Financial situation less than heavenly for Capitol Hill townhouse project The Sanctuary

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Photo: MRK

In an economic environment where even the simplest real estate projects don't have a chance in hell, one of the more improbable redevelopment projects on Capitol Hill is in financial purgatory. We first learned of the project's plight from Matt Goyer's Urbnlivn real estate blog with his brief post titled simply, The Sanctuary is in Limbo. We've now learned from court documents that the developers behind The Sanctuary are the subject of a $9 million complaint brought by the bank that provided the construction loan to help rebuild the 1906 church into one of the most ambitious -- and, it turns out, financially precarious -- development projects on the Hill.

In 2006, the First Church of Christ Scientist building was acquired for $2.28 million. The Church was actively considering another bidder who had planned on demolishing the building, but developer Joel Lavin told CHS in May the Church selected him and partner Joe Sacotte because their redevelopment plan included the preservation and adaptive reuse of the building.

To finance the construction, the developers borrowed $9.3 million from Charter Bank's Seattle office in December, 2007. According to the complaint filed this July, the note was originally supposed to come due in January 2009 but Charter extended the maturity date until February 2010. The extra year didn't matter. First Church, LLC could not pay.

At the heart of the matter, the 12 units of The Sanctuary were not selling. While one or two units were at times pending sale, according to court documents, all 12 units are currently still available.

The complaint sought a judgement against the developers for the $9.159 million still owed on the loan, payment of Charter's legal fees and the appointment of a receiver to take control of the development and find a way to create enough value from it to pay back some of the debts owed. According to court documents, a jury trial was scheduled for January 2012 but a receiver appears to have already been assigned. Resource Transition Consultants of Edmonds, Washington already has the Sanctuary listed on its project page.

The landmark First Church of Christ Scientist was gutted and sub-divided by Lavin and Sacotte into 12 luxury townhomes, no two featuring the same floor plan. Units span from three to five levels and retain many of the building’s original features, most noticeably its stained glass windows, ornate columns, and dome. The developers sought to reuse as much of the original church as possible; church pews and wooden support columns, for instance, were converted into stairs.

The units feature a combination of historic materials and modern finishes. Kitchens include marble and stainless steel countertops and appliances by Bertazzoni, Liebherr, and Asko. Eight of the twelve units feature terraces, several with views of downtown and, on that rare clear day, Mount Rainier. You can read more about the project in a write-up on the amazing project we posted this spring while the drama around the missed February repayment date was growing -- unbeknown to us -- behind closed doors.

At this time, we don't know what is next for Lavin, a Capitol Hill resident himself, and Sacotte. We have an e-mail out and hope to learn more about their situation and their role in Sanctuary going forward. UPDATE: Lavin has declined to comment on the situation at this time.

In the meantime, Resource Transition Consultants are familiar with the Capitol Hill real estate market. Last December, they were behind the auction of the condo units in the Summit Tower project in an effort to quickly move property that was only partly successful. Is there an auction in the future for The Sanctuary? It will be interesting to see what the market rate is for improbably ambitious development is these days.