April 14, 2023

Tacoma, Kent apartments seek to avoid foreclosure

Rendering by IHB Architects [enlarge]

Originally slated for completion this year, Tacoma Trax is now two levels above grade.

Two apartment projects, one still under construction, are bound for a possible foreclosure sale in Pierce County. The initial notice recently ran in the DJC, following court filings in two counties, in late March. July 21 is the date for the auction. Doing business as Madison Trax LLC, developers GIS International Group and DMG Capital Group may be able find new financing before then, avert the sale, and thus maintain control of both projects.

Calling in the $54.5 million construction loan is Parkview Financial of Los Angeles. County records indicate the borrowers are about $2.6 million in arrears, with an outstanding loan balance of about $36 million.

Several liens have been filed for non-payment to subcontractors on both projects; some may now have been resolved. Or, if new money is secured, they may yet be resolved before the July auction at the Pierce County Courthouse, which could be canceled. And July is a long way off.

“We're working on refinancing,” says Eugene Gershman of GIS. He's confident that either new money and/or a buyer for the Madison Plaza apartments in Kent can be found. He didn't name his broker. But a sale in Kent would then allow refinancing of the Tacoma project.

Tacoma Trax, at 415 E. 25th St., is right next to Tacoma Dome Station. GIS is the builder for the five-story, 115-unit project, which IHB Architects designed. The groundbreaking was in January of last year. Gershman says the project is about two levels above grade, with completion anticipated in about a year.

And in Kent, the six-story, 157-unit Madison Plaza was completed last fall at 102 Madison St. That downtown project is just east of Highway 167 and walkable to Kent Station. IHB also designed that, and GIS was again the builder. Gershman says the building is now about 55% leased, adding, “That's going very well.”

Complicating both projects is that the developers sold the land to Safehold, which is part of iStar, the ground lease specialist. Parkview's legal filings from last month say the developers haven't made a required $3 million payment to Safehold; and that the project hasn't kept to the construction schedule on which all three parties previously agreed.

Thus, unless new money is found, Parkview or a different bidder could end up with the buildings, but not the land.

But GIS has surmounted obstacles before, as with its GIS Plaza in Bellevue. That was a challenging project, on a site where the developer's prior 17-story condominium plan was thwarted by the Great Recession. Years later, the nearly completed six-story building is now selling its 16 luxury condos. It also includes one retail bay, and offices for GIS.