Seattle MSA | Amazon/Microsoft Deals

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Welcome to Ultraground. We send you data on affordable housing deals.

Groundbreaking May 3, 2024 – Bond Closing October 30, 2023 – Amazon App December 12, 2021

Northeast Kirkland (Totem Lake)

Grand Opening September 2023 – ARCH Funding March 5, 2020

North Redmond

KCHA October 14, 2019

King County

KCHA May 22, 2023

Northeast Kirkland

Seattle MSA | Amazon/Microsoft Deals

In the Seattle Metropolitan Statistical Area, two corporate titans, Amazon and Microsoft, have deployed billions in capital to address the region's affordable housing crisis. Their substantial commitments—Amazon's Housing Equity Fund now totals $3.6 billion and Microsoft's Affordable Housing Initiative exceeds $750 million—are not monolithic. They represent two distinct investment theses.

Amazon's approach is one of direct participation. It operates on the premise that the existing affordable housing finance system is fundamentally sound but critically undercapitalized. The Amazon Housing Equity Fund acts as a powerful source of patient, concessionary capital—often described as the "but for" funding—that enables otherwise viable projects to move forward. By providing low-interest loans and grants, and mandating a signature 99-year affordability term, Amazon functions akin to a well-capitalized public housing finance agency or a large-scale philanthropic foundation. Its goal is to inject the necessary fuel into the established engine of non-profit and public-private development to preserve and create long-term community assets. To date, this strategy has resulted in over $900 million invested to support more than 10,000 affordable homes in the Puget Sound region alone.

Microsoft, in contrast, operates from a different premise: that the system itself is structurally deficient, particularly for the "missing middle" or workforce housing segment that earns too much for traditional subsidies but not enough for market-rate rents. Its initiative is therefore focused on financial innovation and market creation. Microsoft acts as a financial engineer and anchor investor, pioneering new capital products like the Middle-Income Tax-Exempt Mezzanine (MIT-E Mezz) program and seeding new investment vehicles like the Evergreen Impact Housing Fund (EIHF). The objective is not merely to fund units, but to build new, replicable financial platforms that can attract and leverage mainstream private capital, creating a sustainable market where one did not previously exist. This approach has supported the creation or preservation of over 12,000 units through an allocation of more than $675 million.  

These initiatives are a direct response to intense public pressure on major tech employers for their perceived role in driving up housing costs and contributing to displacement. This context informs their active participation in local housing policy, where both companies have financially supported ballot measures favoring their public-private partnership models over proposals for new, dedicated payroll taxes on large corporations.

Washington State Housing Finance Commission / ARCH / King County 9/16/22

Ardea at Totem Lake represents the definitive blueprint for national for-profit developers entering the high-barrier Seattle market through strategic non-profit partnership and corporate capital layering. This $66.6 million new construction project creates 170 units of affordable senior housing by leveraging a Joint Venture structure between TWG Development, an Indiana-based for-profit developer, and Imagine Housing, a local Eastside non-profit. Control is bifurcated to maximize financial efficiency and tax benefits. TWG acts as the Administrative General Partner with a 0.009% interest, supplying the balance sheet and construction guarantees, while Imagine Housing serves as the Managing General Partner with a 0.001% interest, providing the requisite non-profit status for property tax exemptions and local service infrastructure.

Financial feasibility relies heavily on the "Amazon Model," utilizing a massive injection of private, low-cost capital to fill the gap left after exhausting traditional bond and tax credit limits. Amazon’s Housing Equity Fund committed $16,150,000 in subordinate debt, structured specifically to bridge the disparity between total development costs of approximately $392,000 per unit and the maximum leverage available through tax-exempt bonds. This subordinate loan is not a grant but a concessionary debt instrument with a 20-year term and a 3.00% interest rate, uniquely split into "hard" and "soft" payment obligations to protect project cash flow.

Income restrictions are set deep to serve vulnerable seniors, with 100% of units restricted to households age 62 and older earning between 40% and 60% of the Area Median Income (AMI). Specifically, 34 units are set at 40% AMI, 85 units at 50% AMI, and 51 units at 60% AMI. Forty-five of these units are further set aside for senior veterans. Permanence of these restrictions is guaranteed by a 99-year regulatory covenant required by the Amazon financing, a term significantly longer than the standard 40-year LIHTC requirement.

