To seal the deal, Holt & Haugh accepted $878,933 in cash upfront in exchange for a 30-year lease on the 3,785-sf ground floor of a mixed-use building that will be topped by four apartments in the retail center of the development, which on the residential front already includes 200 homes and rowhouses and about 800 residents. When complete, the project will include 600 residential units, more than 10 acres of retail and commercial space and 130,000 sf of office space.
The deal nets the county its first free-standing library in more than three decades for well under $8 per sf, and gives Fairview Village a virtual lock on the area's public services. Mike Harrington, the county library's facilities operation, tells GlobeSt.com the sweetheart lease deal is the solution to a developer that wanted a library and a county that wanted to own its space.
The county's other option was to commit to a 10-year lease for which it would pay out a total of $730,000 or $19 per sf, albeit spread out over 120 monthly payments. The 30-year deal is the only library lease the county has made that included the option of paying up front, and it will be the county's least expensive library lease.
Holt & Haugh principal Charlie Haugh was unavailable Tuesday to update other portions of the project, but the last word was that Target had signed on for land in the project and the once troublesome124-unit Chinook Way apartment project is leasing up nicely after nearly being lost to the lender earlier this year.
With the assistance of Bellevue, WA-based Robertson Capital Corp., Holt & Haugh in April closed on a refinance loan from Heller Financial that allowed it to pay off the apartment project's construction lender U.S. Bank and buy out its New Jersey-based equity partner.
"That puts into play another 4.5 acres next to Target for a pharmacy and a specialty grocer," said Haugh this spring. "The office market is extremely young out here, but because of the industrial growth in the area and the tremendous demographic growth in the Gresham Market, we think it's a market that will come, and when it does this will be an ideal location."
In mid-January, U.S. Bank filed papers that triggered foreclosure proceedings that would have resulted in a June sale of the apartment complex had Holt & Haugh not come up with the upward of $8 million in principal and interest it owed the bank it owed on two past due construction loans. According to real estate sources, the financial trouble is the result of a failed effort to turn a portion of the apartment project, for which U.S. Bank had loaned its money, into condominiums.
U.S. Bank didn't want to fund condos, so Holt & Haugh brought in a New Jersey-based outside investor. When the condos didn't sell, the lack of income put Holt & Haugh behind on its payments, but the outside investor didn't want to help out. "The issues with the property were never a real estate problem," Haugh tells GlobeSt.com. "They were more partnership and strategy problems; we were trying to sell as condos as the market for them went flat."
Holt & Haugh reverted back to an all-apartment concept and began leasing up the complex, but the loans were more than three months past due. At that time, the bank said it was owed $412,000 of a $618,000 construction loan for two houses, and $7.31 million of a $7.5 million construction loan for the apartment complex, plus $516,544 in interest.
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