by Ralph Nichols

Condo sales have resumed at Burien Town Square.

The sales, which began in October, are the first since ST Residential became owner of the seven-story condominium/retail complex with 124 residential units.

They are also the first since building developer Urban Partners was forced to suspend sales in 2009 when the Federal Deposit Insurance Corp. (FDIC) shut down the bank holding their construction loan.

“Since re-launching sales at Burien Town Square in October, we are pleased to report that there have been 11 contracts executed, of which five are with buyers who previously had pre-sale contracts in place,” Peter Marino, spokesman for ST Residential, told The B-Town Blog.

“We have closed three of the 11 contracts at this point,” Marino noted.

“Throughout the country, sales traffic typically slows down during the holiday season and in the early winter months,” he continued.

“We are encouraged by the response and interest in Burien Town Square. We look forward to a strong year of sales in 2012, but we don’t anticipate sales traffic to really pick up until late winter or early spring.”

These new sales are “good news” for the city, said Burien Economic Development Manager Dan Trimble. “I think it will help move completion of the Town Square project forward.”

The second and third phases of Town Square remain undeveloped. Urban Partners owns both parcels, located north of the condo/retail complex and the Library/City Hall building.

Urban Partners has until late January to submit plans for phase two development to the city.

“The other impact” of renewed condo sales “is that merchants on 152nd and 153rd streets and elsewhere downtown will have more customers,” Trimble added.

“That was one of the intentions” for the Town Square project. Merchants and restaurants “have been very patient and hopefully they will see that pay off.”

Only six condos in the complex, which includes 20,000 square feet of still-vacant ground-floor retail space, were sold before sales were halted in 2009.

The resumption of condo sales is ST Residential’s primary focus. The investment group has yet to announce leases of retail space.

In August, David Ploger, first vice president of ST Residential, told Burien City Council members that, even with lingering uncertainties in the housing market, they hoped to have a public launch of condo sales before year’s end.

Expressing confidence at that time in the marketability of the condos, Ploger described them as “very efficient. The floor plans are state of the art. I’ve looked around and I’m not aware of a better condominium complex in the South Seattle area.”

But to help move sales, he also said then that ST Residential would respond to market conditions by lowering condo prices well below the original 2009 prices.

Construction of the Town Square complex, then owned by Urban Partners, the city’s private developer for the project, was completed in June 2009.

But that September, condo sales were halted when the FDIC closed Corus Bank, which had financed construction of the building with a $38.5 million loan.

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.

Urban Partners has since been waiting until after ST Residential resumed condo sales to propose a development plan for phase two of the Town Square project.

Read more of our extensive coverage of Burien Town Square here.

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

Urban Partners no longer owns the largely unoccupied six-story condominium/retail complex it built as the first private development in Burien’s Town Square.

And the clock continues ticking toward the deadline for Urban Partners to begin construction of its next Town Square project.

It appears, however, that a 10-screen multiplex cinema will not be this project – and that one may never be built at Town Square.

City Manager Mike Martin told The B-Town Blog this week that Paul Keller, managing partner of Urban Partners, implied the proposed cinema complex may be stalled.

Keller reportedly said this while he was in Burien on Nov. 12.

According to Martin, Keller indicated that development costs are significantly higher than earlier estimated, while additional funding for such a project is harder to obtain at this time.

So what happens at Town Square next? It appears that no one knows – or, if they do, they’re not talking.

Neither Keller nor Frank Rimkus, president and CEO of Los Angeles-based Galaxy Theaters, have returned calls from The B-Town Blog.

Last November, Rimkus presented a proposal to Burien council members to build with Urban Partners a Town Square multiplex cinema.

Development Agreement
Urban Partners’ original plan, agreed to by the city in 2005, was for construction of a second condo/retail complex as phase two of the private development component of Town Square.

The development agreement between Burien and Urban Partners also required the city’s private partner to have its second project underway no later than two years after completion of the first.

A certificate of occupancy for the condo/retail complex was issued in July 2009.

Urban Partners owns the vacant parcels east of that property and the library/city hall, immediately west of SW 150th St. It has submitted no plans for the development of either parcel to city staff.

