Burien Council Votes to Begin Process to Buy Back Vacant Town Square Properties
Burien City Council members voted 7-0 Monday night (June 4) to initiate a buy-back of the vacant Town Square properties from Harbor-Urban, which has an agreement with the city to develop them.
Their action rejected a request by Urban Partners’ founding principal Paul Keller, read into the record by James Atkins of Harbor Urban, for more time to start their next development.
“We urge the City Council not to authorize repurchase, but to allow the Developer the chance to create the quality downtown project contemplated by everyone,” Keller wrote in his letter.
But neither Keller’s plea nor Atkins’ additional statements persuaded council members to back away from repurchasing the three undeveloped parcels.
“I’d like to share my dismay with the comments read into the record by Mr. Atkins,” declared Councilwoman (and former Mayor) Joan McGilton.
“We were excited by Urban Partners’ plans” for Town Square when they entered into a development agreement with the city in 2005, McGilton recalled.
But, she said, “I feel strongly that Urban Partners has not been responsible in coming to the city” over the last three years. “We need to gain some momentum in the downtown corridor to create our own destiny.”
Urban Properties, doing business as Urban Ventures in a public-private partnership with the city, developed the seven-story condominium/retail complex at 152nd Ave. SW and SW 6th Ave.
This first phase of private development at Town Square was completed in June 2009 and certified for public occupancy the following month.
The three-story Burien Library/City Hall and the adjacent downtown park – the public part of this project – also opened that June.
Under terms of the development agreement, once the condo-retail complex was certified, the clock started ticking for Urban Partners. The Los Angeles-based firm with Northwest ties then had two years to begin construction a second private development in Town Square.
Since then, however, Urban Partners – which recently merged with Harbor Properties to form Harbor Urban – has submitted no project plans that conform to the city vision for Town Square as defined in the development agreement.
Harbor Urban has been in default of their agreement for 11 months.
In his letter to the city council, Keller said, “To date, the developer has invested over $20,000,000 in the Town Square project with no return. Despite a loss of over $14,500,000, we developed Phase I just as the [development agreement] required.
“As we all know, the recession of the last five years has left Phase I almost completely empty. The condos cannot be sold and the retail spaces cannot be leased, leaving what should have been a great new start for downtown Burien as a blighted area.
“Even the lender for Phase I” – Corus Bank of Chicago – “went bankrupt, requiring an FDIC takeover.”
The FDIC (Federal Deposit Insurance Corp.) closed Corus Bank and seized its assets in September 2009. Subsequently the agency formed a public-private investment group, ST Residential, which now owns the building at Town Square.
Urban Partners was forced by a foreclosure action to transfer ownership of the complex to ST Residential in October 2010.
“We have met many times with the City to discuss our plans, but the City has refused to cooperate in our attempts to recognize the reality of the post-recession market and to take advantage of the opportunities to bring the project back to life,” Keller continued.
“The City has refused to consider our proposals to build a high quality medical office building in the Town Square project. The City also refused to consider our proposal to bring a new Galaxy Cinema to the Town Square project, despite the economic boost that would mean to downtown and the project.”
Council Members Fire Back
But, countered McGilton, the proposed Group Health office building cited by Keller “was discussed by all seven members of the council and it was not something we wanted downtown. The idea of a sea of asphalt [parking lots] was something we had worked 10 years to get rid of.”
Group Health is now expanding at its current Burien campus location on S. 146th St.
Council members “were extremely impressed” with a Galaxy Cinema proposal” for a multiplex movie theater, she added. “We were so looking forward to moving forward … but $4 million from the city [that they requested for the project] “was not a good use of taxpayer dollars.”
McGilton also noted that while “this is a tough economy … it has been tough on everyone.”
City Manager Mike Martin said Keller’s claims were “at odds with the facts of the case…. had we heard something different, we would have been more sympathetic with the developer.”
Harbor Urban, Martin said, has repeatedly failed to respond to requests by the city for new project plans.
“Frankly, I don’t have any faith in Urban Partners and don’t think that adding Harbor Properties” has improved their record, Councilman Gerald Robison said.
Councilman Jack Block Jr. noted that the city “made a commitment to the developer and our commitment has not been reciprocated…. It’s a matter of loss of faith and faith is essential in a project like this.”
He added “there is a number of opportunities for redevelopment of these properties” beyond Harbor Urban.
And, said Deputy Mayor Rose Clark, “I, too, am very displeased with the letter we have just heard.” She noted the developer has not followed through with phase two of Town Square private development “over a number of years.”
Monday’s action is just the first step of a buy-back, authorizing the city manager to initiate the process.
But while the development agreement grants the city the option to repurchase all undeveloped Town Square properties acquired by Urban Partners in 2005 – if the deadline for start of construction on Phase Two wasn’t met – Harbor Urban may challenge Burien’s action.
“The City’s actions have materially and adversely affected the Developer and its partners,” Keller charged in his letter.
“Regardless of the City Council’s decision tonight, the Developer will defend the investment it has made in the Town Square project and its record of good faith bargaining despite the commercial frustrations it has faced.”
The development agreement states that the city can repurchase any undeveloped Town Square properties at 90 percent of what Urban Partners paid for them in 2005.
Before the city makes a buy-back offer to Harbor Urban, however, the properties likely will be appraised for current market value. Other developers reportedly have already expressed interest in building on them after purchasing the land from Burien.
Two of the parcels are located north of the condo/retail complex, and north of the new library/city hall building, with the old city hall building still on that site. Both are immediately south of SW 150th St.
The third is a narrow strip east of the post office between S. 150th and S. 151st streets is the third parcel. The combined area totals 141,000 square feet.