"Landing sold again, current plans scrappedDeveloper Gale Cool was shouldered aside in the bankruptcy auction."
June 9, 2008 · Updated 3:33 PM
"A Seattle development company purchased the Winslow Landing property at a bankruptcy court auction Thursday.Security Properties outbid Bainbridge Holdings and principal Gale Cool, who had been spearheading the plan to develop the prime property immediately north of the Winslow ferry terminal.They're a good outfit, Cool said Thursday as his own bid for the property failed. I'm sure they'll do a good project.Security Properties is the developer of Poulsbo Place, a highly praised village-style project in downtown Poulsbo on the site of what had been a ramshackle collection of World War II row houses. The sale apparently scraps the current development plans for the 4.33-acre parcel north of the ferry terminal.Cool was seeking approval for what would have been the largest mixed-use development on the island, with 60,000 square feet of commercial and retail space and 225 residential units surrounding a central plaza. That plan also called for 525 parking spaces, most in an underground garage.But a Security Properties spokesman said Thursday that the new owners do not have any specific plans for the property.The company has not purchased the Bainbridge Holdings' permit application, and will not go ahead with a planning commission hearing scheduled for Jan. 11 on Cool's proposal.Debts settledThe sale provided a surprise turn to the financial troubles that have dogged the project for more than two years - earlier this week, Cool had predicted that his Bainbridge Holdings would retain the property.But at the auction, held in a federal courtroom in downtown Seattle Thursday, Security Properties' winning bid was $6.038 million, significantly above the Bainbridge Holdings bid of $3.864 million.That does not mean that Security Properties actually paid $6 million-plus out of pocket.The bankruptcy auction stems from the purchase of the tract by Jason Lowe of Poulsbo. In 1998, Lowe, then 23, filed an application with the city for a mixed-use project to include a hotel, tavern, retail space and condominiums.Personal and financial difficulties forced Lowe to deed the project to Cool, who had been his project manager. But while he owned the property, Lowe borrowed some $4.5 million using the parcel as collateral. Through multiple borrowing, Lowe in effect created numerous mortgages on the land - at least seven and perhaps as many as 12.The bankruptcy court action was a way of getting rid of the mortgages. Bainbridge Holdings purchased the interests of the first three mortgage holders. It established in bankruptcy court that the value of the loans made against the property, including interest and attorney fees, was $3.864 million.Under the bankruptcy law, that amount was deemed to be Bainbridge Holdings' bid for the property.Had no other bidders appears, Bainbridge Holdings would have received title to the property, with other interests voided by the court.But Security Properties gained title by trumping Bainbridge Holdings before the auction.Although it had not loaned any money on the property, and was not a party to the bankruptcy proceeding, the company cut deals with mortgage holders number four, five, six and seven, and took over those claims.The total face value of the interests Security Properties bought was $2.174 million, so Security Properties was deemed to have outbid Bainbridge Holdings by that amount.In order to take title to the property, Security Properties must pay the $3.8 million that Bainbridge Holdings was owed in cash. The terms of its dealings with the mortgage holders were not disclosed, and are not matters of public record.We'll probably be made whole out of this, Cool said Thursday, when he learned that Security Properties was planning to submit a bid. The cash amount, less certain costs, will be turned over to Bainbridge Holdings.New plansFor the project itself, it's back to the drawing board. Security Properties CEO John Orehek told the Review Thursday.We have been in the business of residential development for 30 years, Orehek said. Poulsbo Place gives you a sense of what type of residential real estate development we do.Although the firm's main focus is on residential development, Orehek said the firm would not rule out a mixed-use project combining both residential and commercial uses - something both Lowe and Cool had proposed. The land at issue - on the north side of Winslow Way between Cave and Ferncliff avenues - is in what the Winslow Master Plan refers to at the Ferry Terminal Overlay District. The master plan allows high-density housing and limited commercial use of the property - a new neighborhood rather than an extension of the core.One aspect of Cool's plan that may not survive the ownership change is a proposed restaurant. Since Lowe's initial application, which Bainbridge Holdings took over, the city's zoning ordinance was changed to disallow a restaurant in that zone on the north side of Winslow Way. While the use was grandfathered into the Lowe-Cool application, it would not be grandfathered into any new submission. Orehek could not estimate when Security Properties might come up with a specific site plan for submission.The next step will be for our people to meet with the appropriate city officials and talk about where we stand, he said. "