Story by Debbie Cockrell, The News Tribune (Tacoma, Wash.) • 4d
Feb. 16—Point Ruston’s lawsuits and financial woes now include legal action from condominium associations representing residents at the site.
On Jan. 25, five condominium associations representing building residents at Point Ruston filed a petition in Pierce County Superior Court against the Point Ruston Owners Association.
The association is a nonprofit incorporated in 2014 by Loren Cohen, son of the late Point Ruston developer Michael Cohen, state filings show. Michael Cohen died in December 2020. PROA’s sole director is Loren Cohen.
The owners association is at the heart of the development’s on-site governance and administration-management.
The condo associations are seeking a custodial receiver to take over the governance, finances and management of PROA, citing, among other issues, conflicts of interest, a lack of accountability and escalating assessments to cover environmental expenses, marketing and the site’s legal bills.
The upscale community, whose boundaries reach into both Tacoma and Ruston, is also a Superfund site as the former location of the longtime ASARCO smelter.
This isn’t the first legal challenge for PROA, which has faced other Point Ruston-related litigation.
Jeremy Stilwell is a Seattle attorney representing the Baker Building Residential Condominium Association as well as the Century, Copperline Tower East and Tower West and Rainier Building Residential Condominium Associations.
Online marketing indicates more than 400 total condo units are located in the buildings.
In a filing in Pierce County Superior Court Feb. 9, Stilwell wrote that his clients “seek appointment of a neutral receiver to assume control of PROA to be operated in a fair manner without inherent conflicts of interest.”
“The assessments levied by PROA for 2024 are being billed to the property owners on a monthly basis right now. Meanwhile, Cohen’s motivation to push more expenses onto the PROA members is naturally increasing as judgments and foreclosure actions continue to mount,” he added.
Attorneys for Cohen and PROA have strongly rejected the allegations. The defense contends the assessments are appropriate, the plaintiffs’ allegations are false and the associations have no standing to seek receivership.
“The petitioners are not PROA members and lack standing to seek a receiver,” Jack Krona, attorney representing PROA, wrote in a Feb. 7 court filing.
Stilwell in a Feb. 9 filing, stated, “Petitioners have statutory standing to pursue this application based on their interest in the property, irrespective of ownership.”
What happened next took the issue into King County, in a departure from the case’s Pierce County proceedings.
NEW JURISDICTION, NEW RECEIVERSHIP
The same week attorneys for PROA and Loren Cohen were arguing against the condo association’s call for a custodial receiver, Krona filed PROA’s own voluntary petition for a general receiver in another court.
Stilwell was moving forward with a Pierce County courthouse hearing set for early Monday, Feb. 12, where PROA’s attorneys were to “show cause” why a proposed order appointing a custodial receiver should not be approved.
By Monday, Feb. 12, a stay was issued in the condo associations’ case, with an order appointing a general receiver, Resource Transition Consultants of Lynnwood, granted Feb. 9 by King County Superior Court Commissioner Henry Judson.
Stilwell told The News Tribune via email in response to questions this week that he was notified the evening of Feb. 9 of the King County action “when Loren Cohen’s attorney sent an email notice.”
The timing of the notification prevented those involved in the Pierce County case “from taking action to preserve the 9:00 Monday morning hearing,” he wrote.
Attorneys representing PROA and Loren Cohen did not respond to questions from The News Tribune, including about why the action was filed in King County.
RTC already serves as general receiver in two other orders tied to Point Ruston, both entered last year in Pierce County Superior Court:
— The first was requested in April by TerraCotta Credit REIT of El Segundo, California, which is pursuing its own debt repayment case involving seven Point Ruston parcels.
— The second was requested in early December by attorney Jack Krona for various Point Ruston LLCs as part of a petition for dissolution.
In the PROA petition filed in King County, it lists “1201 3rd. Ave. Suite 320” in Seattle as PROA’s address under “Assignment for the Benefit of Creditors” portion of the document. Other references to PROA in the same filing use a 5020 Main St., Tacoma address.
The Tacoma address is used as its principal office address in its corporate filing with the state of Washington. That same corporate filing with the state also shows 1201 3rd Ave. Suite 320, Seattle as the mailing address for PROA’s registered agent.
“We believe the action belongs in Pierce County Superior Court and intend to pursue a motion to vacate the King County order,” Stilwell told The News Tribune via email.
On Thursday, Feb. 15, he did just that, writing in a filing in King County Superior Court, “At a minimum, there were serious ‘irregularities’ warranting vacation of the King County Order.”
Among other issues, Stilwell noted the Seattle address being different from PROA’s principal Tacoma address. He cited that address first appeared in a Statement of Change/Designation filed with the state that changed PROA’s registered agent from one in Spokane to one in Seattle on Feb. 9, the same day as the receivership filing.
“There is no indication that PROA has changed the location of its principal office,” he wrote.
As for the selection of RTC as the receiver, Stilwell cited a previous email from an RTC representative referencing the Point Ruston entities it already had in receivership appearing to have “financial obligations” to PROA.
“As RTC has previously recognized, it cannot simultaneously act as receiver for PROA and PROA debtors,” Stilwell wrote.
The proposed custodial receiver listed in the condo associations’ Pierce County petition was not RTC, but Revitalization Partners of Seattle.
A decision in the motion to vacate order could come as soon as early March.
AURC III and PROA
The turn of events following the King County court order also may affect another case.
In December, The News Tribune reported that AURC III was one of two major lender-investors seeking to recoup tens of millions of dollars in unpaid loans among various LLCs tied to the Point Ruston development via foreclosure and sales of properties.
AURC III represents a group of foreign investors through the American United EB-5 Regional Center of Portland, Oregon.
