September 18, 2014

Mr. Doug Haffie

Sr. Contracts Specialist
Seattle Sound Transit
401 S. Jackson Street
Seattle, WA 98104-2826
RE: Withdrawal from Capitol Hill TOD Process
Dear Mr. Haffie:
I am writing to respectfully submit our formal notice of withdrawal from the Capitol Hill TOD developer
selection process. It is with significant regret that we do so; particularly this far in to the process.
However, after carefully reviewing the Phase-2 RFP, our concerns are too material to proceed. For the
benefit of future public / private development opportunities we want to share the specific reasons for our
withdrawal.
Compliance Cost
Our team would incur more than $200,000 in costs simply to satisfy the Site-A point scoring
criteria. While this is supposed to be the conceptual design phase of the project, the RFP
requirements go far beyond. Specifically, requirements for details on concrete scoring patterns,
lighting, way-finding, expansion joints, stairs, railings, planters, building lobby treatments,
exterior materials, soffit forms, rooftop garden planning materials, and trash receptacles far
exceed industry standards for conceptual design. Typically, this level of design detail evolves
over a period of months, and only after Design Review Board approval to proceed on concept
review for height, bulk and massing.
Lease vs. Sale
Sound Transit will not disclose if the project deal structure will be a lease or sale until after the
competing teams have submitted their proposals. The standard of care required to satisfy our
investors interests includes fully developing deal structures for each transaction type. This
process includes fully understanding and articulating the related impacts on the future sale of our
interest in the property. The significant associated legal and development fees required to plan for
both a sale and lease structure unnecessarily burdens the project and increases the developers
risk.
Retail Constraints
The Wolff Company and the team we have assembled for this project understand retail and
mixed-use development very well. We are concerned the RFP constraints on retail sizes are too
restrictive to allow us to appropriately deliver a retail product that accurately reflects the market
demand or the interests of local merchants and residents. Further, the constraints unnecessarily
challenge the limits of economic viability for the developers pro forma.

Appraisal
The appraisal formula used to value the land does not accurately account for the design
constraints imposed on the developer that increase cost, decrease rentable areas, decrease
residential density and negatively impact financial returns. Not factoring the decretive impact of
the public plaza, pass through, community center and retail constraints results in a land value that
is artificially at the very top of the market. Accepting this flawed methodology would force
developers to trade public interest for economic viability at some point in the design or
construction phase of the project. This is not a trade off we can justify.
We propose future projects ask the developers to calculate, and submit for your evaluation, a
residual land value based on all of the site and program constraints, current market rents, required
yield and IRR, expenses, and construction costs. Another option would be to remove some of the
more proscriptive criteria and allow the design to evolve organically based on market and
neighborhood needs.
Design Review
To be awarded the project, proposers will have to make commitments to Sound Transit that will
subsequently be subject to the Citys full Design Review process. It is not hard to conceive this
could result in conflicting guidance or required changes that significantly impact the project
budget and timeline.
Design Quality
The process, so far as we can determine, awards no points for creative conceptual design or an
overall tasteful, quality aesthetic. Given the importance of this project in shaping the immediate
neighborhood and in many ways the future of Capitol Hill, we believe design should be an
important, and scored, criterion. While extensive, the current technical requirements fall short of
ensuring a pleasing design.
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In closing, we hope this constructive feedback on the process and the challenges it presents for a
developer helps shape future partnership opportunities. We sincerely appreciate the opportunity to have
been a part of this process and wish you the best results as it proceeds.
Very sincerely,

Greg Van Patten

Vice President-Development

Cc: Cathy Hillenbrand