by Ralph Nichols

Marketing of condominiums in the Town Square complex will take place over the next couple of weeks, with sales resuming on Aug. 1 for the first time since late summer 2009.

Condo prices will average 35 percent below what they were when the seven-story building opened to great expectations two years ago.

The long-anticipated announcement was made Tuesday (July 12) by ST Residential, managing partner of the public-private investment group, which acquired ownership of the condo/retail complex from developer Urban Partners on Oct. 29.

“After carefully studying the market, we have decided to re-open sales at the property,” ST Residential said in a statement released by spokesman Peter Marino. “We look forward to selling these homes and infusing new life into this wonderful property.”

Marino said a market analysis indicates the new lower prices – about $120,000 to $420,000, compared to over $200,000 to almost $700,000 in 2009 – “can support sales.”

While not all of the 118 available condos will initially go on the market, “the majority in the first release of homes are on the top three floors of the building,” he added. “With 30 floor plans, we will be flexible depending on buyer needs.”

Six condos were sold before sales were placed on hold when the Federal Deposit Insurance Corporation (FDIC) closed Corus Bank, which issued the construction loan, in September 2009.

Marino noted that ST Residential has “been actively trying to lease … for a number of weeks” the 20,000 square feet of vacant retail space on the ground floor of the complex. “That marketing program is distinct from the home sales program.”

There has been “considerable” interest, but no retail lease agreements have been closed so far.

The announcement by ST Residential appears to end a lengthy chapter riddled with uncertainty in the history of Burien’s still-young Town Square.

Urban Partners – developer for the private components of the Town Square project – financed construction of the building with a $38.5 million loan from Corus Bank of Chicago in 2007.

The nation’s housing market began to collapse a year later, eight months before the condo/retail complex opened along with the Burien Library/City Hall building and Town Square Park.

After the FDIC seized the bank’s assets, including Urban Partners’ loan, ST Residential became holder of its residential construction loan portfolio.

ST Residential is comprised of the FDIC, which holds a 60 percent share of that portfolio, and Starwood Capital Group and four other several private investors.

Urban Partners eventually transferred ownership of the condo/retail complex – avoiding a trustee’s sale of this property, which was in foreclosure – to ST Residential. The FDIC earlier had rejected an offer by Urban Partners to buy back its construction loan.

Burien City Manager Mike Martin told The B-Town Blog on July 13 that, as of then, ST Residential hadn’t informed the city of its plans to resume condo sales at reduced prices.

But, Martin said, he looks forward to increased retail activity in downtown Burien, which new condo sales are expected to generate.

ST Residential will adhere to requirements of the original development agreement with Urban Partners, he added.

Earlier this year, there was speculation that ST Residential might propose marketing at least some of the units in the condo/retail complex as apartments for rent – a change that would have required an amendment to the development agreement by the city council.

That idea was set aside when the market analysis indicated condos will sell with the new pricing.

Urban Partners still owns undeveloped parcels within the Town Square area north of both the library/city hall building and the condo/retail complex. It has yet to announce plans for the second phase of private development there.

by Ralph Nichols

Two years ago this month, everything was coming up roses at Burien’s new Town Square.

Community celebrations heralded grand openings of the Burien City Hall/King County Library building and a condominium/retail complex, and the downtown park between these two facilities began attracting people and events.

When the condo/retail complex – built by Urban Partners, the city’s private developer for this visionary project – was certified for occupancy on July 21, 2009, the clock started ticking. Urban Partners had two years to begin construction of a second mixed-use facility in Town Square.

But through circumstances beyond its control, which stemmed from the onset of the recession in 2008, Urban Partners no longer owns its first Town Square building.

And with less than two months remaining before the construction-startup deadline, Urban Partners still has no plans for a second development.

Dick Loman, Burien’s economic development manager, told The B-Town Blog on June 1 that Urban Partners has asked the city for an extension of time to begin construction of the next Town Square building.

“We [city staff] have it under advisement,” Loman said. “We want some assurance that they will continue their investment in Town Square … Staff is not ready to present it to the City Council at this point, but we hope to very shortly have an extension request for them to consider.”

Urban Partners “remains committed to our investment in Town Square with a ground up development” in the future, principal Paul Keller said in a phone interview.

They have asked for a three-year deadline extension and meet regularly with city officials, Keller noted. “As the economy continues to heal, we are optimistic that at some point in time we will be able to move forward” with the second private development.