Under the development agreement, Burien could buy back those parcels for 90 percent of what Urban Partners paid for them if a second project has not been started by the deadline.

But, said Martin, “at this point the city has no intention of triggering [the buy-back] provision … we know with a great deal of certainty they will not be building condos there in the next couple of years.

“The reality is that nobody is building big projects right now. They just aren’t. It would be foolish to start a major project right now.”

Noting that Urban Partners “just got caught up in a bad economy,” he added the city is “willing to work with them on alternatives.

“We want them to be ready, not too soon and not too late,” when the economy begins to recover. “What is smart now is to be planning what comes next.”

A negotiated alternative might include a realistic time extension for Urban Partners to begin construction of its phase two development, with the city receiving certain benefits in return.

The proposal by Urban Partners/Galaxy Theaters for a multiplex cinema, as an alternative to another condo/retail complex, suggested building it at the southwest corner of S 150th St. and 4th Ave. SW.

Rimkus estimated it would bring 400,000 movie-goers – most of them from the area between West Seattle and Federal Way west of Interstate 5 – to downtown Burien annually.

Some retail space was to be included in the cinema complex.

Urban Partners as Manager?
On Oct. 29, Urban Partners transferred title of its Town Square building to ST Residential rather than going through a foreclosure sale or filing bankruptcy in an attempt to retain ownership of this property.

ST Residential announced at the time that Urban Partners would be manager of the building because of its history with Town Square and the city.

But even this may not be a sure thing.

The Federal Deposit Insurance Corporation (FDIC) holds a 60 percent in ST Residential. Because public funds are involved in this investment group, a request for proposals for a permanent manager of the condo/retail complex may be a legal requirement.

Although Urban Partners likely would submit a proposal – with an inside track given its history with the project – there is no guarantee the development group would win the contract.

Urban Partners financed construction of the private Town Square development with a $38.5 million construction loan from Corus Bank of Chicago.

But the bank, a major construction lender, was closed and its assets seized by the FDIC in September 2009, just three months after the building opened.

ST Residential – an investment group formed by the FDIC, Starwood Capital Group and four other private investors – acquired Urban Partners’ Town Square project loan.

With negotiations between Urban Partners and ST Residential – initiated shortly after the failure of Corus Bank – moving slowly, a legal notice of foreclosure was filed on July 26.

If Urban Partners did not make a past-due payment of $3.5 million by Sept. 1, according to that notice, the Town Square complex would go into foreclosure.

Six condos sold last year were not impacted.

Peter Marino, a spokesman for ST Residential, said this week the investment group is “in deep analysis mode right now since we got the property a few weeks ago. We are getting our arms around it and we will be making decisions on a variety of issues in the weeks and months ahead.”

Those decisions may include how much to reduce condo prices, if at all, and what new retail leasing rates should be so sales can resume and the building can start filling up.

No new sales or leasing activity is expected to begin until mid-spring at the earliest.

by Ralph Nichols

The privately owned condominium/retail complex in Burien’s Town Square could finally begin filling up next year.

Developer Urban Partners transferred title of its six-story building to BTS Marketing LLC on Oct. 29 – ending more than a year of uncertainty about the future of this mixed-use project.

Chicago-based Corus Bank, which held Urban Partners’ construction loan, was closed and its assets seized by the Federal Deposit Insurance Corporation (FDIC) on Sept. 11, 2009 – just three months after the complex opened.

BTS Marketing is an affiliate of Corus ST Residential – comprised of the FDIC and several private investors – which became holder of the construction loan.

Corus ST Residential assumed ownership of Corus Bank’s residential construction loan portfolio after the bank failed. Corus ST Residential has no connection to now-defunct Corus Bank.

Now that ownership of the building has been transferred – avoiding a trustee’s sale of the Town Square property, which was in foreclosure, or filing for bankruptcy by Urban Partners to avoid a sale – what happens next?

Spokesman Peter Marino told The B-Town Blog:

“ST Residential will spend the next several months determining what additional investments to make in the property and when to re-launch it into the marketplace.”

