Everett, Wash.
Published: Tuesday, December 18, 2007

Everett waterfront condos will be delayed for months

A key lender has pulled out because of the mortgage crisis, but the developer is optimistic.

Mike Benbow
Herald Writer

 EVERETT -- The start of condominium construction on the Everett waterfront will be delayed by at least six to nine months after a major financial backer dropped out because of the nation's mortgage mess, developer Maritime Trust said Monday.

"They just flat out got out of the construction market and are selling the unit that was going to do our construction loan," Maritime's Bert Mears said Monday.

He was referring to Merrill Lynch, which fired its CEO this fall after reporting a third-quarter loss of $2.24 billion, primarily due to writing off $8.4 billion in losses in subprime loans.

Lynch had agreed to be the main lender for the $98 million project that involves 137 condominiums. That's the first phase of a $400 million redevelopment called Port Gardner Wharf for up to 660 condos and additional retail, office and commercial space on 65 acres. Paddy Coyne's Irish Pub, which has locations in Seattle and Tacoma, has already committed to the Everett project.

Mears said he's still seeking a replacement lender and may have to wait because of all the publicity about problems in the national housing market.

"We're talking to a couple of other people," Mears said. "I don't think anyone wants to push the button until we get some of this (problems in the nation's housing market) off the front page."

The Port of Everett, which is selling some of its waterfront property and pairing with Maritime Trust on the development, has agreed to start construction soon on the utility lines, roads and other infrastructure for the condo project.

Port commissioner Connie Niva said it's crucial that Maritime or a replacement come up with its share of the financing, noting that most major projects in Everett have to date been built with public funds.

"It's extremely important that this project happen," Niva said. "It's the beginning of a lot for Everett. It signals that private investment can be successful in Everett. If it looks like we can't get a quality development done in Everett, that's a problem."

Mears said he's confident of financial backing for the project because the local economy is strong.

"The good news is that of all the (housing) markets in the country, this is the strongest," Mears said. "The great news about the Seattle area is the incredible amount of jobs at places like Boeing and Microsoft."

Mears said he expects the financing problems will mean his company will make less money and may also need to add another private partner. But he said 40 percent of the first 137 units have already been sold. Prices still remain between $400,000 and $1 million for the condos, which will be built adjacent to a recently completed marina at the port for larger boats.

The delay means people could start moving into the project at the end of 2009, Mears said.

Last week, the port amended its agreement with Maritime.

One of the major changes says that if Maritime doesn't go through with its share of the project, the port won't have to reimburse it for $5 million to $7 million in preparation expenses. Mears said Maritime has already invested $13 million in the project.

John Mohr, the port's executive director, said the waiver of the payment gave the port "the necessary assurances" to get started on the condo infrastructure.

"If they don't get financing within a reasonable amount of time and throw up their hands, then we simply have to find another developer," Niva said. "The Port Gardner Wharf wharf piece could be produced by someone else. But time is money."

The port expects to open its Craftsman District of boat-related businesses in the new development sometime next year.
© 2009The Daily Herald Co., Everett, WA