California company in line for Winthrop hotel

Offers $8.5 million for beleaguered hotel building

kathleen.cooper@thenewstribune.comJune 6, 2014 

A California-based investment company is under contract to buy downtown Tacoma’s Winthrop hotel building by the end of June.

Redwood Housing Partners LLC offered $8.5 million for the property and plans to invest another $10 million in upgrades, said Jim Jensen, senior vice president for Hendricks-Berkadia and lead broker on the deal.

Sixteen potential buyers made offers for the Winthrop after it was listed this spring, he said.

“We couldn’t believe the attention it got, up and down the West Coast,” Jensen said.

If the sale closes by the end of June, Redwood would be the latest private owner of the 89-year-old building that is a city landmark and one of its most scrutinized properties. Built in 1925 as the city’s flagship hotel, it was converted into affordable housing apartments in the 1970s. It has been owned since 2006 by a subsidiary of Prium Cos., whose founders have been in bankruptcy since 2010.

A federal bankruptcy trustee now running the men’s estates is overseeing the sale.

Details of Redwood’s plans for the Winthrop are unknown. Jensen called Redwood an “affordable housing investor” and said it planned to finance its $10 million upgrade using various tax-credit financing related to low-income and historic properties.

Little is publicly known about the company, including whether it has a track record in real estate investment, management or historic building rehabilitation. According to public documents, it formed in 2013 as an equity investment vehicle for up to $10 million. Based in Burlingame, California, its officers are Ryan Fuson and Jeffrey Green. Fuson didn’t return phone calls seeking comment this week.

The Winthrop, 776 Commerce St., has been a civic puzzle for more than a decade. Developer A.F. Evans planned to renovate the building in 2004 but also planned to continue to operate it as affordable housing. The building comes with a valuable federal Housing and Urban Development contract that governs the vast majority of the 194 studio and one-bedroom apartments.

In late 2006, local developer Prium bought the Winthrop from A.F. Evans. Prium promised to build new affordable housing elsewhere, then renovate the Winthrop as a high-end hotel. To help accomplish that goal, the city of Tacoma helped Prium pay for the building with a $2 million loan.

Meanwhile, the economy tanked, the Winthrop aged, and Prium accomplished none of its goals.

“What would be revealing about any potential purchaser is what they propose to do with the HUD contract,” said Michael Mirra, executive director of the Tacoma Housing Authority, which has in the past tried to buy the Winthrop. “It’s a very valuable contract. It pays fair market rent. It is what makes the building have cash flow.”

Mirra said the THA did not try to buy the building from the bankruptcy trustee because it couldn’t determine the extent of the deferred maintenance.

Over the years, estimates of what it would take to bring the building up to snuff range from $10 million to $34 million. The building leaks. Its elevators are constantly breaking down. The electrical and plumbing systems need work. Just a few years ago, masonry was falling onto sidewalks.

The Tacoma Partnership, a group of downtown leaders, has called “saving the Winthrop” a top priority. Desire for a hotel remains. In December, Mayor Marilyn Strickland sent a letter to the bankruptcy trustee.

“I am writing to emphasize that it is the desire and preference of the City of Tacoma to support … a developer who will return it to its original use as a hotel,” she wrote.

The Executive Council for a Greater Tacoma, in a letter just a few weeks ago to the mayor, also expressed support for a hotel or market-rate housing.

Market forces that would support a high-end hotel just aren’t there, said Robert DiPietrae, a broker with Hendricks-Berkadia who also was involved in the sale of the Winthrop a decade ago.

“No one then, nor now, believes that someone would come along and develop a four- or five-star hotel for downtown Tacoma,” he said. “That’s just the economics of it. That’s a $50 (million) to $100 million investment.”

John Barline, chairman of the Executive Council for a Greater Tacoma, said in an interview Thursday that he was surprised even a market-rate proposal wasn’t selected.

“I’m sorry to hear that, in the sense that we were hoping to get market-rate housing, even if it was a mix of market-rate and affordable housing,” he said. “We’re very much in favor of affordable housing, but we’d like to see it spread throughout the city and not just warehoused in that one spot.”

Redwood is the second buyer to have the hotel under contract in the past several weeks, Jensen said.

ColRich, a San Diego-based apartment developer, was the first bid accepted. ColRich is the new owner of two other downtown apartment buildings: Chelsea Heights, on Sixth Avenue and South J Street; and Albers Mill, on the Foss Waterway.

ColRich had planned to convert the Winthrop to market-based housing, Jensen said, but it asked the City of Tacoma to forgive the $2 million loan on the property to make the project pencil out.

The city wasn’t inclined to simply forgive the loan, city economic development director Ricardo Noguera said Thursday. City officials were excited about ColRich, he said, but they needed more information before negotiating that loan. They just ran out of time, he said.

“Unfortunately we are not the (bankruptcy) trustee so we are not calling the shots in terms of who is in, and who is out,” Noguera said.

Trustee Eric Orse, through his lawyer, said in an email Thursday that while offers are evaluated with many criteria, the trustee has a duty to maximize the sales price. Redwood was the highest offer, coming in $250,000 over the listing price. ColRich’s offer was also over listing but slightly lower than Redwood’s, Jensen said.

Noguera said he’s “anxiously awaiting a call” from Redwood. “If Redwood were to say, ‘We are prepared to pay off the city and do some mixed income housing,’ I would do all I can to support that.

“My real goal is to get this two- to three-block area re-energized, and I need people spending their money here,” he said. “We have all these historic properties, but we don’t have any vibrancy in this area. We need to generate more disposable income.

“I’m standing in Tully’s,” Noguera said. “I want Tully’s to be so busy that another coffee shop opens across the street.”

Winthrop timeline

1925 – Hotel’s grand opening. It was built using money from thousands of local people who bought shares to cover the cost of construction because it was considered vital to economic development.

1973 – Conifer 116, a local partnership, converts it to affordable housing for senior citizens.

2004 – A.F. Evans, a California-based developer, buys the Winthrop with plans to upgrade it but keep it as affordable housing.

2006 – Prium Companies buys the Winthrop and promises to relocate the low-income residents into new construction, then renovate the building as a hotel.

2010 – Prium founders Tom Price and Hyun Um file for personal bankruptcy with more than $350 million in debt related to their business.

2011 – The Prium subsidiary that owns the Winthrop files for bankruptcy reorganization.

2012 – Winthrop reorganizes through bankruptcy. Prium is required to sell the property by October 2015.

Trivia: The hotel was named by the winner of a contest put on by The Tacoma Ledger. Theodore Winthrop was the author of “The Canoe and the Saddle,” which helped to popularize the Northwest.

Kathleen Cooper: 253-597-8546 kathleen.cooper@thenewstribune.com Source: News Tribune archives, Tacoma Public Library archives

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