Prium co-founders' relationship dates to college days

Staff writerJuly 16, 2011 

Before they became two of Western Washington’s most prolific real estate developers, Tom Price and Hyun Um were college roommates at Central Washington University in Ellensburg.

Um studied biology; Price, business.

When they went into business together they named their partnership Prium – using a combination of their names – “Pri” for Price and “um” for Um.

Beyond that, most people know little about how the pair work. They have granted few interviews, and they did not comment on this report even after The News Tribune allowed them to read it.

To understand their history and working relationship, The News Tribune turned to depositions related to their personal bankruptcy filings, other court documents and news archives.

Price and Um cut their teeth on residential real estate development in East Pierce County, with ambitious plans that courted controversy and ended in a legal battle.

Price also helped guide his father’s company through skyrocketing growth and rapid collapse.

For Prium, Um is the organizer. He keeps track of Prium’s web of limited liability companies, sets up meetings and manages government bureaucracy.

“I really don’t involve myself – very nominally – on any financial matters of the company,” Um said in a deposition given as part of his and Price’s personal bankruptcies. “It’s been that way since the beginning.”

In the deposition, taken over the course of a day in March, Um answered more than 40 times with some version of “Tom handles the finances.”

Price is the money man. He negotiates loans, works with lenders and manages the money flow through the Prium empire.

THE START OF PRIUM

After graduating in the late 1980s, Um worked for the Tacoma-Pierce County Health Department on clean water issues. Price went to work for his father’s company, T&W Financial Corp., a Fife-based business-equipment leasing company.

State records show Um was a director of a T&W-related corporation in the 1990s. And the pair worked together on plans for a controversial residential subdivision near Bonney Lake.

Starting in the late 1990s, residential subdividing was a business unto itself.

Developers would tie up a piece of land, usually through a purchase-and-sale agreement and a small amount of earnest money. Then they would negotiate with county or city planners on fees or improvements, such as curbs, gutters or sidewalks.

Once preliminary approval for development was assured, usually before the option to buy the land expired, the developer would assign his interest on the land to a homebuilder for a steep markup.

Most of Prium’s early projects were in this vein, Um said, including Frederickson Estates and Hansen Estates in East Pierce County.

In 1996, Price and Um formed Prium Development Company LLC for about $10 each. Its first project was Waterwood, a 39-lot subdivision in Puyallup near 137th Street East and 94th Avenue East.

Um said he didn’t know who the lender was because Price put together the financing. The purchase price of the land isn’t clear, but Puyallup-based homebuilder Soundbuilt later paid Prium $1.1 million for Waterwood, county records show.

BONNEY LAKE CONTROVERSY

Price also was trying to develop land near Bonney Lake through Right Price Recreation Limited Liability Co. The company’s principals were Price and his father, Mike, who at the same time were expanding their equipment-leasing company.

Um worked with Right Price Recreation on plans to build 1,300 houses and an 18-hole golf course on Connells Prairie.

People living in the area opposed the development for environmental and historic reasons. The parcel was the site of the decisive battle in 1856 between Nisqually Chief Leschi and the U.S. Army and settler militia.

County and city planners rejected the 1,300-home plan, so Right Price downsized to about 300 homes. The grass-roots opposition persisted. So in 1999, Right Price sued two residents groups, alleging slander and commercial disparagement.

The company said the groups had made false statements about Right Price’s plans and hurt the company financially by interfering with its sewer rights. The suit was based in part on remarks people made at public meetings.

The residents called the legal action a SLAPP suit – a “strategic lawsuit against public participation.” Such efforts were rare in the South Sound but were becoming a common tool of frustrated developers across the nation.

The Washington State Supreme Court eventually threw out the suit, which the residents had spent three years and tens of thousands of dollars fighting.

By the time the residents tried to collect money from Right Price, the company no longer existed.

STATE LEASING

Price and Um kept at residential land development through the early 2000s. Prium then turned its attention to a specific kind of office building.

