Mechanism

for

Community & Connection in Manufacturing

Equinox Studios: A Community-Driven Model for Affordable Arts & Manufacturing Spaces

Equinox Studios has one of the more unique profiles among the projects featured in this report. The Equinox “mother” company, which owns all three of the cooperative’s buildings, is an LLC owned by Sam Farrazaino and all of the tenants together as a Social Purpose Corporation.

“It’s a complicated structure,” said Farrazaino. “After looking at a bunch of different ways to do it, we settled on stock ownership as the best way because it takes any burden and liability off the tenant.”

Farrazaino, current tenants, and past tenants make up the cooperative for-profit model behind Equinox. Farrazaino was able to purchase the buildings in his Seattle neighborhood through a combination of city, philanthropy, and bank loans. He also took equity out of his initial building to purchase additional buildings.

It’s important to note, however, that Equinox’s first building was purchased before last decade’s recession, and right when real estate values in Seattle started booming. In 2006 they sealed a five-year lease-to-own deal that put the price tag of their first building at $1.9 million. That’s how much they purchased it for in 2011; today it is worth nearly $6 million.

Also to their advantage: the building’s prior owner agreed with Equinox’s mission, which has not changed to date. Farrazaino wants to provide affordable real estate to artists at risk of being pushed out of Seattle. “That was the lease, where I take care of everything and just send him a check, do any maintenance, any repairs. It was low management for him [the building owner]. That inspired him because he didn’t want to be a landlord in the property management sense.”

Farrazaino brought with him 10 tenants from other mission-driven real estate projects he’d been a part of in the past. With the purchase of the building Equinox inherited a metal fabrication company as a tenant. The tenants’ rent payments put the project’s income over the monthly lease rate, and they used the extra money to build out individual spaces for up to 38 different tenants.

“We were able to grow the equity in the building by taking it from a shell building into 38 different income producing spaces that were much smaller,” said Farrazaino. The new appraised value, plus financial help from the city and foundations, gave them the footing they needed to lease and renovate the two other buildings in their portfolio.

Property values have since skyrocketed in the neighborhood, like they have in the rest of Seattle. “For future expansion we’ll need to find a way to either subsidize the rents or potentially hold one or more new buildings more at market value to offset others as part of a portfolio that supports the mission,” said Farrazaino. “Somebody paying higher rent in one can help offset some of the lower rents in others.”

While market dynamics in the neighborhood helped them at the start, Farrazaino said he thinks it's their tenant ownership model, which is part of a broader community first mentality, that has made the project a financial success.

“The tenant body is really instrumental in that public engagement and in that community development side⁠— that I think is the primary success of this place. Them coming in and being part of this community and telling friends it’s a great community to be a part of it, and engaging the public in the experience of art. That’s how we’ve gotten to a point of having a giant waiting list.”

Q&A

Does Equinox have a history of manufacturing development?

Farrazaino has previously developed spaces for arts studios and production in St. Louis, Reno, Boston, and elsewhere in Seattle. However, Equinox Studios is the first space that he has owned.

How did Equinox develop capacity for a manufacturing real estate project?

Most of the past spaces Farrazaino worked on involved turning single floors in underutilized buildings into multi-tenant artist spaces. Like he did with Equinox, he approached those projects with a group of tenants already in mind. That strategy helps him envision the spaces and ensure he can come to the development table with tenants ready to go.

Is there a history of manufacturing in the neighborhood?

The neighborhood is almost entirely industrial. “It’s everything from big industry concrete plants on the river, all the way to smaller maker shops and spaces,” said Farrazaino. “A lot of it is transitioning from the really big industry stuff to the micro-industry, like the makerspace and the artist and small shops. When we came along it was sort of beginning to do that.”

How is a manufacturing/fabrication focused development different from other types of developments in Equinox’s portfolio?

Arts production-based developments are the only kind in Equinox’s portfolio. They are now working towards income-subsidized housing in conjunction with industrial space, a village-type approach with making and living and art and amenities for thriving throughout the neighborhood. That approach is about bringing residential back to the industrial areas so people can live where they work.

How important is it to maintain fabrication activity in their buildings?

The project was created with the sole mission of providing affordable space for custom fabrication by artists and artisans.

