TACOMA, Wash. — Plans to complete development of the long-anticipated Tacoma Town Center will face final City Council action Tuesday.
Getting to that stage has been a learning curve in what the city can actually do with a project whose land sale and contract terms were set ahead of the current skyrocketing real estate market.
Under the proposal, Boise, Idaho-based Galena Equity Partners would step in to shepherd the $303 million project as an Opportunity Zone investment, pending council approval.
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The project, bordered by South 21st to South 23rd streets from Jefferson to Tacoma avenues, is just south of the University of Washington Tacoma. The project stalled after North America Asset Management was unable to generate sufficient financing including EB-5 investment.
Just one building is complete, the Jefferson Yards apartments at 409 S. 23rd St. The building offers 144 market-rate apartments and 6,000 square feet of retail space and was completed in March.
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Members of the City Council raised questions at their May 25 study session as to how Tacoma got to this point with the project, and why the city did not just exercise its rescission rights, start over and seek new bids.
“The concerns I’ve heard from the broader development community is we’re underselling ourselves in terms of the value of the property ... the property’s worth more than what we initially bargained for,” said council member Conor McCarthy at the session.
Getting answers meant council action was pushed to Tuesday’s meeting, after previously being scheduled for approval at its May 25 meeting.
CITY’S EXPLANATION
A statement drafted by city staff, which the deputy city manager sent to all City Council members, sought to explain not only the project’s history, but why a contract rescission was not the best path forward.
Elly Walkowiak, assistant director for the city’s Community and Economic Development Department, shared a copy of the statement with The News Tribune on Friday.
According to the statement:
“In 2015, after full public process including City Council approval, the 6.4-acre unimproved Town Center site was sold to North America Asset Management (NAAM) at its then fair market value of $12.37/sf and governed by a Development Agreement with land use covenants. The rights the City retains under the Development Agreement are expressly and exclusively for the purpose of ensuring that NAAM as property owner completes the project in accordance with the development terms.
“The property has not been in City ownership for six years. Throughout those six years, the developer has invested funds into securing entitlements as well as in site and building development. In addition, City staff and the developer have agreed to amendments to the Development Agreement to facilitate the project’s completion.
“At the present time, while City staff and the City Attorney’s Office believe NAAM to be in default on certain obligations, NAAM and its counsel vigorously dispute that assessment.”
The statement continued:
“Rather than litigate the issue, incurring unknown costs and create investment uncertainty in Tacoma’s market, the City has remained focused on its core goal of pursuing completion of the project. The proposed amendment to the Development Agreement ensures sufficient capital to advance and improve the City’s position by delivering a project aligned with the development covenants and helps meet Tacoma’s critical affordable housing needs and enables the creation of livable wage jobs.”
Under the proposed second amendment to the development agreement, the project is to be tackled in phases, with completion the end of May 2025 with a public plaza and one of the buildings.
NAAM would retain ownership of “Building 2” (Jefferson Yards), and convey the remaining undeveloped property to a subsidiary LLC — Tacoma Town Center Parcels. TTC would then assign its interest to one or more LLCs created and controlled by Galena Equity Partners, according to the plans presented to the city.
QUESTIONS FOLLOWING INITIAL APPROVAL
During the council’s May 25 meeting, the motion to approve an assignment of interest in the purchase, sale and development agreement from North America Asset Management Group to Tacoma Town Center Parcels, was forwarded to its June 8 meeting. The action came after some members of the council raised questions during that day’s council study session about how the new deal came to be, despite the recommendation for full council approval at the May 11 Economic Development Committee meeting.
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