Unlimited Net Worth: Former military homes at Fort Lawton in Seattle’s Discovery Park stand to net developer over $10 million profit

Home in Montana Circle

In February 2015, the US Navy and a subsidiary of Cleveland-based Forest City Enterprises sold the historic homes at Fort Lawton for $10.5 million to Rise Properties Trust, a Canadian based firm that invests in Seattle area real estate.

Fort Lawton, a collection of 26 homes spread across 14 buildings, sits in the Magnolia neighborhood in the middle of the scenic Discovery Park, Seattle’s largest park with 534 acres and boasting views of the Puget Sound and the Olympic and Cascade Mountains. The 26 homes sit in two distinct areas, one referred to as Montana Circle and the other as Officer’s Row. Homes in Montana Circle offer 2,000 sq. ft., while homes in Officer’s Row have 4,000 - 6,600 sq. ft.

Montana Circle and Officer's Row in Discovery Park

According to the Wall Street Journal, they anticipated bidding for the 26 homes to start at $15 million in 2012, with estimates ranging from $14 – $23 million. Ultimately, Rise Properties Trust snatched up the entire property for $10.5 million in February 2015, well below the expected starting bid price.

When Rise purchased the property, many of the homes were in disrepair and in need of substantial renovations. Rise is investing an additional $200K on average in each home in Montana Circle and $400,000 in Officer’s Row on construction, for a total of around $7.8 million. This brings Rise’s total investment to $18.3 million on the property, once they complete all renovations.

With an average sales price of $850K for Montana Circle and an estimated sales price of $1.5 million for Officer’s Row, Rise will see revenue of over $30 million. Rise stands to earn close to $12 million after removing the costs to purchase the property and renovate the homes. With sales, marketing, admin, taxes, salaries, and other fees, their profit will likely be lower, potentially around $6 - $10 million. At the end of the day, an $18 million investment in February 2015 for a potential $10 million return by September 2016 is quite impressive.

On Rise’s web site, they call out a 17.38% annual return (since Jan 24, 2012) since the inception of their fund, which is slightly better than the market as a whole. These homes will certainly contribute to continuing this rate of return. Like with any investment, there is risk for Rise, such as a slower housing market. They deserve to be compensated for taking on the risk and they appear to have a fairly strong margin of safety.