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Korean developer lacks money for downtown Federal Way high-rise project
The Federal Way City Council expected to finalize the sale of the former AMC Theatre site - but was instead taken by surprise when the developer reported it does not have the money to make the purchase.
The council purchased the land, at 31600 20th Ave. S., in 2007 to boost economic development downtown. The city has since awaited the start of the Symphony high-rise project on the site.
It appeared South Korean developer Lander Korus would be buying the property and beginning construction soon. Kyoung-Soo Seo, a representative of the developer, informed the council March 16 that previously interested foreign investors, which viewed the site and contributed a little more than $24,000 toward the project in January, have failed to pay the reminder of the $20 million promised. Seo requested a fifth extension - to expire the end of May - on the purchase and sale agreement.
A French investor is willing to finance the project up to $350 million, and a Korean investor is willing to devote a 10 percent down payment on the $350 million, Seo said. More time is needed to finalize these arrangements, he said. Seo was unable to present documentation of the investors' interest to the council.
"Please understand the situation," Seo said. "We're not just sitting there asking your time. We're doing our best."
In a 6-to-1 vote, the council decided to hold a special meeting March 23 to discuss another contract extension. Council member Jim Ferrell issued the dissenting vote, expressing an opinion that the city has already gone out of its way to accommodate the developers.
"Why are we jumping through hoops? This is our downtown," Ferrell said.
Canadian developer United Properties was awarded the Symphony contract in late 2007, but has struggled to finance the project.
Days before the contract was due to expire in September 2009, United Properties partnered with Lander Korus to co-develop the site and was awarded a contract extension. Lander Korus has taken the lead on the project. But the purchase and sale agreement is still held between the City of Federal Way and United Properties.
Legally, Lander Korus does not have the authority to request an extension on the agreement, city attorney Pat Richardson said. That must be done by United Properties.
United Properties president Victor Setton was not in attendance Tuesday, nor did he submit a written request for an extension. City of Federal Way Economic Development director Patrick Doherty said he spoke with Setton on Tuesday, and Setton gave him no reason to believe he was aware that Lander Korus would be requesting a fifth extension on the purchase and sale agreement.
Because of this, the council choose to hold the March 23 special meeting. Staff will contact Setton to inquire whether he desires an extension, Richardson said. Meanwhile, Seo is expected to gather documentation of investors' interest and present that proof at the Finance, Economic Development and Regional Affairs council sub-committee meeting, to take place immediately prior to the council special meeting at 5:30 p.m. March 23 at City Hall.
Ferrell said he is not in support of awarding another extension on the purchase and sale agreement. He voted against awarding the mixed-use high-rise project to United Properties and has since criticized the developer's communication with the city. Ferrell said he prefers to start afresh, again contemplating what to do with the downtown site.
"From my point of view, I really think we've let enough time go by," he said.
Prior to the special meeting vote, council member Mike Park, who has historically supported Lander Korus and previous requests for extensions, said he is not interested in another contract extension.
"Even if we extend it two months, I don't see any value to it because Lander Korus isn't able to provide sufficient documentation (of investors' interest in Symphony)," Park said.
Also prior to the vote, deputy mayor Dini Duclos said she wishes to wait the remainder of the month to see if anything develops before agreeing to either extend or permanently terminate the contract between Federal Way and United Properties. Council member Jack Dovey said waiting another two months is frustrating, but the city has invested a lot in the process, has paid the bonds on the site and has little to lose by awarding an extension, Dovey said.
"The city's not out anything but time," he said.
If United Properties and Lander Korus are not able to gather the $6.156 million needed to purchase the AMC Theatre site, the council has a few choices. It could grant the companies an extension on the contract, or it could permanently terminate its contract with United Properties, and either sit on the land or seek a new developer with a new design for the 4.1-acre site.
Starting the process over would involve soliciting requests for qualifications from developers, then inviting developers to submit design proposals, Doherty said. Picking a new developer and negotiating the final design plan would come next. These actions could take a minimum of nine months, Doherty said.