The developer of Cascadia, the massive master-planned community on the Bonney Lake plateau, told a federal bankruptcy judge Tuesday that the company will ask her to restructure bank loans to keep the project afloat.
The restructuring of $75.6 million in loans from HomeStreet Bank now in default is key to the overall plan for Cascadia to avoid liquidation, Cascadia attorney Geoffrey Groshong told Judge Karen Overstreet, chief federal bankruptcy judge in Seattle for the Western District of Washington.
New investors as well as real estate and timber sales also will be part of the recovery plan, Groshong said as he outlined in very broad strokes how owner/manager Patrick Kuo hopes to save his 19-year dream to create a “sustainable city” in northeast Pierce County.
He said they have hired Obsidian Financial Group of Portland to review the company’s options and recommend a detailed recovery plan.
Overstreet will have to be convinced that Cascadia is worth a court-ordered solution.
She gave no indication how she would rule during the 45-minute hearing, the first since Cascadia filed for Chapter 11 bankruptcy Oct. 15. The filing stopped a foreclosure sale. Next hearings are scheduled for Dec. 1 and 4.
Overstreet did note that a bankruptcy courtroom is “the last stop for people. … (and) lets them either make it work” or fail.
Seattle-based HomeStreet Bank, which is operating under the watchful eye of FDIC regulators concerned about their loan portfolio, let Overstreet know it wants its money sooner than later.
Bankruptcies, particularly of this size, can best be described as a verbal fistfight by dark-suited lawyers with the judge as referee. Brad Summers, attorney for HomeStreet Bank, did not let the opportunity escape Tuesday to lob a punch at Cascadia.
Cascadia “has been looking (for money) for a long time and not found any,” Summer told the judge. “The debtor has sold zero lots in 2009.” He said that in 2008, earnest money collected on lots sold has been forfeited.
Summer suggested the current value of Cascadia property is $8 million below the debt owed on it.
HomeStreet Bank also has asked the judge to make Cascadia a single asset real estate debtor, which under bankruptcy laws could result in Cascadia being forced to speed up its reorganization effort or begin making payments to creditors within 90 days of such an order.
Overstreet got a taste of part of the argument that Cascadia will use to urge her to allow the project to recover.
John Ladenberg, former Pierce County executive and now chief operating officer for Cascadia, told the judge that the development is too big and too important to Pierce County to be allowed to fail.
With an aerial photograph of the 5,000-acre development behind him, he recalled when Kuo came to the county 19 years ago with a vision for a “sustainable city of the future,” the only one of its kind in the state. Ladenberg was Pierce County prosecutor at the time.
Cascadia, he said, is not just a residential housing development. He called it a city with plans for industrial areas, manufacturing centers, open space and parks, resorts and golf course and some 6,000 homes.
Currently there are no homes or other buildings except a school on the land. Cascadia said it has invested $114 million in mostly infrastructure improvements such as roads and surface water improvements.
Ladenberg was joined by Denise Dyer, Pierce County’s manager of economic development.
She said Cascadia is a major part of the effort to bring jobs to Pierce County, and the county has had inquiries from companies interested in coming there, though she did not offer specifics.
“We do believe it can work,” Dyer told Overstreet.
An indication of how desperate Cascadia’s situation is was a request from Kuo to obtain a “bridge loan” for an unspecified amount from a relative to pay operating expenses such as salaries for six employees in the coming months.
Mike Archbold: 253-597-8692