PICNIC POINT — Backers of the controversial Frognal Estates subdivision are exploring selling the undeveloped property if they can’t work out wrinkles in the embattled project’s financing plan.
Developer John Lakhani expects the 22 acres near Picnic Point Road could go for $22 million to $27 million “as-is” if his team can’t get another loan to advance the project further, he said during a Wednesday hearing held via teleconference as part of bankruptcy court proceedings.
“We have received several inquiries. We have given the information out,” said Lakhani, of Frognal Holdings LLC, which last month filed for Chapter 11 bankruptcy in the hopes of reviving the project’s faltering financials. “We are in the process of getting ourselves organized to appoint an agent who will market the property and get as many offers as possible.”
It’s unclear what a sale now would mean for the planned 112-home subdivision, 15 years in the making. Permits for the project could also be sold to the new landowner if such a transaction were to occur, Snohomish County planning officials have said.
“The end game is to deliver finished lots,” Lakhani, the president and CEO of Everett-based Integral Northwest, said in a Friday text message. But getting the financing to deliver those lots will require cooperation from contractors, some preliminary lot sales and “all permits in hand,” he said.
“We are working concurrently on all options,” he added.
The subdivision still needs a key approval from the Alderwood Water and Wastewater District for its sewer system.
The project has been a source of controversy since the first permit applications were submitted under the name Horseman’s Trail in 2005.
The developer won a series of court battles to advance the plan, despite objections from neighbors, who have argued that Frognal Estates would create landslide risks on steep and environmentally sensitive terrain south of Mukilteo.
The land, once forested, has already been cleared in preparation for construction.
Frognal’s backers purchased the property with one loan and planned to obtain a second loan to finance construction and pay off the first loan. But the developer was unable to get that second loan after a deal fell through with a national homebuilder that was going to purchase the lots, Lakhani said during the hearing.
In accordance with Chapter 11 of the U.S. Bankruptcy Code, Frognal Holdings is formulating a plan to pay the more than $11.3 million that it owes to more than a dozen creditors. The developer intends to file that plan within 90 days, representatives said during the hearing.
Lakhani told creditors that $12.5 million to $13 million will be needed to build infrastructure on the property before home construction can begin.
A foreclosure auction of the property, which was slated for Friday, was again postponed due to the bankruptcy proceedings.
The project’s construction permits don’t expire until summer 2022, and they could be extended, according to county Planning and Permitting Supervisor Ryan Countryman.