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Federal Way City Council to skyscraper developer: Where's your business plan?
Twin Development and the Federal Way City Council each dropped a bombshell Tuesday. The developer announced it could not meet its Sept. 30 deadline to purchase the former AMC Theatres property from the city. The council voted 4 to 3 to extend the closing date on the land for the seventh time.
The extension is the latest in a series of controversial decisions regarding the 4.1-acre property the council hopes will be the key to spurring economic development downtown.
The extension comes just three months after the council sternly told Twin Development it would walk away from the deal if the developer did not find the money to purchase the property by September’s end. The extension was granted at the city council meeting after a nearly 90-minute discussion marked by tension, opposing viewpoints and Twin Development’s refusal to provide a business plan or marketing plan to the city council.
Mayor Linda Kochmar and city council members Jack Dovey, Roger Freeman and Jeanne Burbidge voted for the extension. Deputy Mayor Dini Duclos as well as council members Jim Ferrell and Mike Park voted against the measure.
"We need to have a backbone and put an end to this now," Ferrell said.
Twin Development is proposing a $350 million, unnamed project consisting of two 45-story high-rises and a third 35-story high-rise holding residential, retail, office and motel space on the property at 31600 20th Ave. S. A parking garage and 1.2-acre park are also planned.
The developer has had trouble securing the $6.156 million needed to purchase the property and needs more time to market the project, the partners said. The developer now has until March 31 to close on the property. It must deposit $100,000 into an escrow fund by January. The city will keep the money regardless of whether Twin Development purchases the land.
"We’ve been talking to various investors and (finding financing has) been tougher that we thought, admittedly," Twin Development partner Steve Smith said.
Financing and marketing
Twin Development continues to bank on its coveted EB-5 status to garner financing. The federal EB-5 program designates Federal Way’s downtown as a "regional center." Twin Development is the only local developer approved by the federal government to take advantage of the program by offering a two-year permanent residency status to foreign investors who pump $500,000 into any project Twin Development undertakes in downtown Federal Way. The EB-5 program is the only way the city will see the mixed-used project come to fruition in these tough economic times, Smith said.
"It’s difficult for us, but I think it’d be fair to say that for any other developer, it would be impossible," he said.
Twin Development needs 10 to 12 foreign investors to buy into the project at $500,000 each before it can afford to purchase the land, Smith said. The developer will need another approximately 240 investors to fund the construction of the project, slated to break ground next summer, Smith said.
A major marketing effort is needed. David Cho was hired three weeks ago to begin that process. The city council questioned why marketing had not already begun and asked for a business and a marketing plan from Twin Development.
Smith agreed to present the plans, but then back-stepped when partner Luke Hwang objected. The company is hesitant to disclose proprietary information.
“We’re hesitant to disclose our trade secrets,” Smith said.
The developer agreed to reveal a business and marketing plan only if they could be shielded from public view. Assistant city attorney Amy Jo Pearsall dismissed the idea, informing the partners that the documents would be available to the public under the Public Records Act. The developers refused to budge, turning three of the seven council members away from voting for the extension.
"What concerns me is not having any documentation as to where you’re going," Duclos told Twin Development. "I’m just hearing vague things right now; I want details here."
Ferrell said it seems as though Twin Development knew it couldn’t gather financing by this month and planned to request an extension all along.
"I haven’t seen any bona fide effort to get this accomplished," he said.
Smith denied Ferrell’s statement.
The city council and the developer’s credibility has taken a blow, Federal Way resident Tim Burns said.
"How can we believe either party in the future in what they say?" Burns asked. "To me, credibility is the most important thing any person can have in interpersonal relationships."
Burns said he doesn’t feel Twin Development has a business plan to show. He suspects the developer will request an eighth extension on the purchase and sale agreement.
"I hope it works out, but I'm not optimistic," he said.
The city council’s three-plus year history with the former AMC Theatres property puts it in a precarious situation. The city purchased the land in 2006 for $4.1 million and issued a request for proposals for a mixed-use project on the property. The original contract was awarded to Canadian company United Properties in December 2007. The group repeatedly failed to find financing to purchase the land and, in June, handed the contract over to Twin Development.
The city council approved the hand-off and retained the Sept. 30 closing date, giving Twin Development a little more than three months to provide the initial $3.8 million needed to start the land purchase.