While city hall and the library are constantly busy, and the park draws public activities like Burien Farmers Market, only six condos have been sold.

ST Residential, the investment group that now owns the condo/retail complex, has yet to make known its plans for the remaining residential units and commercial space. However, an announcement is expected in the next few weeks.

Corus Bank, which held Urban Partners’ Town Square construction loan, was closed by the FDIC in September 2009. ST Residential, a consortium of private investors and the FDIC, gained control the property a few months later.

Meanwhile, Urban Partners has placed on the market the vacant Town Square parcel north of the condo/retail complex – one of three undeveloped parcels it still owns – currently advertised on Craigslist by Leibsohn & Company Commercial Real Estate Services:

Its other two parcels are the old city hall building north of the new city hall and library, and a narrow property east of the post office between S. 150th and S. 151st streets.

Loman also reconfirmed that a proposal to build a 10-screen multiplex cinema – once considered as an alternative to a second Town Square condo/retail complex – “is no longer on the table.”

Here’s more from Liebsohn’s Executive Summary on the property (download the PDF here), which lists the price at $1,875,000.00:

The two parcels available make up the undeveloped portion of the Burien Town Square. The larger parcel is 1.72 Acre lot is zoned downtown commercial (DC). Per an executed development agreement with the City of Burien this parcel can be developed as a 7 story, 286,600 Square Foot mixed-use building consisting of approximately 142 residential units, 20,000 Square Feet of retail, and 258 parking stalls. The second parcel is a 0.32 Acre lot which is also zoned downtown commercial (DC). Per an executed development agreement with the City of Burien this parcel can be developed as a 3 story, 20,000 Square Foot residential town home project consisting 11 residential units, and 22 under unit parking stalls.

The City of Burien’s agressive plan for growth and modernization centers on it’s downtown, where Burien Town Square is located. The civic plaza has ushered in a new King County Library and City Hall, along with retail and restaurant space, a one-acre park and residential condos. The city also plans a new, state-of-the-art transit center and upscale hotel nearby. All told, the more than $200 million in public and private funds have been spent on road and infrastruc- ture improvements.

The Port of Seattle will add to the buffer zone near the third runway at Sea-Tac Airport under a planned sale of excess Seattle City Light property near the old Lora Lakes Apartments complex in Burien. A bill authorizing the sale of the old Sunnydale substation property at 15002 8th Avenue South in Burien was expected to be approved by a Seattle City Council committee Wednesday May 18, and then okayed within several weeks thereafter by the Seattle City Council. Formal approval by the Port is also required.

A “fiscal note” report on the bill from the City of Seattle fills in additional details. The sale price of the 12,197 square-foot parcel is to be $178,212, which reflects its appraised value minus a small adjustment to offset costs of environmental remediation the Port will have to perform. With the expected purchase, the Port would own all land surrounding the former electrical substation. The site is in close proximity to the now-vacant Lora Lake Apartments. Under a proposed five-party agreement, King County was to buy the substation parcel from the city as part of a larger redevelopment of the apartment complex for low-income housing, but the whole deal was scuttled when environmental testing revealed a $10 million cleanup cost for the acerage.

The City Light substation property was originally sold to Seattle in November, 1958 for $4,305 by the Tenth Church of Christ The Scientist. Seattle built a 4 kV electrical substation there but it became outdated and the property vestigial after Seattle City Light converted to a 12 kV distribution network, and it was determined no other city department needed the land.

A recent annual staff report found the City of Seattle owned 212 excess property clusters worth roughly $81 million. The transaction for the substation property in Burien would be the first sale of an excess property by Seattle since August 2008.

Sunnydale Substation parcel/City of Seattle. Click image to see larger version.

Matt Rosenberg is founder and editor of Public Data Ferret, a news and knowledge base project of the non-profit Public Eye Northwest. Disclosure: In 1994-95 Matt worked for the Regional Commission on Airport Affairs. Email: matt (at) publiceyenorthwest (dot) org

Burien Town Plaza, located just north of Burien Town Square and home to businesses like Bartells, Staples, Saar’s and Ace Hardware, was sold recently by Wesbild to private equity group Merlone Geier, according to a press release.

“Merlone Geier acquired Burien Town Plaza as part of their growth strategy,” reads the release.