ST Residential has retained Urban Partners to manage the condo/retail complex. Urban Partners also still owns two vacant parcels that, when eventually developed, will complete the Town Square project in Burien’s city center.

The change of ownership “moves the ball down the field and in that sense is a very good thing,” Burien City Manager Mike Martin said. “We don’t control the economy, but this does begin to position the project for that moment when it does change.”

Dan Rosenfeld at the Town Square opening, June 2009.

Dan Rosenfeld, a founding member of Urban Partners, agreed it “is good in the sense that it frees up a single party to move forward with the sales of condos and the leasing of ground floor retail.”

Although no longer a member of Urban Partners, the city’s private developer of Town Square, he remains an investor in Urban Ventures, which owned the building and owns the two vacant parcels.

ROSENFELD FAULTS OBSTRUCTION BY FDIC
As long as a cloud of uncertainty about their construction loan and continuing ownership of the Town Square property “was over us, we were unable to move forward” with selling condos and leasing retail space, Rosenfeld said.

And he placed the blame for that uncertainty – and for the failure of negotiations between Urban Partners and Corus ST Residential – squarely on the FDIC.

“I am disgusted that the United States government would act as a predator in this community,” Rosenfeld told the B-Town Blog.

“The buyer [BTS Residential/Corus ST Residential] is 60 percent owned by the FDIC. When the lender [Corus Bank] – not the borrower [Urban Partners] – went into default, the FDIC refused to negotiate with us.”

The FDIC “refused to sell us the loan, which we offered to buy at a premium, and refused to negotiate new terms. Instead, the FDIC sold this loan as part of a package to a speculator from New York while keeping a 60 percent interest for the federal government.

“So, in effect, it’s the U.S. government that’s meddling with the real estate market in downtown Burien,” he added. “I think it’s disgusting and that’s not what our government should be doing. None of this would have happened if the FDIC hadn’t intervened….

“We understood the economics of the market. We understood what the prices should be. We understood what should be done to restart sales. But the FDIC … refused to allow us to go forward.”

Rosenfeld said the FDIC has “blown out one development after another [and] the profit goes to the feds. That’s a bad policy for the federal government to have … taking investments from private businesses.”

Given these circumstances, the property transfer “is good for the city of Burien because it will clear up title and allow the owner to complete the sales of condos and the leasing of the ground floor.”

Only six of the building’s 124 condo units were sold and none of its 19,700 square feet of retail space for shops and restaurants was leased before the failure of Corus Bank put marketing them on hold.

“I have no doubt that Burien Town Square will be an outstanding successful project, that every unit will be occupied and all the ground floor leased,” he continued. “That’s what we promised and that’s what the community will get.

“This is a first-class project and it just needs to fill up.”

Rosenfeld said their intent after negotiations failed was for the transfer of title from Urban Partners to BTS Marketing/Corus ST Residential to be “seamless. At this time it is best for the project.”

And he stressed the fact the title “did not go back to the original lender” – the failed bank – “is an important distinction. Urban Partners didn’t default. The lender [Corus Bank] defaulted. We had no bank to negotiate with.”

HISTORY OF THE LOAN
Urban Partners financed construction of the Town Square complex with a $38.5 million loan it secured from Corus Bank of Chicago in 2007.

The nation’s housing market began to collapse a year later, eight months before the complex opened in June 2009 along with the Burien Library/City Hall building and Town Square Park.

When the FDIC closed the bank, which was a major construction lender, it seized the assets of the financial institution. Urban Partners initiated negotiations with the FDIC to buy back its construction loan.

However, ST Residential [now Corus ST Residential] – an investment group formed by the FDIC, Starwood Capital Group and four other private investors – subsequently became the holder of Urban Partners’ Town Square project loan.

The FDIC rejected the offer by Urban Partners and sold a 40 percent share of Corus Bank’s construction-loan portfolio to the investors, while holding a 60 percent ownership interest for the federal government.

When negotiations between Urban Partners and ST Residential stalled, casting doubt on the developer’s ability to retain its ownership of the Town Square property, Urban Partners stopped repaying of the construction loan.

