HomeMy WebLinkAboutReg 2025-12-15 Item 7C - Agreement - Fire Station 51 Purchase & Sale Agreement with Sound Generations for $5,000,000COUNCIL AGENDA SYNOPSIS
Initialr
Meeting Date
Prepared by
Mayor's review
Council review
12/15/25
B)M
ITEM INFORMATION
IrEMNo.
7.C.
STAFF SPONSOR: BRANDON MILES
ORIGINAL AGENDA DATE: 12/15/25
AGENDA ITEM TITLE Disposition of Old Fire Station 51 (444 Andover Park East)
CATEGORY ❑ Discussion
Mtg Date
Motion
Mtg Date
12/15/25
E Resolution
Mtg Date
❑ Ordinance
Mtg Dale
E Bid Award
Mtg Date
E Public Hearing
Mtg Date
❑ Other
Mtg Date
SPONSOR ❑ Council n Mayor ❑ .Admin Svcs ❑ DCD ❑ Finance ❑ Fire ❑ P&R ❑ Po/ice ❑ PW
SPONSOR'S
SUMMARY
Authorize the Mayor to Execute a Purchase and Sale Agreement for old Fire Station 51,
located at 444 Andover Park East with Sound Generations and set a minimum purchase
price of $5 million.
REVIEWED BY
❑ Trans&Infrastructure Svcs ❑ Community Svcs/Safety ❑ Finance & Governance ❑ Planning & Community Dev.
❑ LTAC ❑ Arts Comm. ❑ Parks Comm. ❑ Planning Comm.
DATE: N/A COMMITTEE CHAIR: N/A
RECOMMENDATIONS:
SPONSOR/ADMIN. N/A
COMMITTEE N/A
COST IMPACT / FUND SOURCE
EXPENDITURE REQUIRED
$N/A
AMOUNT BUDGETED
$N/A
APPROPRIATION REQUIRED
$N/A
Fund Source: N/A
Comments: The City will receive approximently $4,725,000 in general fund revenue
MTG. DATE
RECORD OF COUNCIL ACTION
12/15/25
MTG. DATE
ATTACHMENTS
12/15/25
emo, dated December 9, 2025
Dashboard of Offers
197
City of Tukwila
Thomas McLeod, Mayor
INFORMATIONAL MEMORANDUM
TO: Tukwila City Council
FROM: Brandon J. Miles, Director, Strategic Initiatives and Government Relations
CC: Thomas McLeod, Mayor
DATE: December 9, 2025
SUBJECT: Disposition of Old Fire Station 51
ISSUE
Authorize the Mayor to Execute a Purchase and Sale Agreement for old Fire Station 51, located
at 444 Andover Park East with Sound Generations and set a minimum purchase price of $5
million.
BACKGROUND
On June 16, 2025, the City Council passed Resolution No. 2119, regarding the disposition of old
Fire Station 51. Specifically, the Resolution provided the following direction to staff:
1. Declared both the real and personal property of old Fire Station 51 as surplus;
2. Authorized an alternative process to receive offers for the property and authorized the
Mayor or designee to negotiate;
3. Required the Mayor or designee to report to the City Council on a recommended
purchaser for the property; and
4. Authorized the City to hire a broker to list, market, and conduct other real estate
brokerage activities for the City of Tukwila.
Included with the Resolution as an attachment was a staff report, dated May 13, 2025, that
outlined criteria the City could use in considering offers.
Brokers and Offers
The City retained Alan ("Al") Robertson and Will Schmidt of NAI Puget Sound Properties to
serve as the City's brokers for the property. The broker's estimate for the value of the property
was $4.2 million. The City's brokers began to aggressively market and promote the property for
sale, as follows:
• 8/1/2025 — NAI Puget Sound Properties received the mutually executed listing
agreement to begin the sale process on behalf of the City of Tukwila.
• 8/1/2025 through 9/6/2025 — Physical marketing of the property began by taking the
offering memorandum to surrounding tenants and property owners.
• 8/25/2025 — "For Sale" sign was installed on the property.
• 8/25/2025 — Email Campaign began to the commercial real estate brokerage community
via internal databases utilized to market properties.
• Social Media posts made via Linkedln generating 2,968 views and reaching 1,663
members. City staff also posted the listing on their Linkedln pages.
• Property was listed on all primary and industry standard listing services such as, but not
limited to: CoStar, Commercial Brokers Association (CBA), Crexi, Buildout via NAI Puget
Sound Properties website, Property Shark, etc.
• Phone calls made to surrounding tenants, property owners, investors, developers, etc.
• There were several inquiries and leads generated from all aspects of marketing.
198
INFORMATIONAL MEMO
Page 2
The property was exposed to the market for 93 days, and a total of 11 groups toured the
property. The City received five competitive offers that were near or significantly above the
broker's estimated value of $4.2 million. A dashboard comparing the offers is attached with this
memo. All groups were given an opportunity to revise their offers and all resubmitted higher
offers to the City than they initially provided.