Who are the key players within the Equinox ownership structure?

“I’m the only one liable for banks and insurance,” said Farrazaino. The rest are stockholders. “On an annual basis we project a six- to eight-percent return. Only catch is that we as a community decide what to do with those dividends. At our annual meeting, if everyone is doing good [economically], we will put that money in art for an at-risk youth program, do a streetscape program [in the neighborhood], or whatever. No matter what you pay in rent, you get one vote in that.”

What role does the board play?

The tenant ownership corporation has a board made up of tenants and Farrazaino to guide decisions at the “mother company” level.

Who are key mentors or advisors?

Ben Rankin, Cathryn Vandenbrink (ArtSpace), Reed Mayfield (RSF), and Arnie Gunderson (Craft3, Heritage Bank).

Any focus on inclusion and equity when selecting tenants?

“We have tried some specific interventions and will continue to work in this direction but we have not had a huge amount of success primarily because of lack of access,” said Farrazaino. “We are primarily an industrial area and transit and accessibility are huge challenges to serving lower socio-economic populations which in Seattle’s traditionally underserved areas are mostly people of color. We do have a pretty good gender balance and try to support women pushing into small business and support a wide variety of sexual preference and identification.”

Is Equinox involved in workforce or other initiatives outside of property management? Individual tenants perform their own job creation, workshops, and teaching. Equinox will occasionally sponsor events that bring community members in to work on projects or participate in educational activities, some of which have a making component. Equinox as a company does not do formal professional development work but Farrazaino informally mentors many of the tenants.

Is Equinox involved in creative placemaking work that involves tenants, the building, and residents from the neighborhood?

Equinox does a monthly open-house art walk and open studio so the “public can come wander through to see what people are making, if they want to purchase stuff or learn about their processes,” said Farrazaino. They also participate in two major annual events—one is an open-house party that brings food trucks, bands, and performances to Equinox, which attracted around 8,000 people to the space in 2018. They also participate in a local arts festival called the Georgetown Carnival building “wild, wacky art making experiences for the public,” according to Farrazaino.

Are Equinox’s projects breaking even or profitable?

“Since our big expansion started in 2015 we have been running at a deficit until 2018 when we turned a small profit. We are in pretty good shape now after paying off all the construction” and other bills, according to Farrazaino.

Have market pressures made it more difficult to achieve any of Equinox’s original mission goals?

Not for the first building. Because of the rising costs in the neighborhood, Equinox’s additional purchases are requiring greater capital injections to get up and running. Future buildings may or may not be able to offer below-market rental rates.

What are partners doing to ensure manufacturers can afford to remain in the buildings even if market dynamics change in the neighborhood?

Farrazaino said they are considering a subsidy model for their future, more costly buildings, which would include bringing in a tenant that pays market rate. Holding one or two new buildings at market value may also help balance their portfolio and keep spaces in the other buildings affordable.

What type of entity is the developer?

LLC with cooperative, stock-based ownership structure. Did Equinox receive assistance from local government? “The city has been really supportive,” said Farrazaino. “As we grow and as we become more influential and more engaged at the civic level, the city realizes that what we’re doing is really holding that place for affordability. We’re a huge part of keeping the arts in Seattle. So there’s a lot of recognition through the arts office, economic development office, through the Mayor’s office … [they’re] taking notes of what we’re doing and trying to help support us.”

How was the parcel zoned for the first building?

For industrial use with a building height restriction of 85 feet.

Were zoning variances needed?

They did a “change of use” for two parts of a single building to accommodate two dance companies and a painting school, which are now assembly uses.

Were zoning changes needed?

No.

Were there any permitting issues?

Equinox struggled a bit with city permitting around some seismic issues that set them back but they came around after structural engineering changes. Equinox has also been correcting issues that came from former owners and tenants.

How many tenants are in Equinox’s buildings?

125 tenants. Employees, students, and dancers also go in and out of the facilities daily.

What types of tenants are present?

Blacksmithing and metal sculpture, painting, ceramics, woodwork, leatherwork, glass, photography, and much more in between.

How many jobs are supported by Equinox?

In all three buildings, nearly 200 jobs.

How many jobs are supported by manufacturing?

About 100.

How are tenants selected?

