Bankruptcy postpones auction of isthmus property in Olympia

Bankruptcy: Owner of 2 properties on strip of land near Capitol Lake files for Chapter 11

March 19, 2011 

OLYMPIA - The development company that proposed high-end condominiums on the downtown isthmus filed for bankruptcy Friday, forestalling a foreclosure auction on two isthmus properties that was also scheduled Friday.

Capital Shores Investments LLC, which includes local developer Tri Vo, filed for Chapter 11 protection in federal bankruptcy court. The foreclosure auction has been postponed until April 22, said Terrence J. Donahue of Eisenhower & Carlson of Tacoma, the trustee in the matter. But he noted that a sale cannot occur while a bankruptcy is pending.

First Citizens Bank & Trust Co. had moved to foreclose on the properties, at 505 and 529 Fourth Ave. W., because Capital Shores is in default on loans. It’s unclear how long the bankruptcy process will last. Kevin Bay, an attorney for Capital Shores, did not return a call seeking comment.

Though no auction took place, the minimum bid for the property at 529 Fourth Ave. W. was set at $1,343,100 and for the property at 505 Fourth Ave. W. at $686,750.

Capital Shores bought the parcel at 505 Fourth Ave. W. from the Housing Authority of Thurston County for $1.95 million in 2008. It bought the parcel at 529 Fourth Ave. W. from Capital Center LLC for $1.285 million in 2003.

Capital Shores borrowed from Venture Bank, a South Sound bank last based in DuPont that failed in 2009. The Federal Deposit Insurance Corp. sold the bank to First Citizens Bank & Trust Co. of Raleigh, N.C., which assumed Capital Shores’ obligation.

The bankruptcy filing is the latest development in a series of events that has lasted for more than three years. It started in November 2007 when Vo’s company filed an application asking the city to raise building height limits on the isthmus to allow for structures as tall as 90 feet. That would have allowed for Vo’s proposal for Larida Passage, two buildings with 141 condominiums, offices, retail space and parking.

The Olympia City Council approved raising height limits on much of the isthmus in 2008. But the council, with new members, reduced those limits to 35 feet last year after opponents claimed taller buildings would block views.

The developer maintains that the project is vested under the 90-foot height limit, and the project could proceed. The application for the condos is still pending and is under review by city staff, according to Keith Stahley, the city’s director of Community Planning and Development. There are no public hearings scheduled on the matter, he added.

Stahley said the proposal could be continued by a new owner if Capital Shores loses the land.

A group of local residents wants to turn the Capital Shores properties, and much of the isthmus, into a park. Gerald Reilly, chairman of the Olympia Capital Park Foundation, said in an email to supporters that he was prepared to begin negotiations with whoever bought the property at auction for his group to purchase the land.

“We now need to await developments in the bankruptcy process and work with that process to make clear our interest in acquiring the property for park purposes at a fair price,” he wrote.

Matt Batcheldor: 360-704-6869

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