DISCUSSION
Staff and the broker ranked the offers as follows:
1. Sound Generations (non-profit providing various social services): $5,000,000
2. Buyer C: $4,315,000
3. Buyer D: $4,250,000
4. Buyer E: $4,050,000
5. Buyer B: $5,000,000
A dashboard that provides a high-level overview of the five offers is attached with this memo at
attachment "A".
Based on the criteria in Resolution No. 2119, the strongest offer submitted was from Sound
Generations, offering $5 million for the property and a quick closing in 2026. Sound
Generations is a 501(c)(3) non-profit corporation, which provides a variety of human services to
the City and King County. Sound Generations is proposing to use the property for its Meals on
Wheels program, transportation, minor home repair program, general office use, and vehicle
storage. Sound Generations provided a letter from a reputable community loan fund for the
financing and is providing earnest money consistent with industry standards.
Overview of Criteria Provided In Resolution 2119
Highest Financial Value to the City
Staff considered various factors regarding the financial impacts of the property to the City. This
includes both the sales price and future tax revenue.
199
INFORMATIONAL MEMO
Page 3
200
Property Taxes to the City After Disposition
The following outlines the anticipated property taxes from the property if it is sold. The actual
amount will vary based on the construction type of use of the property. Additionally, two of the
entities may seek property tax exemption for the property.
Sound
Generations
Buyer C
Buyer D
Buyer E
(Hotel)
Buyer B
Estimated
After Sale
Value
$7,000,000
$10,0000
10,0000
$15,000,0001
$15,000,00
Total
Property
Taxes
Collected
(All),
$10.90908
per $1,000
$76,363
$109,090
$109,090
$163,363
$163,636
City's portion
of the
collected
property tax,
$1.19 per
$1,000
$8,330
$11,900
$11,900
$17,850
$17,850
Exempt
Organization?
Yes.
No
No.
No.
Yes.
Net Present
Value2 of
property tax
collected over
30 years,
assuming a
1 % increase
per year and
using a 10%
discount rate.
Exempt
$94,590
$94,590
$135,129
Exempt
' The Tru by Hilton at 395 Corporate Drive is valued at $13,179,200 by the King County Assessor. This is the
best comparable property to what could go on the old Fire Station property. The Element at 515 Industry Dr.
is valued at $32,285,100. However, this property is over 2.5 times the size of the City's fire station property
and the hotel is much larger than what is proposed on the City's property.
2 Net present value (NPV) is used to value future cash flow in today's dollars. A discount rate is used for the
future cash flow. The basic premise being that a dollar today is worth more than a dollar tomorrow.
INFORMATIONAL MEMO
Page 4
Sales Tax After Disposition
Sound
Generations
Buyer C
Buyer D
Buyer E
(Hotel)
Buyer B
Estimated
Taxable
Retail Sales
Negligible
Negligible
Negligible
$5,064,3753
Negligible
City of
Tukwila Sales
Tax
Collection
Only (.00964)
Negligible
Negligible
Negligible
$32,722,
starting in
2029 once
the hotel is
up and
running.
Net present
value of sales
tax collected
over 30
years,
assuming a
3% increase
per year and
using a 10%
discount rate.
Negligible
Negligible
Negligible
$432,630
Negligible
Total Financial Value of Offers of the City
Sound
Generations
Buyer C
Buyer D
Buyer E
(Hotel)
Buyer B
Present
Value of
Price to the
City.
$5,000,000
$4,315,000
$4,250,000
$4,050,000
$4,416,6045
Less
Brokerage
Fee6
($275,000)
($215,750)
($212,500)
($202,500)
($250,000)
Net Present
value of
property tax
collected over
Exempt
$94,590
$94,590
$135,129
Exempt
3 Working with Explore Seattle Southside, the City estimates the revenue for a 100-unit hotel as being as
foltows 100 rooms*75% occupancy*average rate of $165*365 days=$4,516,875) For incidentals the City is
assuming $547,500 (100 rooms * 75% occupancy *$20 per room * 365 days=$547,500). Total taxable sates in
first year of full operation would be $5,064,375. Assuming first year of full operation would be 2029.
4 Assumes adopted increase from HB 2015.
5 Using a 10% discount rate and applying it to three years of payments to the City.
62.5% seller's broker and 2.5% buyer's broker. Industry standards for commissions.
201
INFORMATIONAL MEMO
Page 5
30 years,
assuming a
1% increase
per year and
using a 10%
discount rate.
Net present
value of sales
tax collected
over 30
years,
assuming a
3% increase
per year and
using a 10%
discount rate.
