Property owned by Thurston Highlands, LLC is going up for auction because the developers are in arrears for more than $12 million.
The property, located on Berry Valley Road in Yelm, is slated to be sold at public auction 10 a.m. Friday, June 5 at the Thurston County Courthouse.
The developers have until Monday, May 25 to come up with the money and stop the sale.
With the current economy and banking conditions, the project’s loan couldn’t be extended or refinanced, co-developer Steve Chamberlain said Monday.
His partner is Doug Bloom.
“We’re developers who had no issues obtaining loans in the past,” Chamberlain said. “We can’t extend or refinance because (the bank) can’t.”
The Federal Deposit Insurance Corporation (FDIC) issued cease and desist orders, not letting people extend their loans, and they had to go to open market, Chamberlain explained.
While the Highlands is in foreclosure, Chamberlain said he isn’t sure whether the property will go to auction. He said he thinks there may be a deal struck “in the 11th hour.”
Despite the possibility of new ownership, the project will move forward.
Thurston Highlands is a master planned community, proposing 5,000 homes on 1,200 acres. It is a 20-year project, one of the largest in the state.
Chamberlain said he anticipated changes in the market, but not to the extent it has now.
“This is the worse cycle we’ve seen in 40 years,” Chamberlain said. “I don’t know of any developer who isn’t struggling.”
In addition to the $12 million debt, the developers owe the City of Yelm $121,500 for planning services associated with the master planned community.
Yelm City Administrator Shelly Badger said the city will not process applications for the Highlands until that debt is paid.
The developers have paid all previous debt until the most recent invoice.
The city will have to sit and look at options and decide how to go about getting the money, Badger said.
The property has several liens from other agencies the developers owe money to. The City of Yelm does not currently have a lien against the property.
Several members of the public voiced concern at Tuesday’s council meeting over the development going into default and the existing debt.
Yelm resident Bill Hashim said that, while the news might be bad for some, it wasn’t for him because the project goes against the city’s Vision Plan.
He urged the council to revisit the Vision Plan and convene a citizen’s board to review the document. Council later requested the Vision Plan be included as new business at a future meeting.
Olympia resident Ed Wiltsie said the city shouldn’t have let the developers run up a debt.
The city should have taken payment up front and held it in a fund to cover the cost of services, he said.
It’s common practice for cities to use this method. When funds decrease to $1,000, cities cease services until more money is paid to cover the services, Wiltsie said. Meanwhile, the city can collect interest on the deposit.
The Highlands developers are looking for new financing.
Once that’s in place they will pay off debt and move forward with the project, Chamberlain said.
In the future, Thurston Highlands will also pay a portion of a water study conducted by the City of Yelm.
The $550,000 study was partially paid for by a $300,000 grant through the state. The rest was covered by money from the city’s water fund.
The study determined that a southwest aquifer was deep enough to accommodate water consumption for the next 30 years without impacting local streams and rivers, Badger said.
Before the state Department of Ecology will issue additional water rights, the city needed to answer those questions.
Badger said the city needed to conduct the study regardless of the master planned community.
While the water study will impact the Highlands, the study was needed for the development of the city as a whole.
“We can’t ignore Thurston Highlands because they’re part of the city,” Badger said.
“They have a right to build.”
Once the project gets closer to the conceptual master plan stage, the city will look at how much of the study pertained to the development.
“We haven’t charged them for it because there’s still a lot of questions,” Badger said. “We don’t have enough pieces of the puzzle.”
“It’s a process to determine how much to charge.”
Some ideas the city is looking at rather than charge the developers a lump sum is tacking on an additional charge for every water hook-up.
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