Wesbild had owned Town Plaza since 2004, and undertook a major renovation which was completed in 2008 which increased the size of the shopping center from 126,000 to 140,000 square feet.

“We are leaving Burien Town Plaza in good hands.” said David Laronde of Wesbild.

Wesbild also sold Westwood Village in West Seattle to Bentall Kennedy, which acquired it on behalf of Multi-Employer Property Trust (MEPT).

“We are delighted to acquire a Class A retail property that combines stable income from popular anchor tenants with an opportunity to increase cash flow as the economy improves”, said Jim Howard of Bentall Kennedy. “Its strong performance is anchored in a tenant roster that serves the daily and necessity shopping needs of value-conscious consumers”.

Westwood Village was acquired by Wesbild in 1990 and subsequently redeveloped into a prominent lifestyle centre. “We have truly enjoyed watching this center and its tenants grow to be a key part of the West Seattle community,” said David Laronde of Wesbild, “We realized our goal of re-positioning and re-tenanting the center into a true community shopping experience and hope it continues to be a community gathering place for years to come.”

by Ralph Nichols

Tukwila-based O’Keefe Companies, whose principal and managing director Tom T. O’Keefe is the founder and past chairman of Tully’s Coffee, has acquired Normandy Park Towne Center.

O’Keefe told The B-Town Blog he will rejuvenate the 53,000-square-foot, single-story retail space, and is planning a grand re-opening for the community – and the five businesses now there – sometime in May.

Towne Center, at 1st Ave. S. and S. 199th St., opened in 2007 but soon was mired in financial difficulties brought on by the nationwide recession.

Things only got worse when a major improvement project to 1st Ave. through Normandy Park was delayed by problems with a contractor, which proved costly to businesses in the new development and discouraged other retailers from locating there.

Columbia Bank of Tacoma, the construction lender, took the property back in December after the original developer defaulted on its loan. O’Keefe Companies closed its purchase on March 31.

“I will put on a very creative leasing campaign to fill with tenants space that has never been occupied,” O’Keefe said. “Currently five businesses are operating there. The bad news is that they’ve been operating by themselves for a number of years.

“I have met individually with every business owner and they are excited about my plans to fill the space that will rejuvenate their businesses as they had planned for” when they moved in.

Normandy Park City Manager Doug Schulze said in a statement, “This acquisition is very significant and a positive step toward the creation of a vibrant and successful commercial area.

“O’Keefe Companies has the experience, motivation and financial ability to bring new businesses to Normandy Park Towne Center.”

O’Keefe Companies develops, acquires and manages office buildings, industrial buildings, retail centers and multi-family projects in the greater Puget Sound area, including RiverPoint Corporate Center in Tukwila.

The group formed within O’Keefe Companies that took title to Normandy Park Towne Center is Medina Fund Four LLC.

“I’m the manager of the LLC,” he said. “O’Keefe development will be the property manager. We manage everything we own.”

He became interested in Normandy Park Towne Center, which includes four new buildings, when it became available last year. “Unfortunately with the market timing, the original developer lost the title given the economy. I was able to buy it at a very competitive price from the bank.

“I’m a big believer in the demographics in the neighborhoods of Normandy Park,” O’Keefe continued. “And this is what I do for a living. I develop new commercial projects or buy what’s referred to as value add, which is competitively priced.”

O’Keefe Development Corporation was established in 1986 and since then has developed or acquired over 3,800,000 square feet of projects valued at approximately $400 million.

Prior to that, O’Keefe was a commercial real estate broker for nine years with Coldwell Banker Commercial Real Estate Services in Seattle.

He founded Tulley’s Coffee in 1992, but his only affiliation with Tully’s today is as its largest shareholder.

O’Keefe and his wife, Cathy, have also been actively involved in community organizations for over 30 years. Their charitable efforts focus largely on the health, education and welfare of the children – including cystic fibrosis and juvenile diabetes – in the Puget Sound region.

This involvement is one of the reasons why he met with Schulze before closing the deal. “My goal is to immediately immerse this project in community programs,” including art shows and fundraisers in the short term.

Beyond the commercial potential of his Towne Center, O’Keefe is eying the possibility of leasing space for a new Normandy Park City Hall, police station, parks and recreation center and, “most importantly, for a new city library.”

“Maybe there are opportunities for some of those uses at this location,” he added. “We’re going to have various discussions about those opportunities. I acquired this as a retail center but there is an opportunity for municipal services as this location.”

