Hospital's conditions include a "free 20-year option" on purchase of Laurelon at 2008 price

Laurelon residents recently received detailed terms of the proposed sale of Laurelon Terrace condominiums to the Hospital. Relatives of a Laurelon resident contacted us with their concerns. In their words:

1. Why is Laurelon granting a FREE 20-year option (indeed why even the free 5 year “closing date extension”)?

This is ridiculous; options cost money and should be paid for at the time the option is granted (which, as we read it, would be upon the execution of the Purchase and Sales Agreement; although there should really be a separate Grant of Option Agreement). The cost for obtaining an option varies in connection with the length of the option period and with what the later sales price is agreed to be. That is, the cost of the option is highest when the exercise period is long and the sales price is similar to what would be offered for a present purchase; and would be lowest where either the exercise period is short, or where the later sales price is significantly higher than what would be offered for a present sale.

Here, the residents are basically granting a free option for a LONG, LONG option term that sets the later sales price at the exactly the same amount the hospital is willing to pay as of the original closing date! If for any reason the original closing date (between Jan 4 and Jan 15, 2010) is not met, the hospital would get a return of its earnest money, but would still have about 19 years of an option at exactly the same terms. For this they would have paid nothing, and the residents will have received nothing, except that their property would be encumbered by the option. Why is this not worth something; something substantial? The hospital would be getting a free 20 year guarantee of the same sale price they are offering now; a price which as of today may be a premium, but which could turn out to be a huge bargain 15 to 20 years in the future! The hospital should either be paying a fairly large up-front sum to secure that option, or the later sale price should increase in later years of the option period until exercised (e.g., sales price of say $93 million in year 1 of the option period, and going up 5% compounded per year from then forward). The Grant of Option amount should be completely non-refundable, completely separate from the property sales price, and should be payable upon execution of whatever instrument conveys the Option (which as of now is the PSA). What was/is the consideration for granting the option(s)? Who priced this option? If the property is worth $93 million on Jan 4, 2010; what would it be worth 20 years later?

2. Earnest money and its refundability

• Why is the earnest money deposit so low ($250,000 total)? We would expect that the earnest money on a $93 million purchase would be more like $4.5 million.
• Why is the earnest money completely refundable if all purchase conditions are not met, even those not under the control of Laurelon? It seems that at least a substantial portion of the deposit should be non-refundable if/after Laurelon gets the 80% ratification and 50% support of street vacation accomplished. The Hospital started this entire process, upsetting many residents, taking up a lot of their time and attention, and keeping them in limbo to a large extent as to their future. Yet Laurelon owners have very little influence on most of the conditions for closing; and if any condition, even those not under Laurelon’s control, is not met, the residents get exactly $0 for being put through this circus.

3. Not enough Notice Time for Laurelon residents to arrange affairs:

• When would the residents know whether all the Conditions of Closing are met or waived? As it appears that the residents must be out of the units by Closing Date, how are they to prepare, when there are so many conditions over which they have no control? Can they get a minimum of 4 months notice that all conditions are met? Can they get the right to stay in the unit up to 4 months after closing free of charge?
• If for any reason the Sale does not close on the closing date, but instead is either “extended” (for up to 5 years!!!) or is re-set due to an exercise of Buyer’s option (up to 20 years!!!), how do the residents know when such a later closing would occur; and how do they plan?

Reminder: Next CAC Meeting Tuesday Sept 23rd, 6pm

September 23, 6 – 8:30 p.m. Laurelhurst Elementary School. 4530 46th Ave N.E. According to the Hospital, "The focus of the meeting will be sustainability."

Does this look like 'maintain[ing] existing view planes' to you?

Our previous post mentioned the PDF document contributed yesterday by Bryant neighbors. Today, these neighbors sent us their words:

The Hospital claims in a ‘Good Neighbors’ mailing received on 9/7/2008 that the Laurelon Terrace Expansion is a “Win for Children’s and the Community” and claims that it “...takes advantage of existing slope...to maintain existing view planes”.

We disagree with that statement and feel that view planes will be profoundly affected for all neighbors to the north of the Hospital. Most dramatically, Bryant's outlook to Mount Rainier and Lake Washington will be blocked by the Hospital and taken away from thousands of residents. A detail of the southern corner of the Hospital and the expansion:A panoramic view from the northwest of the Hospital during summer 2008 (note the view of Mount Rainier and uninterrupted ridgeline):A panoramic view from the northwest of the Hospital proposed Alternative 7 (generated using ZGF drawings):
These images were rendered by a Photoshop professional who teaches 2D digital rendering. They were created using the Hospital's own drawing, sections, and other views of Alternative Seven, combined with a Bryant neighbor's panoramic images. Click on the images to see their details:

Bryant Outlooks + CAC Meeting Reminder: Tuesday, September 9th.

CAC Meeting Reminder: According to the Agenda, Tuesday's meeting will start at 6pm at the Giraffe Entrance with "an optional tour of the buffer (setback) areas" for 40 minutes before moving inside to the Hospital's Wright Auditorium.

Bryant Outlooks: This revealing document just arrived from Bryant neighbors. An excerpt:
A Bryant neighbor and "Photoshop professional who teaches 2D digital rendering" was disappointed that the public did not have access to before/after Bryant images during the DEIS comment period. Kudos to our neighbor for using personal time and expertise to produce carefully-scaled renderings of projected Bryant outlooks.