$300M downtown project stalled amid sluggish market. What’s next for Tacoma Town Center?
A multi-building, office-retail-apartment development in Tacoma remains stalled, with no indication when it might restart.
Tacoma Town Center, a 6.4-acre property bordered by South 21st to South 23rd streets from Jefferson to Tacoma avenues, has encountered delays, liens and legal challenges.
The undeveloped parcels are now two years behind in property taxes for a total of more than $279,000, according to county tax records.
Projected construction deadlines also have been missed.
According to multifamily property tax exemption agreements approved by City Council in 2022, Buildings 3 and 4 were estimated to be completed in September of this year, with 5 and 6 starting in March and completed in March 2025.
Building 1 (a 200,000-square-foot office building) and a public plaza were listed in an earlier 2021 amended agreement with the city to be completed in 2025.
North America Asset Management Group entered into a development agreement with the city for Tacoma Town Center in 2015, purchasing the parcels in the fall of 2017.
The amended agreement in 2021 conveyed remaining undeveloped property to NAAM subsidiary Tacoma Town Center Parcels LLC, which would assign its interest to one or more LLCs formed and controlled by Boise-based Galena Equity Partners.
City media representative Maria Lee referred recent questions about the development’s progress to a representative with Galena, who did not respond.
Building 4’s building permit has expired and will require a new permit application with updated design under current codes, Lee said.
“For the Building 3 building permit (which had not been issued but was still in the review process when it expired), we would likely grant another extension to that permit, but that needs to occur prior to March 15, 2024, when the new building code is adopted,” she said via email.
Without a requested extension, “a new permit application, with updated design under current code, would also be needed for Building 3,” she added.
Additionally, “The other related permits (site development and work order) for the Building 3 and 4 sites are still in the review process and have not yet been issued,” she wrote.
The 2021 amended agreement with the city stated, “Construction commencement and completion dates for the project are subject to change” based on the city’s completion of storm drain system improvements to accommodate the project.
Lee said that the city’s storm drainage work was finished at the end of last year.
“The Jefferson and Hood Street Outfall project was completed in December 2022. This project was designed and installed to alleviate capacity issues for this and future developments in the vicinity of the Town Center project,” she wrote.
A lien from a landscaping company was filed against each of the vacant parcels earlier this month.
Separately, a lawsuit was filed Sept. 28 against Tacoma Town Center Parcels LLC by general contractor Northwest Cascade of Puyallup, claiming nonpayment for work to build a storm-line connection to the property. The company seeks to collect more than $200,000, and it entered a lien claim on the Building 1 site in February.
Attorneys for the LLC denied the allegations in a response filed with the court Oct. 27. The response contended the defendant “was not a party” to the contract the complaint is based on, and that any damages “are the result of the fault of others, including plaintiff.”
Another legal battle over nonpayment of an earlier settlement with Seattle-based Caron Architecture on the project totaling more than $591,000 ended this fall, with Caron’s attorney noting judgment had been “fully satisfied.”
The case was dismissed in October ahead of its November trial date.
Only one building on site so far
The now more-than $300 million Opportunity Zone project is planned as a multi-phased project that includes hundreds of new apartments and retail space in five separate buildings, a 200,000-square-foot-office building, accompanying infrastructure and a public plaza.
So far, only Tacoma Town Center’s Building 2 is completed, home to Jefferson Yards Apartments and ground-floor commercial spaces. Construction finished in March 2021 under NAAM, which still owns the building.
Galena’s arrival was welcomed by officials at that time after the original developer’s funding plans stalled.
Before Galena, NAAM was unable to generate sufficient financing, including EB-5 investment, according to information presented during the amended development agreement proceedings. The EB-5 program offers visas to foreign investors in exchange for investments creating job growth at approved sites.
Galena’s participation would help “facilitate Opportunity Zone investment to complete buildout of $300+ million mixed-use project,” according to a Community and Economic Development Department presentation in May 2021.
In July, city representative Lee told The News Tribune, “We understand from the developer that financing is imminent.”
This month, Lee told The News Tribune in response to questions, “I can confirm that the City has continued to stay in touch with the developer, and expects that this project will continue moving forward.”
The area’s apartment-construction market has seen some high-profile projects take a hit following a boom in recent years. On Friday, the unfinished Tacoma Trax, 415 E. 25th St., was sold to the project’s lender at a foreclosure auction along with a related apartment property in Kent.
In July, Harbor Custom Development pulled the plug on plans for a luxury apartment proposal near the Stadium District. And at least three parcels slated for multifamily units remain undeveloped at Point Ruston, as extensive ongoing debt litigation involving those and some other parcels continue.
Commercial real estate information company CoStar this summer reported that 2023 had seen “one of the slowest starts to apartment construction in a decade,” from Seattle to San Diego. Higher interest rates and rising construction costs were among factors cited in the coastal slowdown.