ST Residential responded by filing on July 26 a notice of foreclosure. If Urban Partners did not make a past-due payment of $3.5 million by Sept. 1, the building would be subject to an Oct. 29 trustee’s sale.

Urban Partners owed approximately $34.8 million on its construction loan when the property title was transferred to BTS Marketing/Corus ST Residential last week. Only the 118 unsold condos and retail space are affected.

“We are extremely proud of what we’ve accomplished with the city and the extraordinary building we have given the community,” Paul Keller, principal and founding partner of Urban Partners LLC, said in a news release announcing the title transfer.

“We want to continue to be involved in its success” – now as manager of the mixed-use complex, Keller added.

The release noted “the move came after the venture was unable, after months of good faith negotiations, to restructure the … debt used to help finance the project. After careful consideration … [Urban Partners] decided not to use bankruptcy as a defensive strategy to keep control of Burien Town Square.”

Matt Burton, CFO of Urban Partners.

Matt Burton, principal and chief financial officer of Urban Partners, said “a battle over the property or a contentious bankruptcy proceeding” would have been detrimental.

Neither action would have been “in the best, long-term interest of the project, its residents, the city of Burien or Urban Partners’ long-standing investment in the community.”

Urban Partner was retained by Corus Construction Venture LLC, an arm of BTS Marketing/Corus ST Residential, to provide ongoing management services for the project because of its “historical knowledge” about the Town Square development.

Those factors include Urban Partners’ “knowledge about the building, buyer demographics, retail leasing and competitive properties in the area along with [its] significant relationships with community residents, businesses and city officials.”

ROSENFELD TALKS ABOUT TOWN SQUARE
Despite the bank failure that led to Urban Partners’ transfer of title to the new holder of its construction loan, Rosenfeld remarked, “We’re still very proud of what we did. It’s the finest town square development there is. It’s as good as any in the nation.

“Phase I is there. It will be filled up. I just don’t know how fast they will fill up. And I have no doubt the other blocks will be developed – just not right now. The real estate lending markets have not thawed yet.

“It’s not going to be quick,” he continued. “Nobody’s going to build another 120 condos on speculation. Everyone knows what’s going on in the overall economy. But we will live to see the rest developed and the vision will be completed.”

Rosenfeld began advising the Burien City Council about the development of a town square in the mid-1990s, shortly after incorporation, and is “proud to have played a small part in it.”

Look at what the city has already as the result of the Town Square project, he observed. Ten years ago the site held the educational services building, an empty Gottschalk’s store, and a lot of parking.

Now there is a “wonderful” new city hall and King County Library building, a downtown park that is the center of many community activities, and a condo/retail complex “with gorgeous quality units.”

Everything that has happened in the past year is “just a bump in the road,” Rosenfeld added. “Now we can move forward. We’ll do more.”

So what do YOU think – will condos start selling again at Burien Town Square? Please take our Poll or leave a Comment below:

by Ralph Nichols

Burien Town Square’s only privately developed property – the nearly vacant condominium/retail complex built by Urban Partners, which opened in June 2009 – is now expected to be sold this Friday, Oct. 29th.

Urban Partners has been negotiating with ST Residential, which holds its construction loan, to retain ownership of the complex and for new repayment terms that reflect the current housing market.

In early October, Paul Keller, managing partner of Urban Partners, the private developer of Town Square, again said that an agreement, which would avoid a trustee’s sale, was under final review.

At that time, Keller still expected a settlement to be signed by all parties involved and the pending foreclosure action to be avoided.

But, Peter Marino, spokesman for ST Residential, informed The B-Town Blog on Oct. 27th,

“The Burien Town Square property is scheduled to be sold pursuant to a trustee’s sale on Friday.”

“We are working with Urban Partners and, in the event an ST Residential affiliate is the successful bidder at the foreclosure sale, we expect to retain Urban Partners to manage the property to ensure a smooth ownership transition for the project and the existing unit-owners.

“ST Residential will provide further comment after the foreclosure sale,” Marino added.

The B-Town Blog is attempting to reach Keller for comment.

Burien Town Square will be put up in a foreclosure sale Friday, Oct. 29th.

