EVERETT — Nearly all of Potala Place’s 220 apartments are leased, but the ground-floor windows reveal bare concrete and exposed pipes inside.
The project promises to bring an upscale food market and shops to downtown Everett. However, the street-level retail space is still unfinished, except for the Choux Choux Bakery, which opened this spring, and there is no clear end in sight.
Potala Place’s market is at the center of a federal lawsuit in U.S. District Court for Western Washington accusing its developer, Lobsang Dargey, of fraud.
He is fighting a proposal by the court-appointed receiver, Michael Grassmueck, to finish Potala Place’s commercial space.
Grassmueck’s plan is a modified version of one approved this summer by U.S. District Judge James Robart. The earlier version, which Dargey backed at the time, foundered when lenders either rejected loan requests or offered “unreasonable” terms, according to a filing by Grassmueck’s attorney in early December.
He estimates completing the Everett project will cost about $4.9 million, according to the filing.
The receiver’s modified plan relies less on an outside loan to finish the project mostly due to cash coming in from apartment leases and from the October sale of Potala Tower, Dargey’s planned skyscraper in Seattle. It also proposes hiring Steve Carlin, a Napa, California-based developer who has been involved with Potala Place off and on for several years, to manage the retail space and run the food market.
Dargey’s attorney filed a motion in mid-December, asking Robart to reject Grassmueck’s plan and approve the sale of Potala Place. That proposed deal, which Dargey orchestrated, is for Las Vegas-based EB5 Group to buy the project from Dargey’s company, Path America SnoCo. EB5 Group is connected to the Molasky Group, one of Potala Tower’s two buyers. The proposed sale, the filing argues, is the best hope for protecting the project’s investors.
The filing accused the receiver of wasting money and time, claims that were rejected by Grassmueck and the U.S. Securities and Exchange Commission, which filed the lawsuit against Dargey in August 2015.
The SEC accuses the developer of defrauding investors on Potala Place and Potala Tower and misappropriating millions of dollars from investors.
The FBI is conducting a criminal investigation into Dargey. No charges have been filed.
From the beginning, Dargey has denied any wrongdoing.
Dargey’s plan is short on details and puts his interests before investors’, SEC attorneys said in a court filing from Dec. 22.
Eighty-four Chinese citizens invested more than $40 million in Potala Place under the federal EB-5 program, which offers foreigners and their families a shortcut to a green card in exchange for bankrolling projects creating jobs in the United States.
The allegations could sink investors’ hopes of becoming permanent American residents. Many already had moved here on a temporary status pending the project’s completion.
Now, they might have to leave the country.
In late November, U.S. Citizenship and Immigration Services, which runs the EB-5 program, determined that the Everett project does not qualify for the program based on the fraud allegations and other factors. Grassmueck has appealed the decision.
More than 40 of the investors filed a motion Dec. 23, asking Robart to approve the receiver’s new plan and set deadlines for finishing the project.
Dargey got his start in Everett, where he renovated several properties and, in 2011, opened a smaller apartment building with ground-floor shops, Potala Village.
Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com. Twitter: @dcatchpole.
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