Farrazaino selects tenants based on an informal interview/conversation and tour of the space. They decide if the community will benefit from the tenant’s presence, and vice versa.

Are there opportunities for on-site equipment sharing?

There is a lot of informal peer to peer lending/using, but no formal tool share program. “[W]e are working towards that as a community resource, not just for tenants but the greater community as well,” said Farrazaino.

What is the cost of capital?

Rudolf Steiner Foundation provided $3.5 million at 4.5 percent APR on 10 years. Heritage Bank provided $5.35 million at 5.6 percent for 10 years for the two newer buildings combined.

What are Equinox’s sources of financing?

Impact debt and owner equity to start and now commercial bank debt.

Did Equinox receive any tax credits?

No.

Were CDFIs involved?

Craft3 was the original lender for the two new buildings but they have since refinanced with Heritage Bank.

What was the size of Equinox’s first real estate deal?

First building was purchased at $1.9 million.

What square footage options do tenants have?

150 sq. ft. up to 3,000.

What is the rent per square foot?

Range from $1.00 to $2.00.

How long are the lease terms?

One to 10 years.

How does Equinox approach subdividing large spaces for multiple tenants?

Buildings have all been subdivided to accommodate multiple tenants. In the first building tenants came and Equinox built to suit. In the newer buildings, Equinox was able to design from scratch with a couple large tenants as anchors to the design and then fill out the rest with a variety of sizes and uses to be very flexible.

Is there an opportunity for tenants to take an ownership stake?

Yes. Every tenant becomes an owner just by being a part of the community.

Who were key stakeholders helping with community outreach?

Farrazaino says he believes public engagement and community development performed by tenants are the reasons the space is successful. “There is a lot of cross-pollination, collaboration, inspiration on a daily basis just inside, but it’s getting people from the public engaged that has helped cement the financial success here,” said Farrazaino.

Total square feet?

100,000 sq. ft. for all three buildings.

This case study was originally published by Urban Manufacturing Alliance in 2019 as part of “All About the Jobs: Eight Mission-driven Industrial Developers on How Their Spaces Anchor Manufacturers and Support Local Economies,” a project developed in partnership with Local Initiatives Support Corporation (LISC) and students at the Albany Law School Community Development Clinic.

Equinox Studios has one of the more unique profiles among the projects featured in this report. The Equinox “mother” company, which owns all three of the cooperative’s buildings, is an LLC owned by Sam Farrazaino and all of the tenants together as a Social Purpose Corporation.

“It’s a complicated structure,” said Farrazaino. “After looking at a bunch of different ways to do it, we settled on stock ownership as the best way because it takes any burden and liability off the tenant.”

Farrazaino, current tenants, and past tenants make up the cooperative for-profit model behind Equinox. Farrazaino was able to purchase the buildings in his Seattle neighborhood through a combination of city, philanthropy, and bank loans. He also took equity out of his initial building to purchase additional buildings.

It’s important to note, however, that Equinox’s first building was purchased before last decade’s recession, and right when real estate values in Seattle started booming. In 2006 they sealed a five-year lease-to-own deal that put the price tag of their first building at $1.9 million. That’s how much they purchased it for in 2011; today it is worth nearly $6 million.

Also to their advantage: the building’s prior owner agreed with Equinox’s mission, which has not changed to date. Farrazaino wants to provide affordable real estate to artists at risk of being pushed out of Seattle. “That was the lease, where I take care of everything and just send him a check, do any maintenance, any repairs. It was low management for him [the building owner]. That inspired him because he didn’t want to be a landlord in the property management sense.”

Farrazaino brought with him 10 tenants from other mission-driven real estate projects he’d been a part of in the past. With the purchase of the building Equinox inherited a metal fabrication company as a tenant. The tenants’ rent payments put the project’s income over the monthly lease rate, and they used the extra money to build out individual spaces for up to 38 different tenants.

“We were able to grow the equity in the building by taking it from a shell building into 38 different income producing spaces that were much smaller,” said Farrazaino. The new appraised value, plus financial help from the city and foundations, gave them the footing they needed to lease and renovate the two other buildings in their portfolio.

