Bank eyes Lacey property
LACEY - The future of the proposed Lacey Gateway Town Center is in jeopardy after a bank began foreclosure proceedings on a key property owned by a Tri Vo-managed company.
Lawyers for HomeStreet Bank filed notice Jan. 29 of the bank’s intent to foreclose on more than 330 acres on the site of the project, including the first phase of the proposed mixed-use town center now under land-use review. The foreclosure auction is set for April 30.
The property owner, Hawks Prairie Investment LLC, managed by South Sound developer Vo, was unable to pay when the principal balance on the loan came due Oct. 31, according to notice of trustee’s sale. Hawks Prairie Investment owes more than $5.5 million on that loan, the notice said. Separately, it owes more than $450,000 in delinquent property taxes from 2009 on the seven parcels owned by Hawks Prairie Investment, including interest and late fees, according to the county treasurer’s office.
The action comes as land-use approval for the town center reaches a critical juncture. Three days before the filing of the foreclosure notice, the city released its final environmental impact statement that examined the effects of the proposed town center’s first phase and ways to mitigate them. The project’s completion could have paved the way for a critical vote before the City Council that would wed the specific project to the city’s land-use policies and goals.
Now, uncertainty abounds.
The bank’s action is a blow to the city’s efforts to create an activity center in a community that incorporated in 1966 without an established downtown. It also shows how developers are ailing because of the precipitous drop in commercial lending that was their lifeblood during a housing boom fueled by easy credit.
Vo already has lost other properties to foreclosure. He’s not alone. In another notable example, a limited-liability company led by another well-known developer, Steve Chamberlain, filed for bankruptcy to protect the 1,250-acre Thurston Highlands property in Yelm from foreclosure. The bankruptcy case is pending.
Vo has made every effort to retain ownership of the town center property despite his financial challenges. It is one of the three significant mixed-use projects he has proposed in Thurston County urban areas, including Bellatorre in Tumwater and Larida Passage in Olympia.
Vo was out of town and unavailable for comment Thursday. Lacey City Manager Greg Cuoio said he had spoken with Vo in the past two weeks.
“The current market across the nation for obtaining loans is significantly depressed, and it’s hard to get commercial loans for much of anything,” he said. “(Vo) wants to retain the property and is fully supportive of the vision and wants to see it happen.”
In 1992, the city adopted a plan that envisioned a high-intensity town center along Interstate 5 between Carpenter Road and Marvin Road. The idea sat idle for more than a decade until Vo and a partner purchased hundreds of acres of land from a family trust in late 2005, including 250 acres with significant I-5 frontage and visibility.
At the height of the building boom, momentum quickly built behind a development project that embraced the city’s vision. The city and Hawks Prairie Investment entered into an agreement in which the city promised water to serve the town center’s first phase in exchange for the first right to buy up to 10 acres of land for civic use. There also were other terms.
The partners then secured $10 million in state grant funding to build roads and other infrastructure to open the area to development. As a result, Cabela’s opened in December 2007.
Cabela’s, whose operators say it attracts millions of visitors each year, was intended to be the magnet to attract further development of the town center’s first phase. The first phase would consist of a lifestyle center, or open-air mall, totaling 1.1 million square feet; 100,000 square feet of office space; and 500 housing units. It would be on about half of Hawks Prairie Investment’s I-5 property, east of Cabela’s.
Cuoio said Vo was in talks to partner with a nationally known development company to complete the first phase of the proposed town center.
Vo planned to develop the remainder of the 212-acre parcel with more retail space, office space and residences in future phases. The other properties that are part of the foreclosure proceeding are zoned for residential development and are north of Britton Parkway.
The bottom fell out of the economy, dealing a heavy blow to Vo’s plans. Banks weren’t lending money. Retailers weren’t interested in expanding.
The bank’s action came at a bad time for the city, as well. The release of the final environmental impact statement, barring an appeal, will allow a master plan, development agreement and so-called planned-action ordinance to be brought to the City Council for its approval, which is essential for the project to move forward. The EIS appeal deadline is Tuesday.
“We got one stage of the process done with environmental review,” Lacey Community Development director Rick Walk said. “Now we’ve got to have the property owner there to complete the process.”
Cuoio said Vo wants to continue the process, but it remains to be seen whether it will be meaningful.
The City Council won’t consider the project before the foreclosure sale, Walk said. He said city staff members need more time to finalize the master plan, which includes revisions based on findings within the EIS.
Vo could secure the needed financing to hold on to the property. Otherwise, the bank or a new property owner could continue the land-use approval process if they favor his project now in the pipeline. If the new owner doesn’t and proposes significant alterations, Walk said, that could put the project back to square one.
A representative of the law firm handling the foreclosure proceedings did not return a message Thursday.
Cuoio characterized the vision as “rock-solid,” noting that it survived prior ownership changes and economic upheavals. He said the town center concept is well-positioned to advance once the economy improves because of the presence of Cabela’s and surrounding commercial development.
The preceding City Council was behind the project, but that unanimous support could be waning.
In January, three new council members took office. Councilman Ron Lawson said he would oppose moving the project forward for now, citing the abundant commercial space available around the city because of the ailing economy. He said the city should sit on the plans for three or four years until there’s improvement.
“Once we get closer to a need, then we can start looking at plans,” he said.
Councilwoman Cynthia Pratt raised concerns about the project when, before her election, she wrote comments in response to the draft environmental impact statement. Specifically, she was concerned about additional traffic congestion and that the project “will be an isolated community unconnected with the greater Lacey area, thus, not identifying with the City and not supporting its revenue base causing a loss of revenue for services,” according to a copy of her letter. In an interview this week, Pratt said she hadn’t reviewed the final study and hadn’t made up her mind about the project.
In response, city staff members noted that the project will be surrounded by existing neighborhoods and businesses and connected to outlying areas by transit and roads.
Councilman Andy Ryder, the third new council member, was unavailable for comment Wednesday.
Christian Hill: 360-754-5427
chill@theolympian.com
Rolf Boone: 360-754-5403
rboone@theolympian.com
This story was originally published February 5, 2010 at 12:00 AM with the headline "Bank eyes Lacey property."