‘Monumental Agreement’ Points to Resolution of Town Square Standoff
A “standstill agreement” – described by Burien City Manager Mike Martin as “monumental” – affecting the undeveloped properties at Town Square – comes before city council members tonight (Monday, Aug. 20; download the PDF packet here, see p. 69).
If the council approves this agreement with private developer Harbor Urban, it will eliminate the possibility of legal action should Burien buy back the three vacant parcels.
It also gives Harbor Urban additional time to propose a project plan – most likely a quality apartment building – that reflects current housing market realities.
“At the end of the day, we have the right to say we don’t like it and move on to something else,” Martin said.
In the meantime, the standstill agreement holds in abeyance the city’s option to repurchase these properties.
The clock for Burien to take action started running June 4 when council members voted 7-0 to initiate a buy-back of these properties from Harbor-Urban (read our coverage of that here).
Prior to that vote, Harbor Urban, which has a long-standing agreement to develop them, asked city lawmakers for more time to launch the second private project at Town Square.
“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,” they were told by a Harbor Urban principal.
What then was Urban Partners had two years to begin construction on a second development after the first Town Square condominium-retail project opened in June 2009. That building is now owned by ST Residential.
Since then, however, the three properties still owned by Harbor Urban have remained vacant and no progress has been made toward the start of a new development.
Harbor Urban is now 13 months in default, and the original development agreement gives the city the right in that event to repurchase any undeveloped Town Square properties at 90 percent of what Urban Partners paid for them in 2005.
City Attorney Craig Knutson told The B-Town Blog this agreement, already negotiated with Harbor Urban, will temporarily stop the clock on the buy-back process and give them until Nov. 15 to propose a viable development that is acceptable to the council.
If Harbor Urban doesn’t meet the new deadline, Knutson noted, “then the city has the right to proceed with repurchase, or sell it to a third party” that could develop a second Town Square housing complex.
He said the city also “could withdraw its intent to repurchase” if market conditions look unfavorable for a new development. “If the market flips, the city would not want to be holding undeveloped property.”
Martin said the standstill agreement provides “certainty around the time frame and certainty that we can now move ahead without litigation.
“When we get to the end of this process, whether the city likes it [Harbor Urban’s new plan] or doesn’t like it, this agreement will avoid litigation. That’s why this is a big deal.”
Any new development almost certainly won’t be another condo-retail complex, as originally envisioned, he continued.
“In my opinion and the opinion of others, condos are not an option at this time. There is no interest in condos.” So Harbor Urban is looking at the possibility of building apartments in Town Square.
But three requirements by the city will come into play for development of an apartment complex, Martin said: density of housing units; “structured and largely hidden parking, not a surface parking area;” and “quality that is compatible with what we already have.
“Most likely it would not have retail” on the ground floor like the existing complex does. That retail space has remained vacant except for a Subway Shop now getting ready to open there.
“It’s important to us that we not compromise our vision” for Town Square, Martin added. “At some place this fall we’ll pretty much know” what happens next.
Here’s the full text as included on page 69 of Monday night’s City Council agenda/packet:
In 2002, the City purchased the Town Square property at fair market value of $4,050,000 and invested significant public resources in constructing and maintaining transportation and park facilities in the Town Square. Following a Request for Qualifications process, the City sold the Town Square property consisting of Parcels I, IV, V, and VI to Urban Ventures Burien, LLC (“Owner/Developer”), at fair market value of $4,666,016 pursuant to a Disposition and Development Agreement dated June 29, 2005.
Owner/Developer chose to develop the Property in Phases, substantially completed the first Phase on July 21, 2009, and was required to commence construction of the next Phase on or before July 21, 2011. On April 30, 2012, the City issued a formal written notice to Owner/Developer that an Event of Default pursuant to the DDA had occurred. Pursuant to Resolution No. 334, on June 8, 2012 the City issued a formal written notice of our intent to repurchase the remaining undeveloped parcels.
Owner/Developer has since merged with Harbor Properties to form Harbor Urban. After extensive dialog with Owner/Developer, the City and Owner/Developer have negotiated a Standstill Agreement that would suspend the repurchase process for a period of time no longer than November 15, 2012. The Owner/Developer would have an opportunity to propose a project and amendments to the DDA. If the project moves forward the repurchase would be canceled and if doesn’t move forward, the Owner/Developer agrees to transfer the Parcels to the City or a third party with out delay or litigation.
Staff is recommending that the City Council approve the Standstill Agreement.