The half-built apartment and retail complex stands exposed to the winter above downtown Tacoma, and the bank that now owns it isn’t saying what it plans to do with the Jackson Building.
Banner Bank bought the seven-story structure at South 25th Street and Yakima Avenue this week with a $19.4 million credit bid. The sale was held after Banner exercised its rights under an agreement reached with the former developer in May. That deal, approved by a bankruptcy judge, allowed the bank to complete its foreclosure if it didn’t receive a payment by August.
Banner Bank spokesman Doug Bain said Thursday that the bank is evaluating its options.
The building was owned by a state limited liability company controlled by Gwen Ingels. The LLC filed for bankruptcy in late March. The bank was the primary creditor, and it now owns the only asset. The question remains unanswered whether the project subcontractors, who collectively are owed about $2 million, will be paid.
Ingels said Thursday that she plans to pay them. She said she has financing to finish the project, and it’s from the same source she’s been working with for months: Lake Forest, Calif.-based Irvine Funding Corp. Documents filed with the bankruptcy court in August indicate Irvine planned to lend $23.5 million on several conditions, including the use of emeralds from Ingels’ business partner as collateral.
Irvine was supposed to have provided $13.5 million to buy out Banner’s interest under the terms of that May agreement, but the payment wasn’t made. That led to the sale Monday. When asked why the financing deal is more secure now, Ingels said Irvine’s funds are no longer tied up and she can provide proof of financing.
Ingels said she tried to contact the bank to delay the sale.
“Starting on Monday we’re going to contact the bank and work out hopefully a very positive scenario where all of our subs will be taken care of, and we can hopefully deal directly with the bank on the project,” she said. “If they choose not to work with us I really don’t know what their plan is because they do now own the property. We are ready to work with them.”
A longtime Tacoma bankruptcy attorney not involved in the case said the bank’s sale and subsequent credit bid changed the playing field.
Banner “owns the property and it controls the action now,” said William Beecher, who has practiced commercial bankruptcy law since 1975. “Quite frankly, standing in the shoes of the bank, it might say ‘We don’t want to get a bunch of strange subcontractors in here who don’t know anything about the project.’
“It might make sense to keep them rather than reinventing the wheel,” he said. “It’s a salvage job at this point. The bank is free to enter into any of those kind of arrangements if (that’s) in its best interest.”
Beecher said most Chapter 11 bankruptcy cases fail, especially in this economy.
“Years ago there was money in the market, called exit financing. It was big business to invest into signature Chapter 11 cases because lenders could turn the loan into ownership,” he said. “But now many Chapter 11s are failing because there’s no way to bail them out.”
Construction stopped on the apartment-retail complex at the end of February. Plywood has been nailed over major entrances and a 6-foot chain-link fence surrounds the project.
The building has some siding, but is mostly covered in yellow sheathing. Some of that is covered with black building paper, much of which has begun to peel away.
Jeff Stroud, vice president of Mountain Construction in Tacoma, has looked on as the project faded. His company is not involved as a subcontractor.
He said nothing on the outside of the building indicates that leaving the building unfinished for so long has caused major problems. Moisture is always a concern, and some of the nail screws are rusted.
“Does that in and of itself make you run away? No. But (the sheathing isn’t) meant to be in the weather that long,” he said. “Wood will get wet, but it will dry out.
“This certainly it isn’t the first time a project’s been left at a less than ideal stage,” Stroud said. “You just have to be realistic about … the things that need to be done to bring it back.”
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