“They were trying to acquire a portfolio specialized in state leases,” William Stegeman said in a deposition taken in December. The former commercial broker has known Price and Um since the 1990s and now is a minority owner of Prium.

The company’s portfolio is extensive, with about 2.5 million square feet of office space in 40 properties.

Across Washington, state agencies are tenants in about 800 leases. Of those, Prium has 59, the most of any leaseholder. Arlington-based Vine Street Investors is the second-largest, with 42 active leases. The third-largest is Kaufman Development of Olympia with 23 leases.

Prium became No. 1 not by bidding for leases, but by buying buildings where agreements already existed. Howard Cox, the state’s chief property officer, said in an interview that Prium came on the scene suddenly.

“In 2002, they make a couple of purchases,” he said. “Then in 2004-2005, they showed up all over the place. By anyone’s standard they seemed to start buying up a whole lot of properties in that era.”

THE 'NONBANK BANK'

While helping build Prium, Price became president of T&W in 1997, the year the company went public after 23 years in business.

With Tom as president and his father as CEO, the Prices took the company from a 28-employee private business in 1996 to a 180-employee public company three years later.

T&W worked with community banks to help businesses buy equipment. In early 1999, the company’s estimated value was $66 million.

“Think of us as a nonbank bank,” Mike Price told The News Tribune in 1999. “We are just like a bank, but we are not as regulated as banks are.”

Two years later, T&W filed for bankruptcy, laid off almost all its employees and closed its business. Bankruptcy documents put T&W’s debts at $101.7 million.

The News Tribune reported that profits had fallen from $4.5 million in the third quarter of 1998 to $800,000 in the third quarter of 1999. Asked what went wrong, Tom Price said the company was unable to attract sufficient equity investments during the second half of 1999.

Both Prices resigned from the company, and a liquidation plan was filed with the court. Another company took over T&W’s lease agreements. By 2002 T&W was out of business – no business license held, no taxes paid.

The bankruptcy court file was closed in 2004.

In his 2011 deposition, Tom Price offered a puzzling account of his time at T&W.

He said he continued to work for the company through 2010, drawing an annual salary of at least $500,000 in 2008 and 2009. He said he wasn’t involved in T&W’s bankruptcy filing, and that he couldn’t recall the reason for the bankruptcy nor the other officers of the company at the time.

The attorney conducting the deposition for some of Prium’s creditors pressed this point, asking at least a half-dozen questions to clarify how Price could work for a company that had been dissolved.

“How was it that you continued to be employed by T&W through late ’09, early 2010?” attorney Troy Greenfield asked.

“I don’t understand what you’re asking,” Price responded.

“I think you testified that you worked for the company through the end of 2009 or into early 2010, so I’m a little confused.”

“I guess I’m confused too. So what …”

“Did you continue to work for T&W Financial through the end of 2009 or early 2010?” Greenfield asked.

“Yes, I did.”

“And it was put into an involuntary bankruptcy – when?”

“You know, I don’t know if it was an involuntary bankruptcy, but it was put into bankruptcy – I want to say 2001 or 2002.”

“I was not involved, so I don’t know exact dates,” said Price, who was president of the company at the time of its bankruptcy filing.

Later in the deposition Price contradicted his earlier timeline when questioned about an LLC called T.W. Price Co.

Price said he set up the company as a brokerage in 2000.

“I think it’s been established for about 10 years,” he said. “It was a short time after I left T&W.”

NEW PERSPECTIVE

Price and Um ran Prium Development until 2005, when heirs to a Seattle fortune invested $40 million in a new LLC, Prium Companies.

That same year, Stegeman contributed $100,000 to buy a property in Federal Way with Price and Um. The project went nowhere, he said later, but he let the money float with Prium.

Prium Companies then focused on the Pierce County condo market, announcing projects every few months in 2006.

In late 2008, Stegeman said in a deposition, Price and Um asked him for a loan. Stegeman agreed with a condition: He wanted ownership interest. In exchange for $200,000 and a $1.2 million indemnity agreement, Stegeman received 15 percent of Prium Companies LLC in January 2009.

