Due diligence starts as Port courts Irish developer for waterfront

A deal is not complete, but the Port of Bellingham made a significant stride forward last week in setting framework for the first private development on the city’s central waterfront in decades.

Port commissioners voted unanimously Feb. 18 to allow executive director Rob Fix to enter a 120-day negotiation period with Harcourt Developments Limited of Dublin, Ireland. Harcourt is seeking to become the lead developer for 10.8 acres of former industrial waterfront bordering downtown Bellingham and the Whatcom Waterway.

The property includes the historic Granary Building, which will get new life after it was once slated for demolition due to decrepit condition.

Fix said the port will spend the following months delving into Harcourt’s financial background and completing other due diligence efforts.

“We’re very much in the evaluation phase of this,” Fix said. “We have a pretty good idea of who they are, but we’d like to dig into those details a little further.”

One important element of the negotiations will involve a revised development vision from Harcourt for the 10.8-acre site. The Irish developer’s initial proposal, which was one of four offers a port-led selection committee vetted last year, included almost all of the 237 acres of waterfront land expected to be redeveloped over the next several decades.

But the possibility for such a grand vision, particularly one involving that amount of property, is not on the table, Fix said.

Harcourt’s proposal itself was light on specifics, as future market forces are likely to determine the actual nature of projects built on the site. But the waterfront quarter is expected to eventually include a mix of residential and commercial buildings, parks, and a possible new facility for Western Washington University.

The firm plans to partner with Bellingham-based Tin Rock Developments Inc.

A letter from Patrick Power, a director with Harcourt, received by the port on Nov. 22, indicates the company is willing to scale back its proposal to fit within the 10.8 acres and align with a master plan for the waterfront that was approved by the port and the Bellingham City Council last December.

Port staffers officially released a “request for proposals” for the site in May 2013. They received four offers from companies seeking the lead role in the property’s development, three separate offers solely to renovate the Granary Building, and additional standalone offers for a waterfront hotel and an affordable-housing complex.

The port’s selection group included Fix; Bellingham Mayor Kelli Linville, Whatcom County Executive Jack Louws; Steve Swan, WWU’s vice president of university relations; additional port and city staff, and representatives from the Seattle-based Heartland LLC consultancy, hired by the port to aid the process.

The group’s recommendations were released Feb. 12. Decisions were unanimous, according to the port.

Harcourt has noted development experience on projects around the globe. One of its well-known endeavors was a major waterfront redevelopment in a quarter of Belfast, Northern Ireland, home to the shipyard that built the famous Titanic ocean liner in the early 20th Century.

Granary’s new future

While the choice for a private developer will weigh heavily on the site’s future, designs for the waterfront Granary Building have also attracted curiosity.

In mid-2012, the port commission was prepared to allow the now-empty building to be torn down, largely due to the perceived high cost of its renovation. At the time, the port’s environmental programs director, Mike Stoner, said it could cost up to $14 million to bring the iconic facility back to life.

That figure, however, was disputed by local developers. And after public outcry over the potential loss of the structure, commissioners agreed to include the Granary in the port’s waterfront development request.

Out of three proposals for standalone renovations of the 1920s-era building, the selection group favored a plan from a local partnership between Tollhouse Energy Company and Zervas Group Architects, both of Bellingham.

The partners’ proposal envisions a mix of residential, office and restaurant space. It also features several ambitious ideas, including plans to have the renovated facility meet the rigorous green-building standards of the Living Building Challenge, as well as construction of a hydropower turbine connected to a currently inactive water line that extends to Lake Whatcom.

Fix said the port won’t enter into a deal directly with the partnership. Instead, Tollhouse and Zervas are expected to work in tandem with Harcourt (or whomever is chosen as the site’s lead developer), he said.

Additional partnerships between the lead developer and other private developers will also be encouraged by the port, Fix said.

Caution urged

The port commission attracted a larger crowd on Feb. 18 than typically seen at port meetings, including a film crew from the Center for New Media, a nonprofit broadcaster in Bellingham. Several people who gave comments during the meeting asked commissioners to act carefully as negotiations with Harcourt begin.

Bob Burr, who was a candidate for Bellingham City Council last year, said he would have preferred the lead developer recommendation go to a U.S. firm, or even better, one based in Washington state.

Local writer and activist Wendy Harris, who has been highly critical of the port and city’s waterfront master plan in regards to its protections of shoreline environment and wildlife habitat, urged the port commission to complete a new analysis of the future development’s environmental impact before any construction on the site begins.

Doug Karlberg, a local commercial fisherman, was worried about the nature of the port’s proposed deal with Harcourt.

Rather than purchase the 10.8 acres, Harcourt wants a joint-venture with the port, according to the recommendation from the port’s selection committee. The agreement would have the Irish developer handle predevelopment expenses, while the port commits the land.

Karlberg said he was concerned that such a deal could be risky for the port, particularly if Harcourt’s intentions for the property change.

“I think [the joint-venture talks] should be a very methodical process, and you’ve got to be careful,” Karlberg said.

Later in the meeting, Fix responded to these concerns, saying a joint-venture has both positives and negatives. Such an agreement would allow the port to keep some control over the development of the property, yet an outright sale would bring more money, he said.

“There’s advantages and disadvantages to each,” he said.

Fix told the commission that the port has not received any worthwhile offers in the past eight years to buy the property. Harcourt does not appear interested in an outright purchase, he said.

Prior to the vote, Commissioner Michael McAuley said he wanted assurance from Fix that the port commission would be allowed a voice in the negotiation process. He said he wants Harcourt to have an understanding of the importance of aligning its development vision with the waterfront district’s master plan, and added that he thinks this understanding must be made clear as early as possible.

Fix replied that in most development negotiations he would recommend the port commission stay out of talks and allow staff to handle details. However, the complexities and community importance of the waterfront development makes this process “a little bit different of an animal,” he said.

Fix assured McAuley that the commission would be kept informed of the talks’ progress.

He said there will also be opportunities for the commissioners and community members to meet with Harcourt representatives as the negotiations move forward. He also said he agreed with McAuley that Harcourt should demonstrate a commitment to the waterfront master plan.

Commissioner Dan Robbins reiterated to those at the Feb. 18 meeting that the process remains far from complete.

“We aren’t making the final selection at this time,” Robbins said. “The next 120 days are going to be very important for the port and Harcourt.”

Evan Marczynski, associate editor of The Bellingham Business Journal, can be reached at 360-647-8805, Ext. 5052, or evan@bbjtoday.com.

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