Foreclosure puts key downtown Burien project in new hands
The new owner of Burien Town Square Condominium is saying little about its plans for the mostly empty building in the center of town.
Seattle Times business reporter
The developer of a condo and retail complex touted as a key to rejuvenating Burien's downtown lost the project to foreclosure Friday.
The new owner of Burien Town Square Condominium provided few details about its plans for the mostly empty building, saying only that it will spend the next few months considering possible improvements and deciding when to "re-launch" the project.
The former owner, Los Angeles-based Urban Partners, will be retained to manage the property, said a spokesman for ST Residential, managing member of the public/private venture that now owns the complex.
ST held the note on the $38.5-million construction loan that Urban Partners took out in 2007 to build the seven-story project. The developer defaulted on that debt last fall.
Matt Burton, an Urban Partners principal, said his firm elected to not fight foreclosure after negotiations to restructure the loan failed.
"I think there was just too big a gap between where we were and where they were," he said.
Burien Town Square Condominium was completed in June 2009, but its financial difficulties have kept it in limbo for a year.
Just six of the project's 124 condos have sold, none since last October (the six were not included in the foreclosure). All the ground-floor retail space remains unleased.
"This moves the ball down the field," Burien City Manager Mike Martin said of the ownership change. "This had to occur for the project to go where it has to go... We regret that it took so long."
The condo complex is a big part of the city's decade-long effort to give the postwar suburb a true center. Burien officials developed a plan for a higher-density, transit- and pedestrian-friendly neighborhood on 10 underdeveloped acres in the central business district, then acquired the land.
The city kept some for a new city hall, library and park — all completed last year — and sold the remainder to Urban Partners, a firm that specializes in mixed-use, transit-oriented development.
The project that was foreclosed Friday was the first of three planned phases of residential development.
It came to market during the worst real-estate downturn in decades, a problem that only got worse when it got caught in one of nation's biggest bank failures.
Burien Town Square's construction lender, Corus Bank of Chicago, invested heavily in condo development around the country during the real-estate boom, only to watch many of those loans default when the market collapsed.
The Federal Deposit Insurance Corp. closed Corus and seized its assets in September 2009. A month later the agency sold a 40 percent interest in Corus' $4.5-billion real-estate loan portfolio to ST Residential, a consortium led by Starwood Capital of Greenwich, Conn.
ST's job: manage the 100-plus mostly non-performing loans to maximize return for itself and the FDIC.
At Burien Town Square, Urban Partners said the construction loan agreement ST inherited from Corus effectively blocked them from filling the building. It specified asking prices for condos and retail space that are too high for today's market, Urban Partners officials said earlier this year.
But the developer couldn't reach agreement with ST. And Urban Partners concluded that other efforts to retain ownership of the complex, such as a bankruptcy filing, weren't in anyone's interest, Burton said.
Condo prices at Burien Town Square ranged from the mid-$200,000s to the mid-$600,000s when the complex opened last year.
Although ST would not address the question Friday, price cuts seem likely if it chooses to continue marketing the complex as condos.
Another possible option: convert the unsold units to rentals, a step ST has taken with some other projects in its portfolio. Several large new condo projects in the Seattle area also have made the switch.
ST's moves will be watched closely in Burien, said Martin, the city manager. While the city has no financial stake in the condo complex, he said, "it certainly has an impact on how the community is feeling about itself."
Eric Pryne: 206-464-2231 or firstname.lastname@example.org