If you’ve suffered property damage from the recent rainstorms, flooding and/or landslides, the King County Department of Assessments wants you to know how you can get help.

“In light of the recent rainfall over the past weekend throughout King County – I wanted to forward along information on how to seek assistance for destroyed and damaged property for residents in the City of Burien,” said Communication and Outreach Coordinator Phillip Sit in an email.

If you’ve suffered any weather-related damage, you are asked to please contact the Department of Assessments at 206.296.7300.

If you own property in King County and wish to file a Destroyed Property claim, please fill out the King County Destroyed Property Form (.PDF).

Click here for additional information regarding property tax relief available to flood and storm victims.

For more information, check out the department’s website: http://www.kingcounty.gov/Assessor.aspx.

by Ralph Nichols

As Burien City Council members prepare to resume work on the 2011-12 general fund budget on Monday, Oct. 25, there is good news for local property taxpayers.

The property tax on a $300,000 home will drop slightly, from $456 to $444 for a $12 reduction, in 2011 for residents already living in Burien before annexation, interim Finance Director Gary Coleman has projected.

For residents of North Burien, who were annexed into the city on April 1, it’s even better. Their property taxes will be $93 less for a $300,000 home than what they were paying King County.

This is due to the increase in assessed value city wide as a result of the additional residential property that annexation added to Burien, Coleman told council members on Oct. 11.

The city’s total preliminary budget is $73.9 million for the biennium, including a $40.1 million general fund budget, with a 2.2 percent average increase in total revenue between 2011 and 2012.

Local law enforcement, with Burien police services provided through a contract with the King County Sheriff’s Office, jail and court expenses account for $21,548,400, or 54 percent, of the general budget.

City Manager Mike Martin asked the council to approve a 1% pay raise for city employees.

Additional projected general fund expenditures include:

• General government operations – $8,957,512 or 22 percent.
• Parks and recreation programs – $5,532,211, or 14 percent.
• Community Development – $2,942,261, or 7 percent.
• Public Works – $1,123,986, or 3 percent.

Anticipated general fund revenues for 2011-12 include:

• Sales tax – $11,841,391, or 29 percent.
• Property tax – $11,693,000, or 28 percent.
• Utility tax – $7,234,699, or 17 percent.
• Gambling tax – $1,150,000, or 3 percent.
• Business (B&O) tax – $1.112,092, or 3 percent.

Remaining sources of the $41.1 million in anticipated general fund revenue include planning and permitting fees, state-shared money, parks and recreation fees and charges, and miscellaneous revenues.

City Manager Mike Martin recommended that council members use the slight revenue surplus to give employees a 1 percent cost-of-living allowance in 2011. They have not received an increase in two years.

He also recommended adding two maintenance workers in Street and Surface Water Management, a senior planner, and a temporary management analyst.

The cost of all positions would be offset through contract savings and a grant.

Preliminary city funding for 21 human service organizations and programs is set at $200,000 – a $30,000 increase from this year.

by Ralph Nichols

Paul Keller (pictured, left) – managing principal of Urban Partners, the private developer for Burien’s Town Square – has virtually disappeared from view.

Keller has all but stopped communicating with city officials about short-term plans and long-range alternatives that Los Angeles-based Urban Partners may have for Town Square.

This lack of information leaves local interests in limbo – even as the firm lists for sale two undeveloped parcels that it owns there, and negotiates with the Federal Deposit Insurance Corp. for a restructured construction loan for its condominium/retail complex that opened last June.

In the meantime, the Urban Partners principal who maintained a public profile in Burien during the planning and first phase construction of Town Square, including frequent contact with both city officials and reporters, has left the firm.

A founding member of Urban Partners, Dan Rosenfeld is now senior deputy to LA County Supervisor Mark Ridley-Thomas.

Dan Rosenfeld has been hired as senior deputy to Los Angeles County Supervisor Mark Ridley-Thomas. Rosenfeld is responsible for economic development, land use, sustainability and transportation issues.

It was Rosenfeld’s personal interest and connections in the Northwest that helped him sell the Burien City Council on the Urban Partners at the inception of the Town Square project. Locally he was also involved in the redevelopment of Burien Plaza.

According to a news release from Ridley-Thomas’ office:

“Rosenfeld has alternated in his career between public and private-sector service, working previously as Director of Real Estate for the State of California and City of Los Angeles.”