Urban Partners financed construction of the six-story Town Square complex with a $38.5 million construction loan from Corus Bank of Chicago.

But the bank, a major construction lender, was closed and its assets seized by the Federal Deposit Insurance Corporation (FDIC) on Sept. 11, 2009 – just three months after the building opened.

The nation’s housing market collapsed about a year before Corus Bank failed and only eight months before the complex opened at the same time as the new Burien Library/City Hall building and Town Square Park.

ST Residential – an investment group formed by the FDIC, which retained a 60 percent interest in the Corus construction-loan portfolio, Starwood Capital Group and four other private investors – acquired Urban Partners’ Town Square project loan.

With negotiations between Urban Partners and ST Residential – initiated shortly after the failure of Corus Bank – moving slowly, a legal notice of foreclosure was filed on July 26.

If Urban Partners did not make a past-due payment of $3.5 million by Sept. 1, according to that notice, the Town Square complex would go into foreclosure.

Urban Partners still owes approximately $34.8 million on its loan from Corus Bank. Foreclosure will affect the 118 unoccupied condos that have not been sold, as well as ground-floor retail space and parking.

Six condos sold last year will not be impacted.

Urban Partners' Paul Keller.

In an August interview, Keller told the B-Town Blog that “Urban Partners anticipates [a settlement] will happen.

“Very simply put, Urban Partners anticipates its continuing participation in this project through the sale of condominiums and the leasing of ground-floor retail space.”

The B-Town Blog will update this story as it unfolds.

Read our previous coverage of Town Square here.

by Ralph Nichols

Despite recent notice of a pending foreclosure action against the condominium/retail complex in Burien Town Square, negotiations between Urban Partners and ST Residential have progressed to the point where a settlement appears imminent.

“We’ve completed our negotiations and the final agreement and various exhibits are being circulated and reviewed now,” Paul Keller, managing partner of Urban Partners, the private developer of Town Square, told the B-Town Blog on Aug. 17.

“I firmly believe that within a couple of weeks, the agreement will be signed,” Keller said. “When I stood before the city council in May, I told them we would see this to fruition. Today I stand by that statement.”

He declined to discuss specifics since the agreement is still under review. “I can only tell you what Urban Partners anticipates will happen.

“Very simply put,” Keller continued, “Urban Partners anticipates its continuing participation in this project through the sale of condominiums and the leasing of ground-floor retail space.”

Urban Partners built the Town Square complex with a $38.5 million construction loan from Corus Bank of Chicago. But the bank was closed and its assets seized by the Federal Deposit Insurance Corporation on Sept. 11, 2009 – three months after the six-story building opened.

The nation’s housing market had collapsed about a year before Corus Bank failed – as the complex was nearing completion and only eight months before it opened in June 2009, along with the new Burien Library/City Hall building and adjacent park.

“I firmly believe that within a couple of weeks, the agreement will be signed" - Paul Keller.

The FDIC kept a 60 percent interest in the Corus construction-loan portfolio and sold the remaining assets to Starwood Capital Group and four other private investors. Together all parties formed ST Residential, which is holding and renegotiating those commercial loans.

When Keller updated the city council on the progress of negotiations in May, he noted, “The FDIC entity does not lend itself to any quick resolution.” Yet in the meantime, “We have people waiting to close escrow and move into the building, but they’re stymied.”

He added this week, “There are all kinds of internal processes they [ST Residential] have to go through that I’m not privy to and then they have to report back to the FDIC” before resuming discussions with Urban Partners.

ST Residential also has its home office in Chicago and a former employee of Corus Bank, who managed Urban Partners’ Town Square construction loan, has continued to be involved with the developer during the negotiation process.

“That’s who we have had to deal with,” Keller said. “So there’s been a continuity.”

With negotiations between Urban Partners and ST Residential, which were initiated last fall, moving slowly, a legal notice of foreclosure was filed on July 26, stating that if Urban Partners does not pay $3.5 million by Sept. 1 its Town Square complex will go into foreclosure.

Urban Partners still owes approximately $34.8 million on its loan from Corus Bank. Foreclosure would affect the 118 unoccupied condos that have not been sold as well as ground-floor retail space and parking. Six condos sold last year would not be impacted.

