A 6.4-acre parcel of vacant land the city of Tacoma has owned since the early 2000s has been sold to a Chinese developer for a mixed-use project on downtown’s largest undeveloped tract of land near University of Washington Tacoma.
The city is calling the sale as a victory: The land will be back on the tax rolls after sitting unused for more than a decade.
Once the planned development — including 360 apartments, 200,000 square feet of retail space and 480 parking spaces — is built out, the city will start to collect business and occupation tax and sales tax from shops that move in.
But the sale also represents a loss to Tacoma’s general fund: The purchase price of $3.45 million is less than half of the $7.7 million the city still owes on tax-exempt bonds on the property, a figure that includes principal and interest.
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The city bought the parcel in pieces from 1998 to 2002, and it was thought of at the time as the future site for a police station.
After the 6 acres were assembled, though, the Police Department decided to build the station on South Pine Street, said Martha Anderson, assistant director of community and economic development for the city, in a presentation to the City Council.
“Then it was held to see if it could serve other city purposes, such as a new City Hall or other public-type uses, and it was finally determined that the city would not move forward with another public facility and we could make it available,” she said.
When the great recession hit, the value of the property tanked, finance officials said. In 2012, the city began marketing it for a large development. A 2013 request for bids didn’t net any that met the city’s requirements, but the city continued to try to attract buyers.
North American Asset Management, a Bellevue-based firm led by Luo Xun Kun, a real estate developer from Wuhan, China, was one of two qualified bidders and was chosen in 2015 when the parcel was assessed at $3.45 million.
Luo is the CEO of Wuhan Boshengshiji Real Estate Development Co., a private company with annual revenues of about $31 million and more than 7.5 million square feet of projects in China under its belt.
Selling the property now and transforming it into something productive seemed a better option than waiting and hoping another developer would pay more for it in the future, said Councilman Joe Lonergan, who along with the rest of the City Council members present at the June 14 meeting voted to approve the sale.
“At the end of the day we’d be holding it until the 22nd century if we wanted to get the money out of it,” Lonergan said. “We’re going to continue to pay the debt down on the bonds that are issued on it, because that’s what we do. We’re not going to default.”
The bonds on the property will be paid off at the end of 2018, according to the city’s payment schedule.
Though the parcel was sold for less than half of what’s owed on it, the sale allows the city to put most of that $3.45 million toward paying off what it still owes on the Murray Morgan Bridge rehabilitation, which is about $3 million.
Because the bonds are tax-exempt, they either must go toward paying down the debt service on that parcel, or toward paying for other government capital projects, such as roads and bridges.
The roughly $450,000 remaining after the Murray Morgan Bridge is paid off will go toward other projects, although the city hasn’t settled on what that money will be used for yet.
“The reality is we’re going to put this property to a good use and we’re going to have some great amenities come out of it and ultimately we’ll have a property that pays taxes,” Lonergan said of the sale.
“I think it will be part of the catalyst — there’s good stuff happening at that end of downtown right now, but it will further lend to the critical mass and momentum at that end of downtown, too.”
Ricardo Noguera, the city’s community and economic development director, said he’s excited about what will develop there.
The land — a vacant, hilly stretch between 21st and 23rd streets and Tacoma Avenue South and South Jefferson Avenue — butts up to the university and is suited to high density apartment living.
Noguera said it also would be an ideal spot for boutiques and restaurants that cater to the college crowd.
As part of the sale agreement, the part of Fawcett Avenue that cuts across the middle of the parcel will be closed to motor vehicle traffic to give the project a centralized, town square feel while allowing bicyclists to safely pass through, Noguera said.
Renderings of the development paint a picture of a metropolitan living and retail center with a hub where shoppers and diners can congregate.
Some of the up to 90,000 eventual square feet of office space could be used as incubator space for tech projects coming out of the university.
“I’m hoping it has tech, because I’m working closely with the Biology Department at University of Washington Tacoma to grow tech,” Noguera said. “That would be our goal: to get more and more software companies moving and growing in Tacoma.”
The relationship with the developer and investors in Wuhan blossomed when Noguera and Mayor Marilyn Strickland visited China in the spring, Noguera said. The project is expected to cost $125 million, and North American Asset Management has paid a $875,000 deposit.
The first phase of construction is expected to start next spring and be completed by 2019, and the whole project is expected to be built out by 2021.