The capital stack for this deal involves seven distinct sources, anchored by 4% Low-Income Housing Tax Credits (LIHTC) and tax-exempt bonds. WSHFC issued approximately $34.6 million in tax-exempt bonds to meet the 50% test, generating an estimated $28.3 million in tax credit equity from investor CREA at pricing between $0.93 and $0.96 per credit. The Amazon subordinate loan of $16.15 million sits in a second or third lien position but is critical for feasibility, effectively subsidizing the project at $95,000 per affordable unit. Public leverage includes a $2.27 million Transit-Oriented Development (TOD) loan from King County and a $1.4 million Housing Trust Fund loan from A Regional Coalition for Housing (ARCH).

Amazon's loan terms reveal a sophisticated "Must-Pay" versus "Cash Flow" interest structure designed to protect the asset's coverage ratio. The 3.00% fixed rate is split: 1.50% is "Hard Pay" (mandatory monthly interest payments), while the remaining 1.50% is "Soft Pay," payable only from available cash flow after senior debt service and operating expenses are met. Remaining cash flow is split 50/50 between the borrower and Amazon to pay down principal, preventing unchecked accrual while maintaining operator incentive.

Ardea at Totem Lake delivers 170 units of senior housing in a single seven-story mid-rise building constructed over one level of semi-subterranean parking. The structure utilizes five stories of wood frame (Type V-A) over two stories of concrete (Type I-A) to maximize density on the 0.73-acre site. Unit configurations are efficient, consisting of 91 studios (averaging 381 sq. ft.) and 79 one-bedrooms (averaging 673 sq. ft.).

Design incorporates specific "Cost Efficient Development" features to boost eligible basis for bond scoring. These include a centralized electric heat pump water heating system and the inclusion of structured parking, which qualified the project for a 10% boost in the Total Development Cost limit calculation. The building is all-electric, eliminating fossil fuel use for HVAC and water heating, and includes a rooftop solar array to power common areas.

Infrastructure costs were heavily subsidized through the State of Washington’s "Connecting Housing to Infrastructure Program" (CHIP). The project secured a $1,000,000 CHIP grant specifically to offset high system development charges (SDCs) and utility connection fees levied by the City of Kirkland and Northshore Utility District. Development required significant right-of-way improvements, including replacing existing sidewalks with wider 8-foot sidewalks, adding a new bike lane along 116th Ave NE, and installing street trees and pedestrian lighting. A wetland buffer modification was also processed to accommodate the building footprint, requiring enhancement of 7,341 square feet of buffer area and installation of a stormwater energy dissipator to protect the adjacent wetland from erosion.

Developer: TWG Development

Public Partner: Imagine Housing

Public Partner: A Regional Coalition for Housing (ARCH)

Public Partner: King County

Public Partner: Washington State Housing Finance Commission (WSHFC)

Capital Partner: Amazon (Subordinate Lender)

Capital Partner: Merchants Capital (Construction & Permanent Lender)

Capital Partner: CREA, LLC (Tax Credit Investor)

Capital Partner: Cedar Rapids Bank & Trust (Construction Lender / Bond Purchaser)

General Contractor: Deacon Construction

Architect: Wattenbarger Architects (Architect of Record)

Legal:

Consultants:

Staff Report: Ardea at Totem Lake Documents

Project Plans: Ardea at Totem Lake Plan

Ultraground Visualization: Ardea at Totem Lake Deal Scan

Memorandum of Understanding (MOU): Ardea at Totem Lake MOU/Terms

City of Redmond / WA Dept. of Commerce 7/1/23

The $104.8 million Together Center deal replaced an aging strip mall with a first-of-its-kind, vertically integrated campus. It delivered 280 affordable housing units built above a 49,000 SF non-profit human services hub. Led by a public-private partnership between Inland Group and Horizon Housing Alliance, the project's financing is a complex "hybrid" structure, utilizing two separate tax credit stacks (4% and 9% LIHTC) and multiple public and private funding sources.

Finesse lies in its public funding, which was sourced in a unique way. The City of Redmond, in partnership with ARCH, leveraged its inclusionary zoning program by allowing two other market-rate developers (Mill Creek Residential) to pay a $4.75 million fee-in-lieu rather than build affordable units on-site at their Modera Overlake and Modera River Trail projects. ARCH analysis determined this was an "equal or better" outcome, as the fee-in-lieu (at ~$24,196 per unit) would fund five times the number of units and at much deeper affordability levels (including 40 units at 30% AMI) than the 24 units at 50% AMI Mill Creek would have provided.

