Capitol Center Building gets new development plan

A new development plan has emerged for the Capitol Center Building, one that could see the nine-story structure between Capitol Lake and Budd Inlet become a mixed-use destination with professional offices, apartments, condominiums and a restaurant.

That’s according to Ken Brogan, president of Commercial Property Services of Tumwater. Brogan, who has developed apartments in west Olympia, pitched his plan to The Olympian last week and also has had a conversation with Olympia Community Planning and Development Department officials about his proposal.

Deputy Director Leonard Bauer confirmed Brogan’s initial inquiry, saying the uses that Brogan has outlined for the building are allowed in the area.

Neil Falkenburg, who has worked closely with the current owners of the property as a property manager, also confirmed Brogan’s interest in the property.

“He’s made an offer that has been accepted, subject to his due diligence,” Falkenburg said.

Brogan explained to The Olympian that he intends to close on his purchase of the tower, a nearby one-story building and the parking lot in early 2016.

His plan for the building includes retail businesses on the ground floor, professional offices on the second floor, apartments on floors three through seven, condos on floors eight and nine, and a restaurant on the top floor. The 10th floor now is a mechanical room that was once home to a boiler. The boiler has since been removed, Brogan said.

One of the co-owners of the building, Snohomish real estate developer Jim Potter, died last year. Brogan said he is working with Potter’s estate and one of his partners to buy the property. Brogan identified them as Capitol Center LLC.

“The downtown project is a good challenge for me,” Brogan said. “I want to revive that building into a gorgeous place for people to work, live, shop and dine, all the while admiring our downtown waterfront from 10 floors above the ground in a very nice restaurant. I would have never thought that I would have the opportunity to own and bring back this building that looked so large as a kid.”

Brogan didn’t specifically identify his offer, but he said his total investment in the project, including purchase price, is expected to be $14 million, with financing provided by a regional lender. The property is currently assessed at about $2.4 million.

“I would say that the value (of the property) today versus the value when the seller purchased it has fallen some 40 percent,” he said.

In addition to his apartment projects, Brogan and a business partner, Douglas Gray, made big news in fall 2014 when they expressed interest in buying the former Olympia brewery on Custer Way in Tumwater. They eventually walked away from that deal.

“The first challenge was traffic on Custer Way restricting access to the main brewhouse,” Brogan said about that deal. “In addition to access concerns, we faced a great deal of environmental and regulatory hurdles that made the project cost-prohibitive.”

As for the Capitol Center Building, he said the building has “great bones.”

“Not many buildings in the downtown area offer fantastic views from all sides of the building,” he said.

The Capitol Center Building was built in the mid-1960s and was last occupied by the state Department of Corrections in 2006. Corrections later moved to Tumwater. The building hasn’t been occupied since then, but several development schemes have been pitched over the years, including using the building for condos or a hotel.

There also has been community interest in seeing the building torn down.

Olympia Capitol Park Foundation Chairman Jerry Reilly said it’s perfectly appropriate for those who own the building to protect their investment, but he also said there is strong community sentiment to see the Capitol Center Building removed and replaced with a civic space, such as a park.

That sentiment could become a “wall of resistance” to what the developer proposes, Reilly said.

“Our preference is for the city to acquire it and remove it,” he said, adding that the foundation’s longtime goal has been to protect and perfect views in the area.

“The highest and best use is to perfect that great vista,” Reilly said about the view from the State Capitol to Budd Inlet and beyond.

Bauer, the planning official, said the hotel idea for the property has received land-use approval — an idea that was pursued by the current owners — and building permits have been issued for a seismic upgrade.

Brogan wants to capitalize on the work done to date, he said.

“My proposal is to take away the hotel and replace it with the mixed-use (development),” Brogan said.

The property is zoned as “urban waterfront,” which for a new building in the area would limit its height to 35 feet, Bauer said. But that doesn’t apply to a structure built in 1965, which means it would be treated as a non-conforming structure, he said.

Because Brogan’s vision for the building hasn’t been submitted to the city, Bauer said there’s no way to know if it would pass muster. But if he’s not changing the building in any way, such as its height or width, it may be an allowed use, he said.

This story was originally published September 26, 2015 at 1:00 PM with the headline "Capitol Center Building gets new development plan."