“(A)t that time they were – they had formed – a company, a big company, very fast, and they, I feel, were in the need of the expertise I bring in the commercial real estate development industry,” Stegeman said in the deposition. “My job has mostly been to provide guidance and direction and maybe a little – I would say more clear understanding of some business situations than they may perceive.”

Stegeman said he welcomed the chance to be involved in Prium, calling it a “prudent investment with a substantial upside if I could help guide them through the most difficult market conditions in our lifetimes.”

He initially drew a $10,000 monthly salary.

At the time there were hints of turmoil between Price and Um.

They “had some differences of opinion and felt that a third opinion would resolve differences or would add light or would help provide guidance as to some of the requests they wanted to do,” Stegeman said. “Mr. Price is more aggressive in building things faster and that kind of stuff than Mr. Um is. I think that was a temporary factor.”

Um, in his deposition, called Stegeman a “father figure” whom he got to know through years of work and golf. “He has seen these type of cycles up and down. I rely a lot on his decisions. We’re very close,” Um said, adding that he and Stegeman talk by phone once or twice a day, almost every day.

“We talk through what things may go on. We talk through the decisions that we need to make.”

In April 2010, Price and Um asked Stegeman to manage Prium. That was the same month Soundbuilt won a $5.9 million judgment against Price and Um for breach of contract in a 2003 land deal.

Nationally, the economy had crashed and several Prium properties were headed for bankruptcy reorganization.

Stegeman testified he told Price and Um he wasn’t looking for a job.

“I don’t really want to work anymore,” said Stegeman, who is 69 and had testified earlier that he was trying to retire.

“If I’m going to do this,” he said he told his partners, “then you’re going to be the primary people responsible for the day-to-day operations of this company, and I will be there as a supervisory managerial oversight role.”

Stegeman then began to draw a $20,000 monthly salary.

By the end of 2010, Prium had laid off more than half its staff, going from 29 employees to 12.

At that same time, Stegeman said he was willing to contribute more money to help a Prium project get out of bankruptcy.

Chelsea Heights LLC, which owned the retail/apartment building near Tacoma’s Wright Park, presented a reorganization plan that included a $300,000 private investment. The bankruptcy judge ultimately rejected the plan as untenable. Chelsea Heights was foreclosed and sold to a Seattle company.

Last month, Prium settled with one of its lenders and agreed to a requirement for a $150,000 payment from Stegeman.

One of Prium’s newest leases is in its headquarters building at 802 A St. in Bank of America Plaza. This fall a former Weyerhaeuser company, Northwest Hardwoods, will move into the fifth and seventh floors on a five-year lease.

INVESTMENT PAYS OFF

Stegeman has attended all of the recent court hearings concerning Price’s and Um’s personal bankruptcies, sitting between the longtime business partners.

Some creditors allege Stegeman is little more than a figurehead and that his involvement in Prium is for his own enrichment and not for the good of the company’s projects.

Through June, Stegeman has earned more than $400,000 in salary from Prium, surpassing his $300,000 initial investment.

“Mr. Stegeman has already received more in distributions than he put into the company in total,” the creditors’ lawyers wrote, “and the monthly stipend payments have only been going on for two years.”

Stegeman did not comment for this story.

In court documents, Stegeman acknowledges that Price and Um run the operation and that he’s rarely in the office. “It is true, I don’t know all the names of the employees in the Prium office,” Stegeman said. “What is also true is I don’t need to know them. My role is to work with Tom Price and Hyun Um directly, no one else.”

In response to allegations he’s a figurehead, Stegman said he’s contributed to improving Prium’s financial state.

“The cash flow has been greatly improved; the operations have been turned around to where many of the buildings are now in positive cash flow position,” he said in a court filing. “This is a result of the expertise of myself and Mr. Price and Mr. Um with regard to commercial real estate.”

As for Price and Um, when not trying to keep their empire afloat, they spend hours in court. The former college roommates sit apart in the gallery. Partners for years, they seldom look at each other.

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