wants to catch up on development coverage, we “tag” it all in the Development category, and you can go to the WSB Categories list in the lower right sidebar, click on Development, and everything we’ve done – newest to oldest – will come up – 534 stories so far in just the past two-plus years since we’ve turned this site toward news :) – TR

  • WSB May 6, 2009 (1:04 pm)

    p.s. anyone following the original story here, I have added the documents from the lawsuit filed in 2007, am about to add the district’s original response. see additions to end of story – TR

  • Kim May 6, 2009 (3:48 pm)

    With school closures becoming a habit, the school district has always been very closed about this particular property. When I asked about it at a previous open meeting with the district late last year the rep refused to answer any questions.
    The school district employee in charge of property and facilities is not skilled or able to do the job properly based on his history of actions.

  • marty May 7, 2009 (8:59 am)

    Ouch!! The Seattle Schools need money and they are literally giving prime property away. We should all be upset about the lack of answers to simple questions. I have asked questions about the pending sale of Fauntleroy School with no answers. My question was simple: “What bidding process was used to guarantee that the school system would get market price for the property”? The two rental halls at Fauntleroy are huge income-generators and I have been ignored whenever I have asked what rent is paid by the folks who run the business. These are public buildings and I do not understand the secrets.

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