Big developer backs out of $25M South Lake Union land deal, blaming coronavirus downturn

The South Lake Union mini-empire envisioned by Vancouver, B.C., real-estate developer Onni Group just got a little smaller.

Onni, perhaps best known to some Seattleites as the firm that wanted to raze the Showbox to build a residential tower, has said no thanks on a $25 million deal to purchase the land at 121 Boren Avenue North, on the site of the former 13 Coins 24-hour eatery (and next to The Seattle Times offices). The property is across the street from two blocks where Onni is building a huge complex of residential towers, retail and office space.

Nine months ago, Onni paid owner H5 $1 million for an exclusive option to purchase the parcel, which is entitled for a 40-story apartment building, according to a breach-of-contract suit filed by H5 in federal court here Wednesday.

Denver-based data center operator H5 alleged in the filing that Onni, after paying an additional $1.5 million in December to secure the property, is now seeking return of the money. H5 says the payments are non-refundable.

Onni did not respond to questions about the suit or about its other property interests in Seattle.

The Boren Avenue tower would have joined Onni’s two massive South Lake Union projects, currently underway. At 1120 Denny Way, the company is building twin 41-story residential towers. One block north at 1120 John Street, Onni is transforming the former Seattle Times headquarters into nearly one million square feet of office space.

Onni, in an April 27 letter to H5, blamed its decision to pull out of the Boren Avenue deal on the “unforeseeable, unprecedented and material consequences of the COVID-19 pandemic.”

“The global COVID-19 pandemic has wreaked havoc on virtually every corner of the United States economy,” wrote Onni attorney David Stone of the Los Angeles firm Allen Matkins. “The transaction at issue here was not immune.”

Coronavirus has clobbered the construction industry. Total building starts in the Seattle area were down 68% in April, compared to 2019, according to Dodge Data & Analytics, with nonresidential construction taking an 86% hit.

However, there are indications that Onni’s woes predate the pandemic.

The Denny site is running roughly 15 months behind schedule, according to construction workers. The project was supposed to finish this summer, but it’s stuck at Floor 40 while Onni reconfigures the penthouses, workers say.

The company laid off seven Seattle employees March 21, before the statewide stay-at-home order that paused nonessential construction work for nearly a month.

Onni also owns 1411 Fourth Avenue in Seattle. Eleven of that tower’s 15 stories are occupied by WeWork, which has missed rent payments and sought to renegotiate lease terms following the double-whammy of a catastrophic attempt at an initial public offering and the coronavirus pandemic.