Negligible
Negligible
Negligible
$432,630
Negligible
Total Present
Value to City:
$4,725,000
$4,099,250
$4,037,500
$4,415,259
$4,166,604
It should be noted that the hotel development could take several years to open and during that
time, even if the City closed on the property, the City would be subject to market risk regarding
the forecasted tax collections. Additionally, there is concern that revenue from a new hotel might
not actually be "new" revenue, but simply redirection of business from existing hotels within the
City. The City currently has sufficient number of hotel rooms and occupancy, even during peak
months, is not going above 90% and the average daily rate never goes about $180 per night.
Additionally, hotels generate a significant number of calls for service for police and fire
compared to warehouse, office, and warehouse operations.
Hotel Occupancy and Revenue Per Occupied Room in Tukwila
Year 2025
Year
Revenue Per Occupied
Occupancy Average Daily Rate Room
January 31 61.2' 117.93 72.14
February 28 69.5 123.67 85.98
March 31 72.2 122.61 88.49
April 30 74.7 ; 124.86 93.27
May 31 , 76.3 ? 140.10 106.86
June 30 1 82.0 } 172.21 141.28
July 31 86.5 179.61 } 155.42
August 31 85.2 r 172.17 146.71
September 30 ] 81.5 153.91 125.47
2024
October 31 73.2
November 30 66.0
December 31 60.1
135.18
119.79
111.82
99.00
79.06
67.21
202
INFORMATIONAL MEMO
Page 6
Closing
All offers have typical closing periods and will provide the full purchase price at closing, except
for the offer from Buyer B. The offer from Buyer B is asking the City to finance the deal over
three years. This is not a viable option because the Washington State Constitution prohibits any
local government entity from lending money or credit to a private party, except for the necessary
support of the poor and infirm (Art .VIII, Sect. 7). Also, the actual value of the transaction in
today's dollars is reduced if the City receives the $5 million over three years versus receiving
the funds next year.
Past Performance by the Buyer
Sound Generations, Buyer C, Buyer D, and Buyer E have experience with development. It's
unclear what experience Buyer B has in development.
Appraisal
May be conducted at a later date. However, the City may not need an appraisal given that we
have received multiple offers that are in a consistent price range for the property. Given that the
property has been exposed to the market for 93 days, we can reasonably conclude that the
offers provided to the City reflect the fair market value of the property.
Zoning Standards
All of the uses, expect for the hotel, appear to be allowable uses in the zone. The City could
change the zoning to allow the hotel use, but the outcome is not certain, it would take
considerable time to accomplish this and the City risks losing the other buyers. The buyer would
have the ability to walk up until the City modifies the zoning or allows it via a development
agreement.
RECOMMENDATION AND NEXT STEPS
The offer from Sound Generation represents the best value overall to the City. Even forecasting
future cash flow from a potential hotel, the net present value of the Sound Generations' offer is
higher than the purchase price and the future tax collections from a hotel.
Staff is recommending that the Council authorize the Mayor to negotiate and execute a final
purchase and sale agreement with Sound Generations, for a minimum price of $5 million,
subject to approval by the City Attorney.
ATTACHMENT(S)
• Dashboard of Offers
203
Attachment "A"
BUYER
Sound
Generations
Buyer A
PURCHASE PRICE $5,000,000.00
EARNEST MONEY
FINANCING
FEASIBILITY
TIMELINE
CLOSE TIMELINE
$200,000.00
Yes
Letter from
Enterprise
Community
Loan Fund, Inc,
approved up to
$6,000,000
90-days & two (2)
30-day extensions
with $10,000
enhanced deposit,
30-days
Buyer B
$5,000,000.00
:0.00
Yes - Payments of:
$1,500,000 upon closing
$1,200,000 12-months
after closing
S 1,300,000 24-months
after closing
Rernaining balance 36-
months after closing
30-days
60-days
Buyer C
000.00
$200,000.00
AN cash paid upon closing
45-days
15-days
Buyer Q
S4,250,000.00
$50,000.00
All cash paid upon closing
60-days
15-days
Buyer E
$4,050,000.00
$100,000.00
Ail cash paid upon
closing
60-days
However, wants city to
permit hotel
development in zone
prior to waiving due
diligence,
45-days
Attachment "A"
USE
Relocation for ittrleals
on ',Pt/heels,
Transporlatierl, and
f‘trlinor Home :Repair
prztgrams,
Installation of
commercial Ititchert,
argenel le veer erdoahni t o_capl fegrf elittt t°(t cur as) ( ge3 ee)
Use for retail spaces,
daycare and early
learning center, in -door
soccer and futsal fields,
non-profit office space,
ride share office
headquarters.
comop:nic:Isigphatcterufcokr 1,0:bisrteicpsair d eryreo isopoemc tei vo te a n qte nl eaanst: hRo tffedi vHffol ot ePilkts eadrte 'loot
maintenance, general storage looking to be in Tuktryila permitted in the zone.
permitted Prithin TIJC-111,1P while conforming with City ha‘re to
zr)nind„ carrent TUC-WP zoning, change zoning