Microsoft's $6.8 million investment was a separate capital contribution targeted specifically at the non-profit human services hub component. The City of Redmond also contributed a separate $300,000 grant from its Human Services Fund for this commercial space. This bifurcated financing—one stack for the housing, one for the commercial hub—was critical to the project's success.

The larger stack was a 4% LIHTC transaction totaling ~$75M. This included $37.2 million in tax-exempt bonds (issued via Citibank), $24.5 million in 4% tax credit equity, $4.25 million from ARCH and the City of Redmond (sourced from the fee-in-lieu payments), and an $8.8 million deferred developer fee.

The second stack was a 9% LIHTC transaction totaling ~$29M. This included $19.0 million in 9% tax credit equity, a $5.8 million taxable loan, $2.5 million from ARCH, and a $1.8 million deferred developer fee.

This hybrid 4%/9% approach allowed the developers to maximize equity and layer different funding sources effectively. The non-profit hub (Together Center) was financed separately, receiving a $6.8 million investment from Microsoft and a $300,000 grant from the City of Redmond's Human Services Fund.

Infrastructure costs, specifically system development charges (SDCs), were subsidized by a separate state program. The Washington State Department of Commerce, through its Connecting Housing to Infrastructure Program (CHIP), provided a $435,938 grant to the City of Redmond. This grant was a direct reimbursement to the City for the $435,938 in SDC waiver fees that Redmond had approved for the Together Center project. This state-level program effectively paid the project's SDC bill, removing a significant barrier to development.

The project delivered 280 affordable rental units with a deep affordability mix: 40 units at 30% AMI, 40 units at 50% AMI, and 200 units at 60% AMI. This product is co-located with a 49,000 SF non-profit campus on the ground floor, which houses multiple human service providers, creating a "one-stop shop" for residents and the broader community. The project is required to maintain its affordability for a minimum of 25 years per the CHIP grant, though the ARCH/City covenants (per the fee-in-lieu analysis) secure it for 50 years.

Developer: Inland Group

Developer: Horizon Housing Alliance

Fee-In-Lieu Partner: Mill Creek Residential Trust

Owner / Non-Profit Partner: Together Center

Public Partner: City of Redmond

Public Partner: Washington State Department of Commerce

Public Partner: A Regional Coalition for Housing (ARCH)

Capital Partner: Microsoft Corporation

Capital Partner: Citi Community Capital

Consultant: ISU TRC Insurance

Staff Report: Together Center Documents

Project Plans: Together Center Plan

Memorandum of Understanding (MOU): Together Center Terms

King County Housing Authority Board 11/19/2018 – 10/14/2019

Microsoft and a public housing authority (KCHA) made a significant move to acquire and preserve 1,029 units of at-risk affordable housing in a single $280.5 million portfolio deal. The seller was the International Association of Machinists (IAM) Building Association. The deal's mechanics demonstrate a novel "Tech-to-HA" partnership model, where private corporate capital was used to empower the public agency to act as a large-scale, competitive developer.

The core challenge was speed. To compete with market buyers, KCHA executed a two-step financing strategy.

First, KCHA secured short-term, market-rate bridge financing from KeyBank to fund the immediate acquisitions. This was authorized through a series of board resolutions, including $70 million for Riverstone (Res 5614), $75 million for Kendall Ridge (Res 5624), and $66 million for Emerson (Res 5627). These were 364-day "Non-Revolving Line of Credit Revenue Notes" with variable interest rates tied to LIBOR, allowing KCHA to close quickly.

Second, KCHA assembled the permanent financing to take out the KeyBank bridge debt. This is where the partnership finesse is most evident. KCHA secured a $60,000,000 "Affordable Housing Preservation Tax-Exempt Housing Revenue Note" directly from Microsoft Corporation. Simultaneously, KCHA layered in significant public capital, including a $13,000,000 loan from King County's Transit-Oriented Development (TOD) fund for the Riverstone acquisition and a $5,800,000 TOD loan for Juanita View.

This structure allowed KCHA to replace expensive, variable-rate bank debt with extraordinarily cheap, patient capital from both its tech and public partners, ensuring the long-term viability of the preservation project.

The financing is a masterclass in blending public and private capital. The primary instrument for the Microsoft partnership was the $60,000,000 Note issued by KCHA in October 2019. The terms of this note are exceptional: 1.0% per annum simple interest, with interest-only payments paid quarterly for the entire 15-year term (maturity in 2034). The Note Purchase Agreement confirms that this was a direct private placement to Microsoft as a "qualified institutional buyer," purchasing the note for its own account, not for public resale.