Property values have since skyrocketed in the neighborhood, like they have in the rest of Seattle. “For future expansion we’ll need to find a way to either subsidize the rents or potentially hold one or more new buildings more at market value to offset others as part of a portfolio that supports the mission,” said Farrazaino. “Somebody paying higher rent in one can help offset some of the lower rents in others.”

While market dynamics in the neighborhood helped them at the start, Farrazaino said he thinks it's their tenant ownership model, which is part of a broader community first mentality, that has made the project a financial success.

“The tenant body is really instrumental in that public engagement and in that community development side⁠— that I think is the primary success of this place. Them coming in and being part of this community and telling friends it’s a great community to be a part of it, and engaging the public in the experience of art. That’s how we’ve gotten to a point of having a giant waiting list.”

Q&A

Does Equinox have a history of manufacturing development?

Farrazaino has previously developed spaces for arts studios and production in St. Louis, Reno, Boston, and elsewhere in Seattle. However, Equinox Studios is the first space that he has owned.

How did Equinox develop capacity for a manufacturing real estate project?

Most of the past spaces Farrazaino worked on involved turning single floors in underutilized buildings into multi-tenant artist spaces. Like he did with Equinox, he approached those projects with a group of tenants already in mind. That strategy helps him envision the spaces and ensure he can come to the development table with tenants ready to go.

Is there a history of manufacturing in the neighborhood?

The neighborhood is almost entirely industrial. “It’s everything from big industry concrete plants on the river, all the way to smaller maker shops and spaces,” said Farrazaino. “A lot of it is transitioning from the really big industry stuff to the micro-industry, like the makerspace and the artist and small shops. When we came along it was sort of beginning to do that.”

How is a manufacturing/fabrication focused development different from other types of developments in Equinox’s portfolio?

Arts production-based developments are the only kind in Equinox’s portfolio. They are now working towards income-subsidized housing in conjunction with industrial space, a village-type approach with making and living and art and amenities for thriving throughout the neighborhood. That approach is about bringing residential back to the industrial areas so people can live where they work.

How important is it to maintain fabrication activity in their buildings?

The project was created with the sole mission of providing affordable space for custom fabrication by artists and artisans.

Who are the key players within the Equinox ownership structure?

“I’m the only one liable for banks and insurance,” said Farrazaino. The rest are stockholders. “On an annual basis we project a six- to eight-percent return. Only catch is that we as a community decide what to do with those dividends. At our annual meeting, if everyone is doing good [economically], we will put that money in art for an at-risk youth program, do a streetscape program [in the neighborhood], or whatever. No matter what you pay in rent, you get one vote in that.”

What role does the board play?

The tenant ownership corporation has a board made up of tenants and Farrazaino to guide decisions at the “mother company” level.

Who are key mentors or advisors?

Ben Rankin, Cathryn Vandenbrink (ArtSpace), Reed Mayfield (RSF), and Arnie Gunderson (Craft3, Heritage Bank).

Any focus on inclusion and equity when selecting tenants?

“We have tried some specific interventions and will continue to work in this direction but we have not had a huge amount of success primarily because of lack of access,” said Farrazaino. “We are primarily an industrial area and transit and accessibility are huge challenges to serving lower socio-economic populations which in Seattle’s traditionally underserved areas are mostly people of color. We do have a pretty good gender balance and try to support women pushing into small business and support a wide variety of sexual preference and identification.”

Is Equinox involved in workforce or other initiatives outside of property management? Individual tenants perform their own job creation, workshops, and teaching. Equinox will occasionally sponsor events that bring community members in to work on projects or participate in educational activities, some of which have a making component. Equinox as a company does not do formal professional development work but Farrazaino informally mentors many of the tenants.

Is Equinox involved in creative placemaking work that involves tenants, the building, and residents from the neighborhood?

Equinox does a monthly open-house art walk and open studio so the “public can come wander through to see what people are making, if they want to purchase stuff or learn about their processes,” said Farrazaino. They also participate in two major annual events—one is an open-house party that brings food trucks, bands, and performances to Equinox, which attracted around 8,000 people to the space in 2018. They also participate in a local arts festival called the Georgetown Carnival building “wild, wacky art making experiences for the public,” according to Farrazaino.

Are Equinox’s projects breaking even or profitable?

“Since our big expansion started in 2015 we have been running at a deficit until 2018 when we turned a small profit. We are in pretty good shape now after paying off all the construction” and other bills, according to Farrazaino.

