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Developer hits financial wall with downtown high-rise project
Developers have been granted their fourth extension on a purchase and sale agreement for the downtown AMC Theatre site.
Representatives from the South Korean investment company Landor Korus asked the Federal Way City Council, on Dec. 15, to extend the purchase and sale contract until the end of March. The council unanimously granted the extension.
The council also voted to push back, until Jan. 15, the due date for nearly $24,000 in carrying costs Landor Korus was scheduled to pay the city this month. Neither action will alter the city's $6.156 million asking price for the property.
In September, Landor Korus partnered with Canadian developer United Properties in an effort to land financing to purchase the 4.1-acre site at 31600 20th Ave. S.
Landor Korus will be the developer and the financial backer for the Symphony high-rise project, which is planned for the property. United Properties will serve in an advisory role, helping Landor Korus navigate the city's building regulations.
United has struggled since late 2007 to secure financing. Landor Korus also ran into challenges lately. Landor Korus representatives told the council they will not have funding to purchase the site or pay carrying costs until early next year. Landor Korus has engaged in discussions with two South Korean investment companies for roughly three months. But the investors are unwilling to hand over funds until they view the property, meet local officials and learn more about the project, Landor Korus chairman Chan Chung said. That action is planned for Jan. 10. Chung said he is confident Landor Korus can meet the March deadline.
The city will finish paying its bonds on the former AMC Theatre property at the end of this year, said Patrick Doherty, director of economic development.
Come January, the city will pay a minimal amount for the property's upkeep, he said. No large funding requirements are present. For this reason, the city council did not demand additional carrying costs from Landor Korus.
If the purchase and sale agreement has not been finalized by March, the council could allow a fifth extension or pursue another developer for the site. Council member Dini Duclos expressed, at the meeting, her understanding of how difficult it can be to get financing for commercial projects. Council member Linda Kochmar said she understands the hardships in securing financing in this economy and knows Landor Korus has had little time to produce results.
"It's very difficult to come up with financing arrangements in a very short time," Kochmar said.
Kochmar prefers finding a way to build the project on the AMC Theatre land, rather than explore another use for the property, she said. The project represents revitalization in Federal Way, Kochmar said. There is no risk in waiting for Symphony to pan out because the city will not owe on the property, she said.
"If we had people knocking on our door, it would be one thing, but we don't," Kochmar said. "That project represents, hopefully, a $300 million cash infusion in our downtown."
Long time coming
United Properties has been slated to construct the Symphony project since late 2007. Construction was due to begin September 2008. Instead, United requested an extension in July on the purchase and sale agreement. The city council gave the developers until Sept. 11 to buckle down financing and buy the property.
On Sept. 10, United Properties announced its desire to team with Landor Korus. The city council at that time voted 6-to-1, with council member Jim Ferrell issuing the dissenting vote, to grant United Properties a six-week extension on the agreement. This was designed to permit Landor Korus and United Properties to strengthen their partnership. The developers have not worked together in the past.
On Nov. 3, the city council gave the partners until the end of 2009 to secure financing to buy the property and begin building the four high rises and the central park. The move marked the third extension on the purchase and sale agreement. Landor Korus, on behalf of United Properties, agreed to pay $23,836 to the city for carrying costs associated with the extension. Landor Korus representative Wayne Choe, a Federal Way resident, told the city council that conducting overseas business was taking longer than expected.
"Dealing with overseas investors, it takes some time, given the 17-hour time difference," he said.