Kenmore Undressed

Why Amend the “Development Agreement” with Urban Partners LLC?

What’s In It For Kenmore? This? Or Nothing?

The City of Kenmore is proposing to Amend the current Development Agreement with Urban Partners LLC by entering into a “ground lease agreement” with a term ending in 2016. Here’s language from the contract:

As I wrote in my post “Kenmore to Lease the Village for $1 Per Year, Are you Kidding?” I wanted to raise awareness of what the City of Kenmore intends to do with regard to the management of the Kenmore Village: They seem to be putting Urban Partners in the position to hold on to city property and, in my opinion, tie up the property with no clear “development plan” during the term of tenancy. The mechanism they are using is the “ground lease agreement” that I highlighted in my last post:

Here’s my concern with this proposal: In the “land lease agreement” there is a lot of language about the tenancy interest that Urban Partners LLC will have with Kenmore Village. What it doesn’t include are any specifics. After reading through page after page of legalise I have no idea what UP will be doing with city property.  I asked a number of real estate and economic development folks about some questions our City Council should answer regarding this arrangement. Here are a few:

• First and foremost: WHAT EXACTLY IS THE CITY OF KENMORE GETTING OUT OF THIS TENANCY?
• Did the City seek the advice of an Independent Real Estate Consultant in crafting this “amendment” to the Development Agreement?
• Are there any formal expectations of performance by UP? Are there drop dead dates for generating revenue or actually “developing” anything on the Village?
• Does the Council have an actual dollar figure of what revenue they expect UP to generate during this tenancy? I happen to know that in 2008 Kenmore Village earned a net total of $392,000 ($534K in rents – $142 in expenses). Is UP being given specific goals to reach?
• If UP takes out a “permitted mortgage” on the property, begins a huge project but encounters financial troubles (see the articles below), will there be an incomplete project left for the City of Kenmore to worry about?
• Other than paying the utilities for the next 6 years, does Urban Partners LLC have any SKIN IN THE GAME?
• Here’s my favourite question: WHY DOESN’T URBAN PARTNERS LLC PURCHASE THE PROPERTY? Why doesn’t the City simply sell Kenmore Village?
• And let’s not forget the current tenants. What assurances, if any, has UP given to the City that they will be treated in good faith?
• Will Urban Partners LLC do NOTHING with Kenmore Village?
• Why is this opportunity not being offered to other developers?

These are questions that should be asked of the City Council on May 24th at the public hearing.

Urban Partners LLC

Since we may be involved with Urban Partners LLC for many years I was interested in finding out how they have handled their development in Burien, the Burien Town Square. I spoke with Ralph Nichols, a reporter for the B-Town Blog who has written a number of articles dealing with Urban Partners. He was quick to point out that Urban Partners LLC generally has a good reputation and has done some fine projects, especially in CA. Their main trouble in Burien has been financing and the lousy economy.  Chicago-based Corus Bank – the construction lender for Urban Partners was seized by the Federal Deposit Insurance Corporation (FDIC). One big distinction between Burien Town Square and Kenmore Village is that UP owns the property they are developing.

I would encourage you to read Ralph Nichols’ posts:

We Can Be Proud of What We Did

Is Town Square’s Urban Partners Becoming a Silent Partner to Burien?

Here’s Why Burien Town Square Sits Vacant Less Than a Year After Opening

Will Condo Prices Be Lowwered Now that Burien Town Square’s Lender’s Assets Have Been Sold?

I believe it’s in the interest of all Kenmore residents to educate themselves about the implications of this newest version of the Development Agreement. Handing a 6 year lease over to Urban Parnters LLC may have long-term consequences. Who knows, things may turn out well. On the other hand, given the highly volatile and risky state of commercial real estate and the economy in general, our City Council and the City Manager owe us a detailed explanation of this “plan.”

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