By Daniel Drake and Kevin Knodell

Two months before construction begins on a new mixed-use complex in Parkland’s business district, the developers can look back on a year of rumors, controversy and community bonding.

Towering four stories over Garfield Street, the new Garfield North building will house a mix of apartments, offices and retail space. But before the first strike of the hammer could happen, eight businesses would need to find a new place to stay.

And although the project has been two years in the making, the owners of Affinity Investments and Korsmo Construction made a conscious decision not to release any official statements until summer of 2012.

That decision made it an interesting year for all concerned.

ENTER THE RUMOR MILL

In early 2012, the developers still had no idea whether Garfield North would become a reality, said John Korsmo, President of Korsmo Construction and Co-Owner of Affinity Investments.

They still hadn’t bought all the properties they would need in order to put up the building, and they were still trying to secure a tax break in order to afford it.

Without either of those things, they would have to call the whole thing off, Korsmo said.

Meanwhile, business owners who still leased a strip of Garfield Street buildings between C Street and Pacific Avenue wondered when —if at all—they would have to move out. Leases were ending at different times in the year, and developers tried to deal with them individually, said Kirk Rector, President of Affinity Investments.

“We’ve tried to adapt and be accommodating to their needs as best we can in this process,” Rector said.

But the absence of any official announcements from either of the two companies about Garfield North would trigger a series of rumors and complaints among tenants.

“If there was any direct fault, it was that we were waiting until we knew everything to start communicating broadly to the community,” said Scott Ramsey, Director for Sales and Marketing at Korsmo Construction.

There never was an exact right time to start releasing information, Ramsey said.

COMPLAINTS

At least three business owners on Garfield Street have complained about Affinity Investments’ conduct since January 2012.

Judi and DJ Brown from Getting Personal Imprinting said they were initially told about the possibility of a construction project in February 2010, but that it would not begin “for another 3–5 years.”

When rumors began spreading in January 2012 that the project might in fact begin sooner, the Browns repeatedly asked Affinity Investments for dates and information in order to plan ahead, Judi Brown said.

“We really weren’t provided with anything,” she said.

In a written statement published last summer, the Browns described Affinity’s handling of their lease as a breach of contract.

Affinity Investments had tried to help Getting Personal Imprinting move shortly after the August street fair, but “discussions broke off,” Korsmo said. Affinity has since agreed to pay the last three months of the lease.

Another business owner, Joye Reier from The Shed Door, said she was not yet aware of the Garfield North project when an Affinity representative visited her store last spring to measure the building.

Rector believes all owners had been told about the project verbally by then, but reiterated that Affinity chose not to issue any written announcements until plans were finalized. Reier’s first written notice would have been a “pay or quit” notice which she received on May 15—one day after the inspection.

Gloria Simpson from Hondle’s Tax Service said Affinity representatives arrived unannounced to do a walkthrough of the property weeks before it was actually sold.

This is news to Rector, who said no inspections were scheduled prior to the April 30 sale of the property. The first inspection happened on May 14, and was announced in a letter dated May 9.

Simpson also recalls an April 1 visit from Rector during which she heard him introduce himself as “the new owner.”  Because her father still owned the property, she immediately called an attorney to verify that the sale had not been made yet, she said.

Rector thinks the incident was a misunderstanding.

“It wouldn’t do me any good to say I’m the property owner when I’m not,” he said, and believes he was misheard. He also recalls talking to staff about how the sale was still taking some time.

RENTS WILL GO UP

Retail space in the new building will cost 2–5 times more than what businesses have so far paid for the old properties.

Affinity Investments charged tenants $4–12 per annual square-foot for staying in the old buildings, Rector said. The new annual rent will be $23 per square-foot for retail space, and $18 for apartments.

Both Korsmo and Rector are confident that small, non-franchise businesses will be able to afford space in the new building. But it would be “optimistic” to assume that the existing businesses would be able to transition straight into the new spaces, Ramsey said.

