YarrowBay is on the edge of becoming the managing partner of the largest master planned development in the state, The Cascadia Project located in east Pierce County.
The Kirkland-based developer has been involved in a U.S. Bankruptcy Court hearing in Seattle before Judge Karen Overstreet involving the reorganization of Cascadia.
Patrick Kuo, president and CEO of Cascadia, filed for chapter 11 bankruptcy Oct. 15, 2009.
Following three days of testimony in bankruptcy court June 22-24, Overstreet ruled June 25 in favor of a plan allowing TPG Opportunities Partners, YarrowBay Holdings and Obsidian Finance Group, based in Portland, Ore. to purchase the project.
“We are very pleased with the judge’s ruling on the Cascadia project and excited about our proposal moving forward,” Brian Ross, president of YarrowBay wrote in an e-mail. “We’re confident that this ruling shows the strength of our proposal and the benefits to all parties.”
Cascadia’s largest debtor, HomeStreet Bank, began foreclosure proceedings in 2009 because it was owed about $76 million. The bank was asking Overstreet for a relief of stay or to be allowed to foreclose on the property.
Overstreet denied the relief of stay motion and allowed YarrowBay and its partners to move forward with the plan.
A final ruling on the reorganization plan is expected at the end of July.
While navigating the legal lanes of bankruptcy court, YarrowBay has also been participating in a closed record hearing in Black Diamond for two master planned developments, The Villages and Lawson Hills. The hearing began June 21.
YarrowBay is asking the City Council to approve permits for the two developments. The developer plans to construct about 6,000 residences, with office, retail, industrial and open space in Black Diamond.
If all permits are approved and the economic stars align, YarrowBay could very soon become king of the hill for master planned developments in the state with more than 13,000 homes planned between Cascadia, The Villages and Lawson Hills.
YarrowBay also has a plan to development Summit Place, a 156-acre site in Maple Valley. The land is currently owned by King County, but is located inside the Maple Valley city limits.
The plan
The Cascadia Project spans more than 4,000 acres located south of Bonney Lake with plans for about 6,500 homes, making it the largest master planned development in the state.
After nearly two decades of planning, construction of roads, trails and an elementary school, Cascadia filed for Chapter 11 bankruptcy protection Oct. 15, 2009.
The disclosure statement for reorganization filed by Cascadia attorney Geoffrey Groshong with the Seattle bankruptcy court spells out a plan where the project will be purchased by TPG Opportunities Partners, YarrowBay Holdings and Obsidian Finance Group.
The plan stated TPG would kick in $49.5 million for 90 percent ownership of Cascadia, YarrowBay $4.4 million for 8 percent and OPG $1.1 million for 2 percent ownership. The group is referred to as Holdings.
A second entity will also be formed titled Servicing Entity, which will manage the Cascadia project.
According to the letter of intent from TPG and included in the court documents, YarrowBay will be 60 percent owner of Servicing Entity and Obsidian 40 percent.
TPG, which was formally Texas Pacific Group, is described in the court document as “one of the largest private equity firms globally, focused on leveraged buyout, growth capital, and leveraged recapitalization investments in distressed companies and turnaround situations.”
Cascadia hired Obsidian in January as a financial advisor. The firm is described in the document as a “hybrid advisory and investment group.”
Cascadia past and future
Patrick Kuo, the founder and president of Cascadia, began the project 20 years ago. Kuo’s vision was an employment-based community, with high tech and light industry, a golf course and a 500-acre free trade zone with seven schools.
The first major problem hit Cascadia in 2006 when a tunnel being drilled under the Carbon River allowing connection to the Orting wastewater treatment plan collapsed, delaying the project.
The next major problem came in 2008 when three builders backed out of purchasing lots for homes. As the recession deepened Cascadia was unable to come up with the cash to meet debt obligations, the largest being two loans for about $76 million from HomeStreet Bank.
The bank began foreclosure proceedings on the loans in 2009.
Cascadia filed a petition for reorganization and recapitalization and the court gave Cascadia until May 31 to file a plan for reorganizing and paying debts.
According to Ross, the plan means, “We are making every investor whole by paying 100 cents on the dollar.”
The reorganization document stated if the plan is accepted by the judge, HomeStreet would receive a $10 million payment on the loan debt with a repayment plan for the balance.
Kuo would be paid $150,000 per year for three years. From that money he would pay the interest on a $1 million loan.