Keller noted that the foreclosure action and the $3.5 million payment “are all included in the agreement.”

During negotiations with ST Residential, Urban Partners has attempted to renegotiate down its construction loan so prices of condos and retail space can be reduced to reflect current market rates.

Peter Marino, a spokesman for ST Residential, said in response to an inquiry from The B-Town Blog, “at this point, we are a few weeks away from being able to comment publicly about [the Town Square] property. We will let you know as soon as we have something to say.”

Urban Partners may bring a 10-screen cinema, with an additional stage for community theater and dance, to downtown Burien.

Town Square Cinema Next?
Beyond the anticipated agreement – and resumption of condo and retail-space sales – Keller said Urban Partners is “absolutely” committed to continued involvement in the private development of Town Square.

“Urban Partners has been diligently working with Galaxy Theatres for a transaction that can be advanced and can satisfy all the requirements of the downtown plan.

“I’m cautiously optimistic that very soon I will be able to report back to the Burien City Council and the Burien Economic Development Partnership of fruitful progress on a Galaxy Theatre” for Town Square.

The recent approval of financing for Burien’s Transit-Oriented Development parking garage by Sound Transit and the King County Council “is a big step forward, a critical component,” for the proposed multiplex cinema project, he said.

If built, it would bring a 10-screen multiplex cinema, with an additional stage for community theater and dance, to downtown Burien at the southwest corner of SW 150th St. and 4th Ave. SW where the old city hall building is located.

A 10-screen cinema would be built at the corner of SW 150th St. and 4th Ave. SW where the old city hall building is located.

The parking garage, which would provide needed evening and weekend parking for movie goers, will be built near the northeast corner of SW 150th St. and 4th Ave. SW. Construction is expected to begin in late summer or early fall with completion in about a year.

Council approval would be required for a cinema, since it would represent a significant change in plans from Urban Partners’ current Town Square agreement with the city for development of another condo/retail complex on that site.

PREVIOUS COVERAGE:

• REPORT: Burien Town Square Facing Foreclosure
• “We Can Be Proud Of What We Did” Town Square Developer Dan Rosenfeld
• Is Town Square’s Urban Partners Becoming A “Silent Partner” To Burien?
• 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

Burien City Council members were told in a cautiously optimistic “bottom-line” update Monday night (May 24) that residential units in the mostly vacant, six-story Town Square condominium/retail complex could be selling later this year.

“This city and community will see the project sold out sometime in the future,” said Paul Keller (pictured, left), managing partner of Urban Partners, Burien’s private developer for the Town Square project. “I don’t think it will be years. I think it will be months.”

Keller also announced that, in June, Urban Partners and Galaxy Theaters will present the council “with a proposal to move forward with a theater project.” The idea of building a cinema in Town Square was initially discussed with lawmakers last November (read our previous coverage here).

This development, if built, would include a 10-screen multiplex cinema, with an additional stage for community theater and dance, on the Town Square parcel at SW 150th St. and 4th Ave. SW where the old city hall building is located.

“Working in this economy has been very, very challenging,” Keller said. “And then when we lose the construction lender – that was frustrating.” Nevertheless, “Urban is absolutely committed to this project.”

Burien's old city hall building at SW 150th and 4th SW could be the home of a new Galaxy Cinema complex.

Corus Bank of Chicago, through which Urban Partners obtained the construction loan to build the phase one complex in Town Square, was closed and its assets seized by the Federal Deposit Insurance Corporation on Sept. 11.

Now the Urban Partners’ construction loan is held by a joint venture of the FDIC and Starwood Capital Group – S.T. Residential.

“The FDIC entity does not lend itself to any quick resolution,” Keller noted. “I have spent countless, countless hours in meetings in New York, in Chicago, in San Francisco, in Seattle trying to move that process forward.”

“We have people waiting to close escrow and move into the building, but they’re stymied.” While Urban Partners waits on the FDIC process, the investment group continues to actively manage the condo/retail building.

“We have made four separate proposals to the FDIC to maintain our involvement with phase one,” Keller continued. But “since the federal takeover of Corus, we are not in control of the timing or the outcome of events.”

