For Gonzaga University, prime real estate in downtown Seattle was just too good to sell
Gonzaga University recently announced it would lease land to a developer to build a 17-story apartment tower in downtown Seattle.
But don’t expect the Jesuit school to expand its footprint in the Emerald City or pin its financial future on real estate development.
“This might give the appearance that the university is in the construction business, when it’s really not,” said Joseph Smith, Gonzaga’s chief financial officer.
The coveted Seattle waterfront property, currently used for parking, was a gift from the late Spokane philanthropist Myrtle Woldson, and Gonzaga officials say it’s simply too good to sell for a one-time sum. By leasing the land, the school can derive revenue from it for years to come.
“This happens all the time in various real estate developments,” Smith said. “The landowner wants to retain rights to the land and benefit from the economics of the land, but it’s not necessarily in the business of developing whatever might live on that land.”
Gonzaga is counting on AMLI Residential to transform the Seattle property into a profitable housing development by 2022. Smith said he couldn’t disclose how much Gonzaga expects to gain from the lease because of a confidentiality agreement with the Chicago-based developer.
But the revenue will be significant, Smith said. The three Seattle properties Woldson gave to Gonzaga – two that make up the lot being developed, and a third that has condos on it – already generate about $1.8 million a year for the university. King County values those three properties at about $20 million for tax purposes, meaning Gonzaga could fetch significantly more if it were to sell them all at market value.
The apartment building will be an unusual investment for the university – one that doesn’t directly serve an educational purpose. Smith said the vast majority of Gonzaga’s real estate and buildings are part of the Spokane campus. The school also has holdings in Florence, Italy, where it hosts a study-abroad program.
It’s not unusual for private universities and nonprofits to receive land, vehicles and other donations that they don’t have an immediate use for. Often those gifts come from the estates of wealthy alumni or community leaders, and the donors expect the university to sell the properties so the proceeds can fund scholarships, endowments and capital projects.
“The vast majority of our gifts, when received, are converted to cash and then put to use consistent with the donor’s intent,” Smith said.
The Woldson properties are an exception to that rule because they are in such lucrative locations. In other cases, Gonzaga has received gifts it didn’t quite know what to do with.
The university owns one other piece of property in King County, for example. County records show in 1980, a woman donated 40 acres of secluded forestland east of the town of Carnation. It’s valued at $127,000, and Smith said it doesn’t even have an access road.
“We know we’ve got it, and we’re probably paying a very minor amount of property tax on it,” Smith said. The university just hasn’t gotten around to marketing and selling the land, he said.
While Gonzaga’s Seattle apartment building is an unusual case, other universities have found plenty of innovative uses for off-campus real estate.
The University of Washington, for example, owns several blocks of prime property in downtown Seattle, including the site of an under-construction high-rise called Rainier Square. The land was gifted to the school in 1861, nearly three decades before Washington became a state, the Seattle Times reported.
And Washington State University – established with a federal land grant in 1890 – is in talks to build a “village” of apartments, condos, retail stores and dining options near the northeast corner of the Pullman campus. Under the proposed agreement, WSU would lease most of the triangular, 20-acre parcel to developer Duane Brelsford’s company, while a portion for the condos would be sold.
WSU spokesman Phil Weiler said that deal has not been finalized.