What happened to redevelopment of Graffiti Garages? The answer takes surprising twist
Another planned apartment project for Tacoma has fallen on hard times and is back on the market.
725 Broadway, more commonly known as Tacoma’s Graffiti Garages, was the focus in 2022 of an ambitious mixed-use commercial residential apartment project. It’s currently looking for a new owner to take on the dream.
But there’s more to the story.
The site’s downfall is tied to a larger bankruptcy of an investment firm facing multiple lawsuits and is under federal investigation for a potential Ponzi scheme, according to lawyers in the case.
The case is the latest disappointing outcome among other local delayed or distressed projects, including the unfinished Tacoma Trax, much-delayed Tacoma Town Center and the ongoing legal imbroglio that is Point Ruston.
Meanwhille, the Broadway property is up for sale with an asking price of $2.25 million. The site, according to marketing from Kidder-Mathews, could be developed for different uses: “Multifamily, senior housing, retail, office, hotel, cultural, governmental.”
The property includes the structure and an adjacent parcel.
A suggested design enclosed in the brochure envisions a sleek, glass-covered multi-story development, a stark contrast from the current, dilapidated garage structure more familiar with the site.
How we got here
In February 2022, The News Tribune reported on plans to demolish Graffiti Garages, 725 Broadway, to be redeveloped as a 130-unit apartment site.
725 Broadway LLC was the developer of the project representing Bellevue-based investment firm iCap. The LLC purchased the property in July 2014 in a bundle of five parcels between Commerce Street and Broadway for $700,000.
The site had been the subject of other pre-app redevelopment talks with the city in 2014 and 2018 but this go-around seemed to be the one that made the most progress, at least on paper with permit filings.
By fall 2022, crews had prepared it for demolition, and there was fencing around the property.
In December 2022, the project gained an 8-year multifamily property tax exemption from the city for the creation of all-market-rate apartments along with some live-work units, parking stalls and commercial space.
Construction was to start January 2023 with tentative completion date listed as Feb. 1, 2025, at an estimated cost of $58.75 million, according to its MFTE filing with the city.
Then came 2023.
County records show liens started to be filed against the property starting in March 2023, and the first investor lawsuit was noted against the property’s title in Pierce County records in August.
That lawsuit, filed by Li Tan of King County and a group of other investors, accused iCap and its entities, under direction of then-iCap CEO Chris Christensen and his brother, chief operating officer Jim Christensen, of carrying out “a deceptive, abusive, and calculated multi-year campaign to mislead unsuspecting Chinese investors and misappropriate millions of dollars of investor funds.”
According to the second amended complaint filed in King County Sept. 13, 2023, “Defendants induced Plaintiffs to invest their savings in private offerings of debt and equity securities based upon false or misleading assurances about the security, profitability, and liquidity of the investment.”
It contended that in January 2023 “Defendants began failing to fulfill Plaintiffs’ repayment requests” and by March “Defendants circulated a formal announcement to investors stating that they could no longer meet their obligations in the timeframe promised.”
The Seattle Times reported last fall that the former CEO Chris Christensen wrote in March that “Rising interest rates and other unforeseen market factors have resulted in increased costs and reduced property values across the board,” which had “severely restricted lending options” and “resulted in fewer transactions in the market.”
Among other issues, that lawsuit contended that iCap properties including the Tacoma site were marketed in a new venture called Invalus, “and that iCap’s obligations to repay Plaintiffs would be converted into a proportionate share of equity in this new entity.”
All told, six lawsuits were filed in King County between June and August 2023 against iCap’s ventures.
Later in September, 725 Broadway LLC entered Chapter 11 bankruptcy as part of a larger filing among the other entities tied to iCap.
The various bankruptcy filings among the entities affiliated with iCap were soon consolidated into one main bankruptcy case.
One lawsuit was filed on behalf of its top creditor, who lives in Beijing and is owed more than $10 million, according to the firm’s bankruptcy filing.
In the complaint filed July 2023, it accused the investment firm of “self-dealing behaviors that have effectively depleted any equity in the properties supposedly serving as security.”
An example that lawsuit featured was the 725 Broadway property in Tacoma.
It noted that “in June 2021, 725 Broadway, a property holding subsidiary under the iCap Investments notes, executed a deed of trust to Vault Holding to secure a $1.2 million loan. The deed of trust was later amended in January 2022 to increase the secured amount to $2.7 million.”
It continued, “However, the assessed value of the property owned by 725 Broadway is just shy of $2 million, meaning that there is essentially no equity left in this property.”
Pierce County records as of May 3 show the assessed value of the site remains at just under $2 million, with $22,433.15 owed in overdue property tax.
In March, The Seattle Times reported that attorneys for former CEO Chris Christensen wrote in court filings that the U.S. Securities and Exchange Commission and FBI “recently opened a criminal investigation into iCap.”
The allegations stemmed from iCap’s third-party restructuring company, Paladin.
Chris Christensen’s attorneys reportedly urged the court to hold off on determining whether the company was a Ponzi scheme “until the parties have a clearer understanding of the criminal investigation.”
Christensen has denied the allegations.
An April iCap status report filing in U.S. Bankruptcy Court for Washington’s Eastern District notes 1,800 investor creditors are owed $250 million.
Prime location
725 Broadway, which went on the market Feb. 29, is a prominent piece in an ongoing redevelopment push aimed to bring new life to the Old City Hall Historic District. The site is near both the McMenamins-restored Elks Temple and the current redevelopment of Old City Hall by Surge Co., which announced May 1 on social media it was starting to lease spaces.
While permitting had been pursued by iCap/725 Broadway LLC for the property, the city says enough time has lapsed that those permits are now void, including deferred submittals filed in early March 2023, tied to original permits.
As for the 8-year MFTE, there’s still life to that.
“The MFTE does run with the parcel. The three-year window to complete the project is up December 20, 2025,” said Maria Lee, city media representative, via email. “If the project were to change considerably, the new owners would have to reapply.”
News Tribune and Seattle Times archives contributed to this report.
This story was originally published May 6, 2024 at 5:30 AM.
