Kathy Mink (center) and her husband, Steven Ourada (in yellow), along with members of the Sno-King Watershed Council stand at the Frognal Estates development on Wednesday in Edmonds. (Andy Bronson / The Herald)

Kathy Mink (center) and her husband, Steven Ourada (in yellow), along with members of the Sno-King Watershed Council stand at the Frognal Estates development on Wednesday in Edmonds. (Andy Bronson / The Herald)

Frognal property up for auction over debt? Developer says no

A public notice warned of foreclosure due to a $10 million debt. But Integral Northwest says it’s a minor hangup.

PICNIC POINT — A public notice at the Frognal Estates has sparked confusion about the future of the controversial housing project, now 15 years in the making.

The notice says the 22-acre property near Picnic Point Road — now strewn with tree stumps, where a forest once stood — will be auctioned from the steps of the Snohomish County Courthouse on July 24, if the developer fails to pay nearly $10 million in debt by then. It’s a routine step in the commercial loan foreclosure process outlined by state law.

On Wednesday, longtime opponents of the project and local residents called on Snohomish County to buy the vacant land, restore it and make it a park.

“It feels like the developer cut the forest, left a mess and basically just gave us the middle finger and walked away,” neighbor Emily Wood told the County Council during its regular meeting, held via the online video service Zoom. “We’re asking for help and asking for options. We just feel so abandoned and so screwed over here.”

But the developer, Everett-based Integral Northwest, told The Daily Herald it still plans to construct the 112 homes. There were hangups in the project’s financing plan, but Integral Northwest is working to fix them, said John Lakhani, the developer’s president and CEO.

“We have invested a lot of time, a lot of money, a lot of energy in this,” he said of Frognal Estates. “And we intend to see it completed.”

Integral Northwest got a loan to purchase the property, and the developer had planned to get a second loan to finance construction and pay off the first loan, Lakhani explained. But due to delays in permitting and other issues, Integral Northwest couldn’t repay the first loan when it initially anticipated it would, he said.

“This lender that we have only was an interim lender — only to see us through getting all the approvals,” Lakhani said, adding that he’s “working on finalizing” the second loan.

The questions about the project’s future mark the latest chapter in the Frognal Estates saga, which began in 2005 when the first permit application for the development was submitted under the name Horseman’s Trail.

The developer won a series of court battles for the project, although it still must address drainage and slope stability on steep terrain south of Mukilteo.

The property sits just north of Picnic Point Elementary School.

Once covered in trees, it’s now dotted with stumps.

“It just looks like somebody dropped a bomb on the property,” Howard Slauson, a Lynnwood resident who often visits Picnic Point, told the County Council.

Residents rebuked the county Wednesday for allowing logging before the developer obtained all the permits it needed for the project and expressed concerns about landslide risks at the site because the trees have been removed. They also urged the County Council to change permitting rules to bar such early logging at future developments.

“This should never happen again. The danger and frankly the scourge that is now the bare hill of Frognal Estates needs to be mitigated by Snohomish County,” said Julie Meghji, who now lives in Redmond but called the Picnic Point area home for a decade.

The site of the Frognal Estates subdivision while it was being logged in December 2018. (Noah Haglund / Herald file)

The site of the Frognal Estates subdivision while it was being logged in December 2018. (Noah Haglund / Herald file)

The council is working with County Executive Dave Somers’ office, as well as the Planning and Development Services Department, to address the concerns that residents raised during the meeting, Council Chairman Nate Nehring said.

A “third-party geotechnical engineer” and county staff are monitoring the site for erosion and stability, county Planning and Permitting Supervisor Ryan Countryman said. The developer has posted bonds to ensure that monitoring continues and that erosion control measures are maintained, Countryman said in an email.

The county has issued construction permits for the project that don’t expire until summer of 2022 and could be extended beyond then, he said.

“Development approvals are regularly sold by an applicant to a new party who intends to build a site. If the property sells, the transfer of permit entitlements would be an issue between buyer, applicant and the bank,” Countryman said.

The next step toward construction would be removing the stumps before grading work can begin. But “to be funded, we have to have all the permits in hand and finalized,” Lakhani said.

The project’s sewer plans still need approval from the Alderwood Water and Wastewater District, said John McClellan, the district’s engineering and development director. Designs for an off-site sewer line haven’t passed the district’s muster, he said.

“It’s a challenging design problem for the engineer because it’s a steep slope. It’s difficult construction. And there’s some concern about managing erosion both short-term and long-term,” McClellan said. “We’re waiting for the developer’s engineers to come up with a design proposal that we’re comfortable with and that we feel will last a long time.”

The project stalled during the recession and was subject to a full environmental impact statement.

Now, it’s stalling again amid the COVID-19 pandemic, as Gov. Jay Inslee has ordered many construction projects to cease.

“That’s the biggest unknown here,” Lakhani said.

Rachel Riley: 425-339-3465; rriley@heraldnet.com. Twitter: @rachel_m_riley.

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