As Burien Town Square sits languishing, developer Urban Partners has all but stopped communicating with the city or potential customers.

A founding member of Urban Partners, he also was a senior officer with The Cadillac Fairview Corporation, Tishman-Speyer Properties, Kilroy Industries and Jones Lang LaSalle.

The Los Angeles Times noted that his particular emphasis at Urban Partners was “on public sector relationships, design, marketing and activities in the Pacific Northwest.”

It seems by no means certain, given the lack of information from Urban Partners and the attempt to sell some of its Town Square property, that the firm will continue to have an ongoing interest in this region.

Regardless of what happens with private development in Town Square, City Manager Mike Martin emphasized earlier this week that Burien will lose no money even if Urban Partners’ venture should fail.

Urban Partners' Paul Keller apparently refuses to comment. Or communicate.

The city has no financial interest in either the condo/retail complex or the undeveloped land parcels, which are owned by Urban Partners, Martin noted.

And Dick Loman, Burien’s economic development manager, said a new buyer of the undeveloped land would be obligated legally to conform to the agreement for Town Square development that Urban Partners signed with the city.

PREVIOUS COVERAGE:

• What Is Urban Partners Planning To Do With Burien Town Square?
• Here’s Why Burien Town Square Sits Vacant Less Than A Year After Opening
• 10-Screen Multiplex Theater May Be Built At Old City Hall Location
• Cinema Reps Make Their Pitch To Burien City Council
• Will Condo Prices Be Lowered Now That Burien Town Square’s Lender’s Assets Have Been Sold?
• Are Reports Of The Demise Of Burien’s Town Square True? Take Our Poll
• Over 1,000 Witness Burien Town Square Grand Opening

by Ralph Nichols

Is Urban Partners, the private developer for Burien’s Town Square, just trying to cut its financial losses?

Or is the Los Angeles-based firm beginning to pull out of this major downtown project?

No one with the city seems to know the answers to these questions. Urban Partners apparently is telling council members and staff almost nothing about their plans for the recession-plagued development.

And unlike Dan Rosenfeld – who led the effort by Urban Partners to contract with the city, then maintained a visible profile here – managing principal Paul Keller is not keeping Burien residents updated on the status of this ambitious project in the heart of their downtown.

In fact, there has been no public discussion about Town Square since Urban Partners approached the city council last fall with a proposal, based on existing housing market realities, that they be permitted to develop a multiplex cinema on one of the vacant parcels rather than a second condo/retail complex as originally envisioned.

Keller has not responded to repeated requests by The B-Town Blog for an interview about the current Town Square situation.

Regardless of what Urban Partners may do, “The sky’s not falling,” Burien City Manager Mike Martin said on April 28. “It truly isn’t. The city will do everything we need to do to protect our interests.”

Martin also stressed that “the city has no money invested” in the private development part of the Town Square project, “so the city will not lose any money.”

Urban Partners recently listed for sale on a commercial broker site two parcels of undeveloped land it owns within Town Square, The B-Town Blog confirmed this week.

The largest parcel, located south of SW 150th St. and east of 6th Ave. SW, is listed for $1.8 million. North of the new condominium/retail complex built by Urban Partners, this land was occupied by the Burien/Interim Arts Space last year.

A vacant half block south of SW 150th St. and west of 6th Ave. SW is listed for $330,000.

At this time, Urban Partners appears to be holding onto the other large undeveloped parcel it owns in Town Square, located south of SW 150th St. and west of 4th Ave. SW, still occupied by the old city hall building.

Urban Partners also retains its interest in the Town Square condo/retail complex. The firm is negotiating with the Federal Deposit Insurance Corp. and Starwood Financial Group for a restructuring of its construction loan that reflects current market conditions.

The FDIC seized Corus Bank, the original lender, last September, then sold a 40 percent interest in the bank’s construction loan portfolio to the Starwood group at 50 cents on the dollar.

Dick Loman, Burien’s Economic Development Manager, said that under the development agreement the city signed with Urban Partners, “after a certificate of occupancy on Phase One [the condo/retail complex] was issued, Urban Partners has the right to sell its interest in the remaining property.

Dan Rosenfeld, right, sits with Mayor Joan McGilton, Rep. Jim McDermott and Rep. Dave Upthegrove at last June's Town Square opening. Rosenfeld is no longer with Urban Partners.

