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New life for Lynwood Center's Blossom Hill?
The consequences of the current real estate and building swoon on Bainbridge Island is rarely visibly apparent, but then there’s the Blossom Hill development in Lynwood Center.
The four large, unfinished buildings – looming two-stories tall at the bottom of the hill – epitomize the economy’s downside. Construction stopped abruptly about two years ago when the bankrupt City Bank of Lynnwood shut off its money spigot to developer Bill Nelson, who was forced to put the 16-acre project into an uneasy hibernation.
After putting protective coverings over the buildings, Nelson and the 15 investors of Rich Pass LLC nervously watched as City Bank suffered a FDIC-forced closure. The bank was taken over by Whidbey Island Bank, which two weeks ago officially became the development’s owner by paying $10 million for the property at a foreclosure auction in Port Orchard. More than $27 million was owed on the two original deeds of trust. The bank was the only bidder.
With the property back on the market, will it lead to a resurrection for Rich Pass? Perhaps, Nelson hopes, since the number of developers currently interested in completing the ambitious development during this recession are scarce.
“We have been in negotiations with the bank (Whidbey) for quite a while and the auction was just a formality,” he said. “The bank is now trying to put a value on the project by seeking other interested parties. There is just us right now; most people won’t want to get involved in a half-done project. But the bank is seeking competitors in an effort to reestablish the value in a market that really doesn’t exist right now.”
Nelson, who is a native islander, still believes his ambitious concept of erecting a hillside village at one of the island’s four service centers is not folly. He admits it won’t be easy to find new financing to buy the property and finish construction at the worst of times. But he won’t yield.
As envisioned by Nelson, Blossom Hill would include four buildings (containing 15 condominiums and several retail businesses), 73 residences built on the hill (where roads and sewer lines have been laid out) and an existing restaurant, which would also serve as a community center.
“We still think the development can be supported by the south part of the island,” said Barbara Sinnott, one of the Rich Pass investors. “We’re excited about completing it because it would be wonderful for the area, which is really booming right now just as it is.”
Ironically, the poster child for how to succeed during a financial downturn sits right across the road in the form of the “new” Lynwood Center building, which was renovated after Blossom Hill shut down.
How did this happen with two projects a stone’s throw from each other? Likely because there were two different developers with contrasting appetites and visions.
Architect Steve Romein’s 18-month Lynwood Center project was financed before it started and was primarily a renovation of four separate buildings into one; apartments and business spaces were reconfigured; parking and sidewalks were redone. All of the existing half-dozen businesses remained open during construction, and Treehouse Cafe’s expansion and the Historic Lynwood Theatre’s growing popularity serve as anchors.
Across the street, Nelson and his investors bought the land and then used a line of credit to fund the construction of phase one, which was clearing the land and constructing the street-front buildings. Only the back section of the fourth building hadn’t been erected when construction stopped, though much of the buildings’ interior and exterior finishings remain undone.
Romein said the uncompleted project hadn’t affected business across the road.
“As vibrant as the Lynwood Center has been,” he said, “that should speak well to the potential over there. It has not been a negative for us. If he finishes it, it would only help us all. This market is tough, but it’s a well-designed project and we’d all like to see him finish it.”
Romein said his only gripe is that the city didn’t require a bond from Rich Pass to finish the road work.
“That’s a big disappointment for me,” Romein said. “That’s made it worse, with the road still torn up some. I had to do a bond for our part, but the city didn’t require it from them for some reason.”
Both believe the neighborhood concept is viable.
“Romein has done wonders over there and the community is crying for more because people like the village concept,” Nelson said. “Boomers are beginning to retire and I’m convinced our product will be in high demand. Islanders have rediscovered Lynwood Center, thanks to what Romein and others have done.”
Nelson said the condition of the buildings is good, despite the fact the wood structures were left unfinished for several months.
“There’s high-quality plywood exterior sheathing for the walls and they are now wrapped and sealed,” he said. “We didn’t skimp. We used the highest end of windows and lumber. Inside it’s dry and ventilated and performing well.”
The bank has split the $10 million into two parts, according to Sinnott, asking half for the buildings and the restaurant, and the remainder for the undeveloped part of the project. She said all 15 investors are still involved in Blossom Hill.
About a dozen liens worth nearly $1 million were filed in 2008 on the project, including $396,274 by Nelson’s Wood and Glass Co., which worked as a subcontractor on the job. The liens still exist on the property and will have to be taken care of upon closing between the buyer and the bank.
“It was a byproduct of us being cut off,” Nelson said. “The bank failed to release the final construction draws and the subs were stuck with the debt, so they filed liens. No one saw it coming. City Bank took a year and a half to close after going bankrupt in 2008. They just ran out of money.”
There’s no doubt he’s feeling pressure to get the project back on line.
“Time is of the essence,” he said. “The goal is to start it up as soon possible to take advantage of the dry weather. We’re trying to get outside investors involved, but it’s still not an easy market and it’s difficult to anticipate what’s the best sale price. But I’m confident it’s a worthy project and we’ll get it done. I’ve put a lot of years into it, and I’m not about to give up.”