Bargain deal for downtown lots may end long-running Foss Waterway hotel legal challenge

Staff writerMarch 28, 2014 

Proposed Foss Hotel

HOLLANDER INVESTMENTS

The Tacoma City Council will consider a deal next week that could end a four-year-long legal and political fight over construction of a 104-room hotel on downtown Tacoma’s Thea Foss Waterway.

Under the deal, the city would sell two parking lots to the owner of the Hotel Murano for $1.25 million – about one-third of the current assessed value – in exchange for it agreeing to stop suing over a competitor’s attempt to build a hotel on the Foss, and not to sue over the city’s attempt to develop a third site near the convention center.

If the council approves the proposal on Tuesday, it could finally open the door to construction of the first of two hotels planned for the waterway site between the Esplanade Condominiums and Thea’s Landing.

Bellingham’s Hollander Investments owns the site and has been planning a Hilton and a Marriott Residence Inn. Hollander has been trying to move forward with the construction of a 104-room Marriott since 2009, but it has been thwarted repeatedly by political and legal challenges mounted by the owners of downtown’s Hotel Murano.

Tacoma is involved because the governmental entity in charge of waterway development was chartered by the city, and its five board members serve at the pleasure of the City Council. Also, the city owns the two lots being used as carrots in the settlement offer.

None of the parties to the proposed settlement was available for comment Friday. Kate Buska, spokeswoman for Provenance Hotels in Portland, which operates the Murano, said none of the executives was in the office Friday.

Mark Hollander, principal of Hollander Investments, was not at work Friday, his assistant said.

City spokespeople and representatives of the Foss Waterway Development Authority did not return calls.

The FWDA has been working since 1999 to find a new use for the waterfront lot. Three potential developers have planned hotels for the property, which the waterway authority calls Site 4, but none has succeeded in breaking ground. The land is now owned by Hollander Investments.

One source of the enmity between the Murano owners and the proposed Hollander hotels is related to unionization. The owners of the Murano, which is unionized, say Hollander didn’t keep its word to use union labor in its Marriott hotel on Pacific Avenue. When it came time for Hollander to build a new hotel on the Foss, the Murano and a hotel workers union lobbied the Tacoma City Council to delay issuing an environmental document needed to build the hotel.

That was more than four years ago.

A new City Council finally approved that agreement, but the Murano and its allies then challenged the Hollander’s shoreline development permit, taking it through several levels of hearings examiners and judges before losing.

Most recently, the Murano owners sued the FWDA last fall, contending the authority had illegally approved a development permit for the Marriott without putting the site development up for a new round of proposals.

The Murano owners contended that when the authority first advertised the site to potential developers more than a decade ago, it had specified its preference for “boutique” and “first class” hotels for the site.

Hollander’s proposed hotel, they argued, is of lesser quality than first class.

The authority countered that Hollander had bought the property from a previous unsuccessful developer who had bought it from the authority. The authority argued that since it no longer owned the property, it didn’t have the authority to require a higher grade hotel from a subsequent property owner. The authority’s attorneys also argued the Murano owners didn’t have standing to bring the suit and that the statute of limitations prohibited a challenge.

Pierce County Superior Court Judge John McCarthy agreed and issued a summary judgment in favor of the authority last fall. The Murano’s attorneys appealed.

The deal proposed to the council seems designed to put an end to these legal impediments once and for all.

Under its provisions, the city would sell the Murano owners, KS Tacoma Holdings LLC, two parking lots south of the Murano and the adjacent Bicentennial Pavilion. KS Tacoma would pay $1.25 million for those two sites.

According to Pierce County property records, one of the sites, directly south of the hotel, has an assessed value of $2.47 million.

The other site is half of a parcel that includes only a parking lot. The assessed value for the entire parcel’s land only is $3 million. If the parking lot in the settlement is half that parcel, then the land there would be assessed roughly at $1.5 million.

Using those assumptions, the Murano would be buying $3.97 million worth of property for the settlement price of $1.25 million.

In return, KS Tacoma would agree to drop its latest lawsuit against the FWDA, would agree not to bring further suits in regard to that site and likewise agree not to start any suits over the city’s development of a third site near the Greater Tacoma Convention and Trade Center.

The city is now evaluating proposals prepared by developers to build another hotel south of the trade center.

John Gillie: 253-597-8663
john.gillie@thenewstribune.com

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