He said as recently as Monday afternoon, he was involved in an exchange of ideas that could help bring the parties to an agreement in the next 30 to 45 days “on our continuing involvement in phase one.”

But, Keller cautioned, although he remains hopeful, there is no certainty at this time that a resolution will emerge from the current discussions. Even so, “I don’t anticipate that an impasse will develop.”

A factor that could help Urban Partners is that their construction loan is the only one of the 135 large commercial assets – ranging in value from more than $50 million to around $225 million – in the portfolio held by S.T. Residential for a property located in Washington state.

The $52 million, phase one condo/retail complex in Town Square, with 142 residential units and 20,000 square feet of ground floor commercial space, “was completed on time and on budget,” Keller stated.

This city and community will see the project sold out sometime in the future,

But phase two – construction of more condos in a separate complex just north of the existing building, which opened last June – “is on hold given the collapse of the housing market.”

Development of a cinema in the meantime would “increase business downtown and benefit existing businesses,” he predicted.

“Urban Partners is so proud to be part of Town Square,” Keller told the council. “This development and our investments remain a very high priority … despite the severe economy.”

PREVIOUS COVERAGE:

• ‘We Can Be Proud Of What We Did’ – Town Square Developer Dan Rosenfeld
• Is Town Square’s Urban Partners Becoming A ‘Silent Partner’ To Burien?
• 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

As work on the six-story condominium/retail complex in Town Square neared completion, principals of Urban Partners held their breath, month by month, until troubled Corus Bank of Chicago paid each draw on the construction loan.

“The good news is we made it to completion. They funded every construction draw,” Dan Rosenfeld, a founder of Urban Partners – Burien’s private developer for Town Square, told The B-Town Blog last week. “Then they went bust.”

Corus Bank was closed and its assets seized by the Federal Deposit Insurance Corporation on Sept. 11. Now the Urban Partners construction loan is held by a joint venture of Starwood Capital Group and the FDIC.

“If we do nothing else in our lives, we can be proud of what we did with this project in this community,” Rosenfeld continued. “In our hearts, we know we have done a great thing in Burien. We took empty parking lots and turned them into a world-class project.”

But the condo/retail complex – which opened last June at the same time as the new Burien City Hall/King County Library – remains only partially occupied with six residential units sold, due to complex financial entanglements completely removed from the control of Urban Partners.

“Every sale or lease of space requires lender approval,” Rosenfeld said. But since the failure of Corus Bank, “there is no one to approve leases or sales. There is no one to even approve prices.”

Starwood currently seems”unwilling or unable” to do that, “but this won’t last forever,” he continued. The financial issues resulting from the bank failure will be resolved, and he expects that most of the condos will be sold and the retail space leased or sold by the end of this year.

Trading Places
Although no longer a principal with Urban Partners, a Los Angeles-based development company, Rosenfeld remains involved with Town Square as “an active partner and investor” through Urban Ventures – a related company that actually owns this property with other investors.

[Note: Because Urban Partners submitted the original private proposal for Town Square, the name Urban Partners is used throughout this story.]

Rosenfeld became concerned in 2007 “that the real estate market was increasingly fragile, and we needed to take a more conservative approach. It was time to get out. But I didn’t want to let this one go.”

Keeping his Burien investments – including Town Square – in his portfolio, he sold his shares in Urban Partners and many other investments to his partners in the development company, Paul Keller and Matt Burton.

“I stayed loyal to Burien,” he added. “It’s a great community.”

In the meantime, Urban Partners, with Rosenfeld no longer a principal, has continued with its other investments and development projects, including the Terry Avenue Apartments in downtown Seattle.

Rosenfeld formally left Urban Partners last year to join the staff of Los Angeles County Supervisor Mark Ridley-Thomas, a friend of 20 years.

Dan Rosenfeld now works for Los Angeles County Supervisor Mark Ridley-Thomas.

As a senior deputy responsible for economic development, land use, sustainability and transportation issues, he now oversees a $1.7 billion light rail project and the $700 million replacement of hospitals that don’t meet seismic codes, just in Ridley-Thomas’ district.

