More information has come out about the developer Weidner Apartment Homes pulling out of discussions with the city of Kenmore to develop on the large industrial site known as Lakepointe.
Kenmore had been working with the Weidner Apartment Homes for more than three years, with the developer spending more than $15 million on studies and property acquisition in the area. Dean Weidner, owner of the development company, met with city staff on Nov. 1 and delivered a letter stalling — and possibly ending — the development planning process for the $1.5 billion project. The letter has since been posted online at the city’s Lakepointe webpage.
In it, Weidner said that based on a review of the progress made in the past three years, he felt it necessary to suspend discussions on a parameter agreement that was recently presented to Kenmore City Council by city staff. Weidner said the company had spent more than $15 million already, much of it on property acquisition.
“We maintained throughout our deliberations, Weidner needed to see solid progress from the City on how it would address the financial gap created by a site that carries historical uses for which neither the City nor Weidner can be asked to bear alone,” the letter read. “…Without substantial agreement regarding the financial burden the city would be willing to shoulder to help close the gap, the risk for any developer is too great. Unfortunately, it has become increasingly clear to me that a detailed commitment for public participation for the Lakepointe project that Weidner had hoped for from Kenmore has not materialized.”
The “gap” referenced in the letter is a projected shortfall between revenues and expenditures that the developer could expect to see from building on Lakepointe. According to a study commissioned by the city and paid for by Weidner Apartment Homes, there was a roughly $155 million gap, meaning Weidner would take a $155 million loss if it developed the more than 50 acres of the Lakepointe property on its own.
Kenmore city manager Rob Karlinsey said the city had hoped to help lessen this gap with tax credits and incentives, like offering breaks if Weidner had constructed multi-family housing. It was not, however, offering money up-front to the developer.
Specifics were supposed to be ironed out during official parameter agreement negotiations, Karlinsey said. It was expected that tax breaks from the city could have filled roughly half of the funding gap, and Karlinsey previously told the Reporter he hoped the state would step in and help fund the project. Lakepointe is a former Washington State Department of Transportation landfill, and as such, would require extra foundation stabilization if it is to be built on, increasing the overall construction cost to developers.
Weidner’s decision to pull out of the process came less than a month after council was presented with a draft parameter agreement at its Oct. 22 meeting. During the meeting, council members asked city staff to look at ways the development could include changes or enhancements to public access and amenities. The next step would have been to move into formal negotiations between the city and developer.
“We’d felt like we made a lot of progress, especially in the last few months with the financial feasibility analysis, which confirmed that there that there was indeed a financial gap, and talked about ways to close that gap,” Karlinsey told the Reporter during a Nov. 13 phone interview.
Weidner had already bought land that would have been part of a future development at Lakepointe. The company purchased of a strip mall on the corner of Northeast Bothell Way and 68th Avenue Northeast, which was planned to be the street-facing edge of Lakepointe. It is unclear what Weidner Apartment Homes plans to do with this property now, or how this could affect future development efforts.
King County property records show that Kenmore Land LLC, owned by Dean Weidner, purchased at least three parcels in the northeast corner of Lakepointe in 2016 and 2017. The properties were bought for a combined $5.6 million.
In the letter written by Dean Weidner, he said the original intent of the parameter agreement was to describe what the city would like his company to consider as amenities and to outline how the city would address the need to close the financial gap. During the Oct. 22 city council meeting, the council added feedback focused on enhancing requirements to the developer, Dean Weidner wrote in the letter.
On their own, Dean Weidner said in the letter, he understood the requests made in the draft parameter agreement and those made by council had the intentions to enhance public benefit but that the cumulative effects of those requests added to the financial infeasibility of the project, while ignoring the financial gap. It also suggested the city look at proposing a bond to help finance development at Lakepointe, an idea Karlinsey said would be a hard sell.
Karlinsey said he was disappointed by Weidner pulling out of negotiations, but said the company had been professional and thanked his staff at the city for their work on the project. He also said Lakepointe still provides an opportunity for development as the largest piece of undeveloped land on Lake Washington.
“We’ve got this blighted industrial piece of land right on the lake and it would have been pretty cool to have a new waterfront neighborhood that provided almost three-quarters of a mile of new access to the water and all the environmental restoration that would have happened with that,” Karlinsey said.
The city has been hoping to develop on the property since 1989. A previous development effort in the early 2000s failed after the tech boom known as the dot-com bubble burst. Since then, the property has been used as a storage facility, with occasional construction activity.
“I don’t know that another opportunity like this will present itself any time soon, this might have been a once-in-a-generation opportunity that’s now slipped through our fingers,” Karlinsey said.
The Reporter will continue to follow this story and has submitted a public records request with the city of Kenmore for communications between staff and Weidner Apartment Homes over the past few months.
Karlinsey said the city will continue to discuss the future of Lakepointe with residents but didn’t know what the next steps would be. In his letter, Dean Weidner offered to come and discuss his decision to pull out of the project with council, an offer which Karlinsey said he hopes to take up. Also, while Weidner paid for the financial feasibility study, the city will be able to retain it and use it in future planning.
“There was a lot of excitement about the project and so, you know, we are a little disappointed, but we do feel like for the first time ever we made some real progress on the project,” said Kenmore public information officer Becky Range.