Have market pressures made it more difficult to achieve any of Equinox’s original mission goals?

Not for the first building. Because of the rising costs in the neighborhood, Equinox’s additional purchases are requiring greater capital injections to get up and running. Future buildings may or may not be able to offer below-market rental rates.

What are partners doing to ensure manufacturers can afford to remain in the buildings even if market dynamics change in the neighborhood?

Farrazaino said they are considering a subsidy model for their future, more costly buildings, which would include bringing in a tenant that pays market rate. Holding one or two new buildings at market value may also help balance their portfolio and keep spaces in the other buildings affordable.

What type of entity is the developer?

LLC with cooperative, stock-based ownership structure. Did Equinox receive assistance from local government? “The city has been really supportive,” said Farrazaino. “As we grow and as we become more influential and more engaged at the civic level, the city realizes that what we’re doing is really holding that place for affordability. We’re a huge part of keeping the arts in Seattle. So there’s a lot of recognition through the arts office, economic development office, through the Mayor’s office … [they’re] taking notes of what we’re doing and trying to help support us.”

How was the parcel zoned for the first building?

For industrial use with a building height restriction of 85 feet.

Were zoning variances needed?

They did a “change of use” for two parts of a single building to accommodate two dance companies and a painting school, which are now assembly uses.

Were zoning changes needed?

No.

Were there any permitting issues?

Equinox struggled a bit with city permitting around some seismic issues that set them back but they came around after structural engineering changes. Equinox has also been correcting issues that came from former owners and tenants.

How many tenants are in Equinox’s buildings?

125 tenants. Employees, students, and dancers also go in and out of the facilities daily.

What types of tenants are present?

Blacksmithing and metal sculpture, painting, ceramics, woodwork, leatherwork, glass, photography, and much more in between.

How many jobs are supported by Equinox?

In all three buildings, nearly 200 jobs.

How many jobs are supported by manufacturing?

About 100.

How are tenants selected?

Farrazaino selects tenants based on an informal interview/conversation and tour of the space. They decide if the community will benefit from the tenant’s presence, and vice versa.

Are there opportunities for on-site equipment sharing?

There is a lot of informal peer to peer lending/using, but no formal tool share program. “[W]e are working towards that as a community resource, not just for tenants but the greater community as well,” said Farrazaino.

What is the cost of capital?

Rudolf Steiner Foundation provided $3.5 million at 4.5 percent APR on 10 years. Heritage Bank provided $5.35 million at 5.6 percent for 10 years for the two newer buildings combined.

What are Equinox’s sources of financing?

Impact debt and owner equity to start and now commercial bank debt.

Did Equinox receive any tax credits?

No.

Were CDFIs involved?

Craft3 was the original lender for the two new buildings but they have since refinanced with Heritage Bank.

What was the size of Equinox’s first real estate deal?

First building was purchased at $1.9 million.

What square footage options do tenants have?

150 sq. ft. up to 3,000.

What is the rent per square foot?

Range from $1.00 to $2.00.

How long are the lease terms?

One to 10 years.

How does Equinox approach subdividing large spaces for multiple tenants?

Buildings have all been subdivided to accommodate multiple tenants. In the first building tenants came and Equinox built to suit. In the newer buildings, Equinox was able to design from scratch with a couple large tenants as anchors to the design and then fill out the rest with a variety of sizes and uses to be very flexible.

Is there an opportunity for tenants to take an ownership stake?

Yes. Every tenant becomes an owner just by being a part of the community.

Who were key stakeholders helping with community outreach?

Farrazaino says he believes public engagement and community development performed by tenants are the reasons the space is successful. “There is a lot of cross-pollination, collaboration, inspiration on a daily basis just inside, but it’s getting people from the public engaged that has helped cement the financial success here,” said Farrazaino.

Total square feet?

100,000 sq. ft. for all three buildings.

This case study was originally published by Urban Manufacturing Alliance in 2019 as part of “All About the Jobs: Eight Mission-driven Industrial Developers on How Their Spaces Anchor Manufacturers and Support Local Economies,” a project developed in partnership with Local Initiatives Support Corporation (LISC) and students at the Albany Law School Community Development Clinic.