In the event of such a sale, “whoever acquires that property is bound to abide by the original agreement with Urban Partners. The city’s interest is protected … [and] “they are not in default with the city under any agreement they have” with Burien.

News that Urban Partners had listed the two parcels “came as no surprise to us,” Loman continued. “They are seeking opportunities, given market conditions, to enter into a joint partnership or to sell.”

He said while the city would be “disappointed” should they back away from Town Square, “that won’t necessarily be bad” since another developer could move in and continue the project.

“We don’t have any evidence of that and don’t want to make a judgment based on the level of information we have right now,” Loman added. “We’re limited in what we can proactively do … Paul Keller is calling the shots on this thing.”

Martin said while “it is very difficult to see into the depths of this financial morass … the Town Square project is still in place. Yes, there will be additional development on the property.

But all he knows “for sure” about Urban Partners’ plans is that “some of the property is on the market … they are trying to move ahead” and that could involve selling, leasing or developing with a partner. “Like developers everywhere, they are losing money and that’s not sustainable.”

The city’s plan for Town Square “has been thrown off the tracks by the economy, but we’re flexible enough to know that we have to improvise … this is a fairly natural progression for projects like this in days like these,” he noted.

Urban Partners recently listed this parcel, located south of SW 150th St. and east of 6th Ave. SW, for sale at $1.8 million. It formerly served as home to the Burien Interim Art Space.

“I don’t view it as necessarily a bad thing if Urban Partners withdraws. That’s not the way we planned it, but we didn’t plan for the recession. We want the project to move forward [but] Urban Partners has not told us their mechanism” to do this.

Urban Partners or a new developer could pursue several options to complete Town Square, Martin said. These include additional condos with street-level retail or office space, a cinema, or something not yet proposed.

by Ralph Nichols

“Now Leasing Retail,” reads the message on a street-level storefront window in Burien’s still-new Town Square condominium/retail complex at SW 152nd St. and 6th Ave. South.

Other window signs advertise 20,000 square feet for shops and restaurants in the stand-alone building at this prime location for business downtown.

Yet no business has located there – and only five condos have been sold – since the complex opened last June, despite several serious offers to lease or buy available commercial space.

The barrier to these real estate transactions, as first reported by The B-Town Blog last October (read the story here), stems from the failure of Corus Bank – the construction lender for Los Angeles-based Urban Partners, the city’s private developer for Town Square – which financed this complex.

Corus, headquartered in Chicago, was closed on Sept. 11 by the Federal Deposit Insurance Corporation (FDIC), which took control of the bank’s assets and acquired its entire construction portfolio of about 120 loans valued at $4.5 billion, according to a news release on the action.

A group of investors led by Starwood Capital, including Perry Capital and WLR LaFrak, then acquired an equity interest in a limited liability corporation that purchased Corus’ construction loan portfolio from the FDIC at a substantial discount.

This put real estate transactions at the Town Square complex on hold while Urban Partners navigates a byzantine financial maze.

"Negotiations going on far from Burien have left anybody interested in getting into the project out in the cold." - Daniel Keane, owner of Market Place Salon.

“There are a number of individuals and businesses that have tried to get a deal in this project and nothing is going to happen until … distant investors can reach an agreement, amicable or otherwise,” Daniel Keane recently told The B-Town Blog.

Keane and his wife, Melinda, have wanted to move their Market Place Salon & Day Spa (BTB Advertiser) to Town Square since the project began. But they are among the businesses and organizations that have found themselves bogged down in a quagmire of uncertainty.

Market Place Salon
The Keanes’ experience in trying to acquire space for their salon and spa in Town Square opens a window to the frustration experienced by businesses dealing with real estate agents and financial institutions representing Urban Partners.

“We were very excited when the Burien Town Square project was announced, and were subsequently approached as possible tenants in the project,” Keane recalled.

But after initial discussions with Urban Partner’s original real estate agent, “we determined that the price was too high and told them so.”

The Keanes continued doing business in their location at Five Corners, and “when the economy began to sour we were approached again to consider leasing in the project and we negotiated again.”

During this process, a change was made in leasing real estate agencies. Soon afterwards, the Keanes’ bank and accountant both suggested they try to purchase space for their business.

After they looked at a couple of freestanding buildings, Urban Partners approached them “with the idea of buying commercial space in their [Town Square] building.