“Transit-oriented and community development remain my great interest,” he said. “The time to develop new real estate will someday return.”

While his personal interest and connections in the Northwest helped him sell the Burien City Council on Urban Partners at the inception of the Town Square project, Rosenfeld admits the L.A. investors face an uncertain future here.

Urban Partners future role?
“Starwood [Financial Group] has very strong rights” to the condo/retail complex, he conceded. “They bought the [construction] loan –with the FDIC after it closed Corus Bank. They control the note.”

The FDIC sold a 40 percent interest in the bank’s construction loan portfolio to the Starwood group for about 50 cents on the dollar – while Urban Partners was attempting to buy its Town Square construction loan directly from the federal agency.

Now Urban Partners is negotiating with Starwood and the FDIC for a restructuring of its construction loan that reflects current financial conditions. “The market has changed since the project started,” Rosenfeld said. “Nothing is easy today.”

He hopes the negotiations will result in either a partnership or similar relationship between Urban Partners and Starwood for ownership and management of the building, or its outright purchase by Urban Partners. The development company’s other investment partners are also involved in the negotiations.

While Starwood and the FDIC own the note on the construction loan for the condo/retail complex, “Urban Partners knows Burien and the project better than anyone else,” Rosenfeld said. “It would be hard for Starwood to focus adequately on this one project in the Corus portfolio,” especially since many of their projects are in the Sunbelt.

With these factors in mind, he speculated that Starwood might seek a partnership or joint management role with Urban Partners for the Town Square building. “Urban Partners has credibility [in Burien]. No one can do a better job for Starwood, or for the community.

“Let’s each bring our strengths to this and get the project sold out. Sell the condos with pending buyers and then sell the rest.” Six condos closed last year, with serious interest from buyers in 34 others despite the fact the sales can’t be closed at this time.

Land for Sale
For now, Urban Partners still owns the three remaining parcels of land on the northern half of the Town Square site. But the group recently listed two of the undeveloped parcels for sale with a commercial broker “to test market interest,” according to Rosenfeld.

The largest parcel, located south of SW 150th St. and east of 6th Ave. SW, is listed for $1.8 million. Immediately beyond the condo/retail complex, this land – originally designated for phase two development of the project – 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 shows no indication that it would let go of the third 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.

A proposal for construction of a 10-screen cinema on that site is under study. Yet nothing is carved in stone for Urban Partners, either the parcels it might sell to the right buyer, or the future use of each parcel.

All Options Considered
“We’re looking at all choices,” Rosenfeld said. In the future, Urban Partners could end up developing mixed-income housing or a medical office building or a hotel on the remaining parcels. “All are possibilities. It’s a matter of time and economic recovery.”

Any new buyer of vacant land in Town Square will be obligated, legally, to conform to the original development agreement that Urban Partners signed with the city, according to Dick Loman, Burien’s economic development manager.

City Manager Mike Martin noted last month that Burien “has no money invested” in the private development components of the Town Square, “so the city will not lose any money” if Urban Partners is unable to continue and new investors don’t move in to complete the project.

Rosenfeld remains optimistic. “I don’t know what will happen in the future, but, with our long history here – my family has been active in business in Burien for 47 years – we have made commitments. We set the bar high. Eventually phases two and three will be built.”

Although he provided input to the original Burien City Council when a town square was first discussed, as far back as 1995, “I had no idea I would bid on the site someday, let alone build on it. We are very proud of what we have done together.”

Town Square today – the King County Library/Burien City Hall building, the condo/retail complex and the park between them – is “recognized around the country as a textbook example of first-tier suburban revitalization,” he said.

“It took a lot of determination, and it happened because of the dynamic intervention of the city ten years ago. When we started, parking spaces along [SW] 152nd [St.] were empty after five o’clock.

“Now, with new restaurants and businesses on the street, it’s busy well into the evening,” Rosenfeld added. “We have changed Burien significantly – for the good. Nothing worthwhile is easy, indeed.”

PREVIOUS COVERAGE:

• Is Town Square’s Urban Partners Becoming A “Silent Partner” To Burien?
• 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

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.