PROA is a defendant in the AURC case, via Point Ruston’s parking garage and its ties to the building as a common area under its governance. The parking garage is one of the properties AURC is moving to foreclose on. PROA was added as a party to the case in November.
Arguments began Feb. 5 in Pierce County Superior Court in the trial’s first phase of sorting out the financial formula of the final amount owed to AURC. The trial’s second phase will focus on the foreclosure of various Point Ruston properties tied to the debt held by AURC.
AURC and Point Ruston first entered arbitration after interest payments on the loan stopped in 2020. An $11.49 million arbitration award came in October 2021 in favor of AURC against several Point Ruston LLCs.
The current trial is the result of AURC’s second lawsuit filed in November 2022. AURC contended that while the arbitration award was paid, “interest continued to accrue on the promissory note, and defendants failed to pay interest due,” the complaint filed in Pierce County Superior Court stated.
On Feb. 5, the trial’s first phase ended in less than 30 minutes.
Attorneys for AURC III and the attorney representing both Point Ruston LLC and PROA agreed to the math behind what is now owed on the original $66 million loan negotiated in 2013 by AURC III and Point Ruston developer Michael Cohen.
According to a stipulation on the amount owed signed Feb. 5 by attorney Russell Knight for AURC and attorney Krona for Point Ruston LLC, Point Ruston’s debt total owed AURC has reached more than $90 million. That’s up from a partial summary judgment last year in the case of more than $87 million.
The new total includes the principal plus interest through the end of January, a LID assessment payment to the City of Tacoma advanced by AURC, as well as interest on the LID payment through Jan. 31.
The stipulation stated, “All parties reserve all rights with regard the Court’s summary judgment ruling and (Point Ruston LLC) intends to appeal the summary judgment ruling.”
It added, “Under the ruling, Point Ruston LLC “is not contesting the amount due, under the October 1, 2013 Promissory Note and Loan Agreement but is not otherwise waiving its appellate rights, and will contest its responsibility for these amounts on appeal.”
AURC’s court filings have repeatedly stated that it maintains first position on the deed of specific properties as originator of the loan to fund Phase 2 Point Ruston for construction of multifamily units, a theater, retail, hotel and parking garage.
Now that PROA is in receivership, it’s unclear to what extent that will affect the trial’s second phase in March.
AURC attorneys did not respond this week to questions from The News Tribune.
In a filing Feb. 9, attorney Knight joined AURC in the condo associations’ petition for custodial receiver.
“AURC recognizes that if a receiver is appointed over PROA, the court will enter a stay of pending litigation. AURC does not oppose the stay as resolution of all related claims against PROA should likely occur in one lawsuit, but AURC raises the trial date to advise the Court and the parties of the impact this petition has on pending litigation.”
He added, “If a stay is entered, AURC reserves all rights to assert all claims against PROA in the receivership action.”
OTHER CASES
— TERRACOTTA: Investment group TerraCotta Credit REIT of El Segundo, California, has an ongoing receivership case involving seven Point Ruston properties (three vacant and four developed).
Affected parcels also tied to AURC III’S case include Point Ruston’s parking garage, public market, and two developable lots surrounding the garage, Knight told The News Tribune last fall, with some overlap property also involving TerraCotta.
In December, the receiver was granted approval to hire a broker to market and sell three parcels tied to PR Main Street Retail LLC, which include two retail strips (Buildings 8 and 18) and the theater. Building 8 includes such tenants as Multicare Indigo Urgent Care, Obee Credit Union, and Rebels & Lovers clothing store. Building 18 includes tenants such as Farelli’s Wood Fire Pizza, Intaglio Salon, and Ice Cream Social.
TerraCotta was approved to move forward on foreclosure sale of the four other properties. Those include commercial and retail space on the ground floor of Village on Main Apartments at 5020 Main St., and three vacant lots (future Buildings 14, 15, 16) which had been envisioned for multifamily unit development along Yacht Club Road.
For properties overlapping with AURC’s case, proceeds are to be paid first to TerraCotta, then AURC III if any sufficient funds remain. Marketing for those properties began in January. If the three properties are not sold by July 1, TerraCotta can then shift to foreclosure sale on those as well.
— CITY OF TACOMA: On Jan. 31, the city of Tacoma filed for foreclosure of local improvement assessment liens against Point Ruston LLC in Pierce County Superior Court.
The delinquent amounts for the first five listed total nearly $84,000 on a total payoff amount of nearly $398,700. The delinquent amounts for the second bundle was $132,456.58 on more than $631,000 total owed.
The affected sites are 5102 and 5202 Ruston Way, both vacant pad sites in Ruston.
Maria Lee, media representative for the city, told The News Tribune in response to questions that Tacoma brought the lawsuit for delinquencies in the 2022 and 2023 LID payments.
“Tacoma is taking the lead because it has an agreement with the city of Ruston to do so,” she said via email. ” State law authorizes cities to coordinate like that.”
The LIDs were approved by Tacoma City Council in January 2013. The funds were for infrastructure improvements, sewer, water, street lighting, underground wiring and paving.
If Point Ruston LLC does not answer the lawsuit, “the city will ask the court for a default order and issue an order of sale for the two parcels,” she told The News Tribune. “If they do answer, then Tacoma will file a motion for summary judgment to foreclose.”
No responses to the case had been filed as of Feb. 15. Krona did not respond to a News Tribune request for comment.
— OTHER PROA LITIGATION: PROA’s petition for receivership that was filed in King County includes a list of other litigation involving the owners’ association and potential creditors. The list of cases, each filed in Pierce County, begins with the condo associations’ case, and follows with a lawsuit filed in May 2023 by Pierce County Security Inc. for alleged unpaid services; the AURC III case, and a PROA lawsuit against Serpanok Construction involving the parking garage/public market property.
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