EVERETT — Big things were supposed to happen on Everett’s riverfront after the city sold an expanse of former industrial land to a California developer five years ago.
Soon, however, the real estate market bottomed out. Few, if any, outward signs materialized of big-box retailers wanting to locate there, or of homes and business space getting built.
City leaders watched in frustration as more than 100 acres of developable land sat mostly dormant.
At least that’s how it looked from the outside.
OliverMcMillan of San Diego reported sinking more than $25 million into the Everett Riverfront property before unloading it last month to Bellevue home builder Polygon Northwest.
The sale price was a little over $18 million. That’s roughly $10 million more than OliverMcMillan paid Everett for the property back in 2008.
Despite selling the land for more than double what it paid, Oliver McMillan claims to have lost more than $7 million on the venture.
Neither developer returned calls Monday seeking comment.
Polygon, the new owner, already has started bringing in fill dirt to raise the southern portion of the property, Everett public works director Dave Davis said. Roads and other construction prep should begin next spring, with homes to follow.
“We’re all excited about it,” Davis said. “It’s nice to have Polygon on board. They’re putting a lot of effort in it.”
The value of land in Everett has dropped significantly since the city sold the property. The Snohomish County Assessor reported an approximately 6.5 percent drop in the average value of commercial properties in Everett from tax year 2008 to 2013, while residential properties in Everett dropped by 37.6 percent during that period.
When the Everett City Council approved the sale between the developers in May, it sought assurances that one owner wouldn’t just flip the property at a profit. The move was to ensure that the property owner had acted in good faith, given that tens of millions of public dollars have been invested in environmental cleanup and infrastructure.
“I did feel that this was a good deal from that standpoint, that the public interests would be protected with regards to the cleanup, and with regard to public access to the riverfront,” City Councilman Paul Roberts said.
The expenses OliverMcMillan reported to the city include: about $3.4 million for “capitalized general and administrative costs”; $3.1 million for “developer’s fees”; $2.8 million for architecture and engineering; $2.7 million for consultants; and $1.8 million for “capitalized interest.”
A significant amount of that money went toward clearing complex regulatory hurdles for the project, namely obtaining an environmental impact statement and a shoreline permit.
City Councilwoman Brenda Stonecipher, a certified public accountant, said OliverMcMillan clearly complied with the cost covenant, but the information the others in the city asked the developer to supply was too vague.
Ideally, she said, the covenant should only have allowed the developer to list costs, such as the environmental permits, that increase the value of the land.
“The new property owner isn’t going to buy something to pay off your loan fees,” she said.
This spring, Stonecipher was the only council member who voted against approving the sale of the Riverfront property. She wanted more assurances about the quality of housing to be built, among other aspects of the development.
“I hope that Polygon proves me wrong and that it ends up being beautiful,” she said.
By the time work is finished, an estimated $80 million in tax dollars likely will have gone into the site.
Work completed so far included preparing the landfill cap at the old city dump where the Everett Tire Fire broke out in 1984. Infrastructure improvements also were made in anticipation of the development. They include the I-5 overpass at 41st Street, a new roundabout on the south portion of the property and an access road from Pacific Avenue. More work has gone toward preserving wetland habitat and controlling water runoff from developed areas uphill from the riverbank.
Polygon, like OliverMcMillan before it, must comply with a series of benchmarks intended to ensure that taxpayers get a good return on all of the public money invested there. The company must build at least 400,000 square feet of retail space on the former landfill site by mid 2017. By that same deadline, the builder also must construct small shops and at least 100 homes or hotel rooms.
The Riverfront area includes more than 200 acres of former industrial land. About half of the area can be developed. The area also includes areas set aside for wildlife and wetlands.
City leaders specifically wanted to steer commercial development to the area to increase Everett’s tax base.
The area stretches along the Snohomish River from Lowell north to Pacific Avenue. The largest part is the former city landfill, which covers about 60 acres. South of the landfill property lies the 40-acre site of the former Simpson Paper Co. mill, to the north the 17-acre site of the former Eclipse Mill. At total buildout, zoning there allows up to 1,400 homes plus nearly a million square feet of commercial space.
Noah Haglund: 425-339-3465; nhaglund@heraldnet.com.
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