“Before the holiday season in 2009, we met with [managing principal] Paul Keller from Urban Partners and discussed a possible deal, to which he was in agreement and asked us to secure our financing and plan so that he could see that we were legitimate buyers,” Keane said.

“We shook hands and went our separate ways to do the parts we had agreed upon.” The Keanes began the process of securing financing from the Small Business Administration and Chase Bank, and also were qualified by Timberland Bank.

“We sought a designer and began to plan our space,” he added. “We created our plan and contacted our current landlord to make them aware of our plans. We communicated all of this to [Urban Partners] directly and through their [real estate] agent.”

The Keanes waited for a response – and heard nothing. “After many failed attempts to contact Paul Keller, we finally heard through [the agent] that they were considering our offer but there were some issues they were working on.”

Keane emphasized that throughout the negotiations, despite their frustration with the process, “we have been very happy with our [real estate] agent and his efforts. The disappointment is with the communication from the building’s agents.”

The next news the Keanes received was not good. Starwood Capital had bought the foreclosed bank’s discounted portfolio, leaving Urban Partners in no position to lease or sell space in its condo/retail complex until its loan can be renegotiated.

And, observed Keane, “these negotiations going on far from Burien have left anybody interested in getting into the project out in the cold, and have left our small city with a big empty building.”

Urban Partners
“Urban Partners is a well-funded developer with a good track record on many projects around the country as well as in the Northwest,” Keane noted. “The bank they chose for this specific project unfortunately was not strong enough to survive the economic downturn.”

Agreeing with this assessment, Dick Loman, Burien’s economic development manager, added emphatically, “Urban Partners is not in default” on this construction loan. They are “not leaving town” and will remain the city’s private developer for future Town Square buildings.

Urban Partners still owns the Town Square complex, Loman said. The only thing that has changed is the financial group holding its construction loan.

The Starwood investors bought 40 percent of Corus’ construction portfolio – including the loan for the Town Square development – for 50 cents on the dollar.

Loman said this bargain rate, coupled with a current value on the building that is 25-30 percent below its appraisal three years ago, has put the brakes on leasing and selling space.

“Everybody wants a bargain. They don’t want to move in, to lease or buy, and pay the old appraisal rates that are higher than the building’s current value,” he continued.

Urban Partners is now working with the FDIC and Starwood Capital to negotiate “a new loan that reflects the current market,” Loman said. Until such an agreement is reached, Urban Partners is in no position to reduce prices for either retail space or condominiums.

The Catch-22 in which Urban Partners is snared, Loman observed, is that it needs a new loan agreement for the Town Square building, yet there is nothing the FDIC can do independently to change the terms of a loan unless that loan goes into default.

“That’s what’s happening throughout the entire country,” he said. “It just goes around and around and around – the FDIC doesn’t move quickly, and this has been the problem here.”

In the meantime, Loman said last fall, Urban Partners is “trying to do the right thing. I know that Urban Partners wants to meet the market, but they can’t act until they receive a green light for moving forward.”

Keller did not respond to a request for comment from The B-Town Blog.

And Dan Rosenfeld, whose Northwest ties (he still has an interest in the Burien Plaza at SW 148th St. and 1st Ave. S.) helped Urban Partners land the development contract, has left the company.

Starwood Capital
Established in 1991, Connecticut-based Starwood Capital Group was one of several investment groups “whose leaders profited from the 1990s savings and loan crisis.” Today it is “among firms buying assets from the Federal Deposit Insurance Corp. for as little as 22 cents cash on the dollar,” according to an April 14 report at Bloomberg.com.

Starwood Capital is described on its website home page as “a private investment firm”; Since its inception, Starwood Capital has completed more than 300 transactions representing assets in excess of $20 billion. Public companies created by Starwood Capital have gone on to acquire, often with Starwood’s assistance, an additional $20 billion in assets.

A Bloomberg Businessweek company overview says Starwood acquisitions include “asset and financial restructuring,” with investments that include multi-family, office and luxury retail.

Because the federal government “was faulted two decades ago for letting bank assets go at fire-sale prices, [it] is planning to profit along with investors” in the wake of bank closures during this economic crisis, according to Bloomberg.com.

“Instead of selling the loans outright [such as Corus' construction loan portfolio acquired by Starwood Capital], the FDIC kept stakes of 50 percent or more in at least five loan portfolios sold since September. It’s also demanding as much as 70 percent of any gains.”