Bankrupt Tacoma developer’s apartment property goes to lender in $5 million credit bid
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A Tacoma apartment site completed in 2022 by a local developer who later went bankrupt is now in the hands of the developer’s lender.
It’s one of several Tacoma commercial properties that hit hard times in the past year over financing.
Sound Capital NW Holdings LLC, affiliated with Sound Capital Loans of Bellevue, took possession of the property in a $5 million credit bid Aug. 21.
Harbor Custom Development, founded in Gig Harbor in 2014 as Harbor Custom Homes, sought Chapter 11 bankruptcy protection last December.
Sound Capital has since been seeking to collect on construction loans it made to the developer.
In February, Harbor Custom announced it had “found no viable plan” to continue and would sell four apartment properties in the area along with assets in three other states as part of its wind-down process. The planned sell-off included its 80-unit Pacific Ridge Apartments, 8445 Pacific Ave. S.
Sound’s construction loan for Pacific Ridge as of June had an outstanding balance of around $20.3 million, according to court filings.
In Harbor Custom’s second amended Chapter 11 plan filed in late June, it stated, “Sound Capital Construction Fund, LLC shall receive the Pacific Ridge Property in exchange for a $5 million credit bid and the payment of costs of sale and other amounts as set forth in the Settlement Agreement.”
It added that upon the transfer of the property to Sound Capital Construction Fund, “the Sound Capital Construction LLC lien shall be extinguished, and loan deemed satisfied.”
The property has an assessed value of more than $17.5 million, according to Pierce County property assessment records.
Shelly Crocker, the chief restructuring officer for Harbor Custom Development, wrote in a declaration filed June 13 with the U.S. Bankruptcy Court for the Western District of Washington that the value of Pacific Ridge in the Fern Hill area was well below what was owed on it.
Pacific Ridge is tied to one of four of Harbor Custom-affiliated LLCs that the developer hopes to close out from bankruptcy court later this month, according to recent filings.
The other three LLCs represent properties in Port Orchard as well as Whatcom County and Punta Gorda, Florida.
Harbor’s bankruptcy case involves properties in four states with total debt listed in its initial filing last year totaling $172.5 million with $224 million in assets.
Officials with Sound Capital did not respond Sept. 13 to a request for comment its Pacific Ridge property.
Other cases
The lender acquisition of the site to recoup costs is the latest in similar actions taken at various commercial properties in Tacoma involving different developers in the past year. Some have seen credit bids made, while others remain in limbo:
▪ Tacoma Trax: The unfinished 115-unit apartment building at 415 E. 25th St. and a completed apartment site in Kent was foreclosed on last fall by Los Angeles-based Parkview Financial to collect on $36.2 million owed on the two properties. Parkview paid nearly $40 million as the sole auction bidder. Parkview also paid $4.2 million for Trax’s land lease, which was part of a leasehold arrangement between the original developers GIS International Group, DMG Capital Group and an LLC affiliated with leaseholder Safehold.
▪ Point Ruston market, garage and “Building 18”: Lender AURC III, representing a group of EB-5 investors, entered a $66 million credit bid, equal to its original loan, at a Pierce County sheriff’s sale in July for the upscale waterfront site’s market and garage to collect on a more-than $91 million judgment in its multi-year case involving financing at the property. The Point Ruston LLCs involved in the case filed an appeal shortly after the judgment. Another lender, El Segundo, California-based lender TerraCotta Credit REIT, made a credit bid of $8.6 million in July for the site’s Building 18 (5103-5109 Main St. retail site) in its pursuit of more than $82 million in unpaid principal balance, interest, fees and attorneys’ fees.
▪ Tacoma Town Center: The estimated-$300 million project, a 6.4-acre property bordered by South 21st to South 23rd streets from Jefferson to Tacoma avenues, was to bring hundreds of new apartments near the University of Washington Tacoma.
The project’s Boise-based development partner Galena Equity received a more-than $10 million judgment against it in King County Superior Court earlier this year for breach of contract with the site’s first developer and has faced other lawsuits in Idaho and a debt-collection case in Pierce County Superior Court involving a general contractor. One of the parcels has been transferred to a San Diego entity, and the undeveloped parcels owe two years’ worth of property taxes totaling more than $455,000, according to online county assessor-treasurer information.
▪ Graffiti Garages: The property at 725 Broadway remains for sale after plans for demolition and redevelopment into a 130-unit apartment site went bust amid developer-investor legal issues and a federal investigation. The site also has delinquent property tax debt for this year of nearly $24,000.
News Tribune archives contributed to this report.
This story was originally published September 14, 2024 at 5:00 AM.