This $60M in private capital was stacked directly with public loans that offered similarly favorable terms. The $13,000,000 King County TOD loan for Riverstone also carried a 1.0% simple interest rate with interest-only payments, but for a much longer 50-year term (maturing in 2072). The $5.8M TOD loan for Juanita View had identical 1% interest-only, 50-year terms.

In exchange for the $13M King County loan, KCHA placed a 50-year affordability covenant on Riverstone, binding 154 units (50% of the total) to households at or below 80% of AMI. The Juanita View loan similarly restricted 47 units (50%) to 80% AMI for 50 years. While KCHA paid lender fees for the KeyBank bridge loans and Microsoft's legal fees, the ability to secure $73M+ in permanent financing at a 1% interest-only rate demonstrates the powerful financial advantage of this HA-led partnership model.

The portfolio consists of five 1970s and 1980s-era garden-style apartment complexes. The primary driver for the acquisition, as stated in KCHA's resolutions, was the preservation of existing Project-Based Section 8 contracts, securing housing for extremely low-income residents in high-cost, transit-oriented areas. The properties (Riverstone, Kendall Ridge, Emerson) were explicitly targeted for their proximity to current or future light rail stations, locking in affordability in locations at high risk of displacement. The 180-unit Kirkland Heights property, also part of this acquisition, was later deemed "functionally obsolete," leading KCHA to pursue a full demolition and 276-unit new construction redevelopment using this site as the land base.

Developer / Owner: King County Housing Authority (KCHA)

Capital Partner: Microsoft Corporation

Staff Report: KCHA / MSFT 5-Property Acquisition

King County Housing Authority Board 5/22/23

Kirkland Heights is the second phase of the HA-Led model: redevelopment. KCHA, having acquired the "functionally obsolete" 180-unit Kirkland Heights property in the 2019 Microsoft portfolio deal, is now acting as the lead developer for a full demolition and new construction of 276 units.

KCHA, as the landowner, formed a new entity, "New Kirkland Heights LLLP," with itself as the sole General Partner. KCHA then executed a 99-year ground lease to this new LLLP. This structure allows KCHA to control the project while bringing in a private tax credit equity investor, RBC Community Investments, LLC, as the Limited Partner.

Affordability is not achieved via a single mechanism but by stacking four distinct layers of public financing, each with its own long-term regulatory covenant. This creates a deeply and broadly affordable project, but also a complex, overlapping compliance burden.

The capital stack is a clear example of leveraging multiple public sources. First, KCHA issued $114,615,000 in tax-exempt revenue bonds (Series 2023A1/A2/A3) and loaned the proceeds to the LLLP. This bond issuance is governed by its own 15-20+ year KCHA Bond Regulatory Agreement.

Second, the bonds generated 4% LIHTC equity from RBC. This equity is governed by a 40-year Extended Use Agreement with the Washington State Housing Finance Commission (WSHFC), requiring 100% of units to utilize Income Averaging (with an average AMI at or below 60%) and reserving 10% of units for Households with Disabilities and 10% for Large Households. Third, the original $11.2M King County TOD loan was amended to add $1.075M in CDBG funds. This combined $12.275M in county capital is governed by an Amended and Restated Covenant requiring 138 units (50%) be restricted to 80% AMI for a 50-year term (until 2072). Fourth, A Regional Coalition for Housing (ARCH) provided a $1,056,300 loan with a 1.0% interest rate and 55-year term. This loan imposes its own 55-year covenant (until 2078) that also requires 100% Income Averaging and mandates that 106 units be operated with Section 8 assistance.

The project is a full demolition and new construction of 276 apartment units, replacing 180 older units. The product is 100% affordable, utilizing Income Averaging to serve a range of households from 30% to 80% of AMI. The unit mix includes one, two, three, and four-bedroom units, driven by the WSHFC covenant for 28 large household units. 106 units are required to accept Section 8, and 28 units are set aside for residents with disabilities.

Developer / Owner: King County Housing Authority (KCHA)

Legal Counsel for Developer / Owner:

Legal Counsel for Capital Partner (Investor Limited Partner):

Bond Counsel (Document Preparer):

Public Partner: A Regional Coalition for Housing (ARCH) / City of Bellevue

Public Partner: King County (Dept. of Community & Human Services)

Public Partner: Washington State Housing Finance Commission (WSHFC)

Trustee: The Bank of New York Mellon Trust Company, N.A.

Capital Partner: RBC Capital Markets

Staff Report: Kirkland Heights Documents

Memorandum of Understanding (MOU): Kirkland Heights Terms