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November 3, 2015
Lobsang Dargey's Path America has lost control of another real estate project.
A purchase and sale agreement with Seattle Housing Authority to buy land for an apartment complex and farmer's market near the Othello light rail station expired last weekend after the developer failed to meet several design and planning milestones.
Kerry Coughlin, director of communications for SHA, said the purchase and sale agreement will not be renewed. She said the deal fell through because Path America did not fulfill its obligations. The ongoing Securities and Exchange Commission's case against Dargey and Path America was not related to the collapse of this deal, she said.
The agreement would have allowed Path America to acquire 3.2 acres at the southwest corner of Martin Luther King Jr. Way South and South Othello Street, just south of the Othello light rail station, for $7.5 million. Path America planned about 530 apartments and a community space with a farmer's market.
SHA wanted to know what would be built and when before the land deal closed, so the agreement included design and planning milestones.
In August, SHA sent Path America a letter saying the developer had defaulted on several terms of the agreement, including design, budget, environmental planning and listing key members of the project team.
Coughlin said Path America pledged it would make progress but did not follow through. In a second letter dated Oct. 9, SHA said it would let the agreement expire Nov. 1. Coughlin said SHA received no response from Path America after that.
“We were disappointed because we liked the plans,” Coughlin said. “What Path America had in mind was the type of project we would want to see in that community and location.”
As part of the SEC case, a U.S. District Court judge recently ordered that Path America's assets be placed into receivership. That order gave control of the assets and several development projects to Michael Grassmueck of Portland. The Grassmueck Group has more than 25 years of experience as a trustee in bankruptcy proceedings, and state and federal court receiverships.
Grassmueck declined to comment on the Othello project.
Dargey is accused of misusing funds raised through the federal EB-5 program, which allows immigrant investors to receive green cards in return for investing in qualifying projects.
Coughlin said SHA will put the site back on the market. She didn't say when that will happen, but said the agency will move quickly.
Seattle Housing Authority acquired the land about a decade ago. It is adjacent to the agency's 1,400-unit NewHolly community.
The next developer won't be forced to stick to Path America's plan, but SHA would like to see a mix of affordable and market-rate housing as well as community space.