Pill Hill property sells for a bundle

Today's real-estate quiz:

What does an acre of First Hill cost these days?

A) $4.4 million.

B) $15 million.

C) $25 million.

Did you guess A? That's the value placed on the property at 1000 Madison St. by the King County Assessor's Office.

How about B? You'd be in good company. That's what one potential buyer estimated the property would be worth, based on its location and development potential.

C? Ding-ding-ding, you got it. After a spirited bidding war involving local and national investment groups, Virginia Mason Medical Center has emerged as the buyer for 1.2 acres in the heart of "Pill Hill" — the nickname for First Hill because of its preponderance of hospitals, clinics and doctors' offices.

The agreement is still being worked out and the price hasn't been disclosed, but people familiar with the property say it will be around $25 million.

For Virginia Mason, it was a rare chance to buy a nearly a city block on the southern edge of its 7.3-acre campus. When the property came up for sale about six weeks ago, the medical center staff and board quickly agreed to pursue it, said Todd Johnson, Virginia Mason's vice president for facilities.

"This opportunity, when it's gone, is gone for many generations," he said. "It was clear that we needed to be involved."

The sale is scheduled to close early next year. Then, Johnson said, the medical center will begin a lengthy process of deciding how to use the land and obtaining city approval to expand its campus boundaries.

The deal underscores Seattle's gung-ho real-estate market.

The price works out to almost $500 a square foot for the land.

By comparison, land in the downtown office district, usually the most expensive in Seattle, goes for $300 to $400 a square foot, the assessor's office and real-estate brokers said.

The property, at the northwest corner of Boren Avenue and Madison Street, includes the Chasselton Court Apartments, neighborhood shops and eateries and a parking lot. It's zoned to permit high-rise residential or commercial development, and located on a hillside near I-5 that would afford great views for the top floors.

"Really, the combination was very intriguing, because the potential development could go three or four directions," said Eric Leland, development manager at Sabey Corp. Leland said he looked at the property and estimated its value in the $15 million range, but decided not to bid when it became clear the price was headed over $20 million.

The property is owned by Mad Boar Investments of Seattle, according to county tax records.

"The level of interest from developers far exceeded our expectations," said Craig Kinzer of Kinzer Real Estate, who along with Meriwether Partners handled the marketing of the property. "Especially those from out of town that want to create a beachhead in Seattle."

But in the end, the buyer came from across the street. Don Audleman, a principal at Seattle's Capstone Partners, one of the local bidders, said that wasn't surprising.

"They probably see their way to a higher value because of the accretion of their campus," he said. "They've been landlocked for a long time."

Assuming the deal goes through, it will mark the biggest addition to Virginia Mason's campus since 1980.

"We've been incrementally growing here on First Hill since we started in 1920," Johnson said.

"This is our center of operations, and if we're successful in closing this deal, it really underscores that, and sets us up for the next 85 years."

Tom Boyer: 206-464-2923 or tboyer@seattletimes.com