“They are in those spaces now because they are very inexpensive spaces,” Ramsey said. “This is going to be a brand new building with very high-quality retail space.”

The developers have worked with the architect to design smaller retail spaces in order to make it more attractive to old tenants, Rector said.

Affinity has begun to actively market the new building to new businesses, and hopes to attract a mix of local and franchise tenants.

A RISKY VENTURE

To make the $20 million project less risky for investors, the new Garfield North LLC—owned by PLU, Affinity Investments and Korsmo Construction—has secured a tax break allowing the company not to pay property tax on the new apartments for 12 years.

It will still pay taxes on retail and office space.

This move was “imperative” for attracting investors because Garfield North is a “very risky venture,” Rector said.  Because initial returns will be “minimal,” any extra costs or delays could mean a revenue loss for investors without the tax break, Rector said.

There was just one problem: No law actually existed which would allow Pierce County to grant such a tax break. The developers therefore worked with the State legislature to draft Senate Bill 6277, which would enable the county to do so, Korsmo said.

“Keep in mind that it [the bill] wasn’t written specifically for PLU or Affinity, but our project will be the first to utilize the multi-unit housing exemption,” Ramsey wrote in an email.

SB 6277 and HB 2489 were signed into law in March 2012. Using this law, Pierce County unanimously approved Garfield North’s tax break on Oct. 30, 2012.

The bill was an initiative made by Pierce County, which suggested the idea of an eight-year abatement, Korsmo said. The developers decided they would need 12 years instead.

Property tax rates are based on the value of the property, and the current buildings are valued at $23,000 per year, Rector said. He estimates that the new building will raise the property value to generate about $350,000 per year.

But for the first 12 years, Garfield North only has to pay taxes on 15,000 square-feet of its 127,000 square-foot complex.

Ed Cedras, owner of Northern Pacific Coffee Company, said he is worried about how the loss of tax revenue will impact surrounding schools and community, and that he disagrees with the developers’ choice to rely on tax abatement.

“If they didn’t have enough money to afford the building, they should never have started the project in the first place,” Cedras said.

The developers believe the project will pay for itself through increased revenue once the abatement expires. Rector also said the retail space will immediately generate both property and sales tax revenue once new businesses move in.

Cedras is also concerned that Garfield North’s presence will raise the value of surrounding properties, forcing those owners to pay more property tax as well. The owners might pass on this cost to local businesses through higher rent, and that may drive some tenants out of business, he said.

COMMUNITY IMPACT

Affinity Investments originally bought properties for The Shed Door, Inkstand Tattoo and Getting Personal Imprinting on Feb. 24, 2010. The plan was to upgrade and renovate those properties, Rector said.

Knowing that any sort of development would involve parking and site upgrades, the developers started talking to PLU about using the area toward 121^st Street South. PLU then expressed an interest in how to develop Garfield Street further, Korsmo said.

As a result of those discussions, Affinity Investments decided to try acquiring the remaining properties from C Street to the auto licensing office. On March 26, 2012, it bought the corner property on Garfield Street & C Street. It bought the remaining properties in April 2012.

Garfield North joined the Garfield Street Business Association this fall and received feedback from business owners at an Oct. 9 meeting. Security had then become a main concern, since people had begun to break into vacant buildings at night.

“They were going through the crawlspace and cutting through the floor,” Ramsey said.

As a result, Garfield North hired a security guard to watch the property from 7 p.m. to 7 a.m., and it has also removed brush around the easternmost building, he said.

The parking lot adjacent to the building will feature a “rain garden” which filters storm water before it is released into the ground. The parking lot will consume half of the athletic space east of C St., Korsmo said. During construction, sidewalks will be closed for 1–2 days to connect with utility lines below Garfield Street. The building itself will adhere to Leadership in Energy and Environmental Design (LEED) standards.

Construction is scheduled to begin in February 2013.