EVERETT — A federal court is considering a plan to complete the ground-floor market at Potala Place, a 220-unit apartment building in downtown Everett. The sprawling space has sat empty and unfinished for nearly a year since a lawsuit by federal regulators put it at the center of fraud allegations.
The U.S. Securities and Exchange Commission alleges that the project’s developer, Lobsang Dargey, defrauded his foreign investors and misspent millions of dollars. Meanwhile, the FBI has been investigating the monk-turned-real-estate-mogul.
Dargey, 42, of Bellevue, has denied any wrongdoing since the SEC filed suit in U.S. District Court for Western Washington. The legal action halted progress on several other projects, including a proposed skyscraper in Seattle, owned by Dargey’s myriad businesses.
The court-appointed receiver, Michael Grassmueck, wants to finish construction at Potala Place on Grand Avenue in the heart of downtown Everett. In July, he asked the court to approve completing the project essentially in line with Dargey’s original vision of upscale shops focused on food. U.S. District Judge James Robart is considering the motion.
One of Dargey’s original partners in Potala Place’s market, Steve Carlin, put together the business plan that Grassmueck asked the court to approve. The Napa, California-based developer specializes in high-end food markets. Carlin, who runs the Carlin Co., had pulled out of Potala Place prior to the SEC lawsuit. The receiver negotiated his return earlier this year.
Everett is not the ideal setting for the type of markets developed by the Carlin Co. However, it has something that helps close that gap: a city-granted property tax break estimated to be worth more than $5 million over 12 years, the business plan says.
The company expects that getting the marketplace up and running will “require a significant subsidy,” the business plan states.
The tax break, which the city approved in 2013, is tied to developing a premium food market with a focus on farm-to-fork products.
The market is the project’s defining feature, and is a major reason that Potala Place’s apartments have rented at 15 to 20 percent more than the market average. The apartments are making money, as is an adjacent 122-room hotel that was built as part of the project.
If the court approves the plan, Carlin will open and operate the ground-floor commercial space for three years. The plan’s tentative timeline has the anchor attraction — Farms &Market — opening in January 2017. Farms &Market would feature a year-round farmer’s market, a boutique grocery and prepared food. A French bakery, Choux Choux Bakery, could be opened by this fall.
Carlin proposes rebranding the space as Grand Avenue Marketplace. Whatever it is called, he estimates it will cost nearly $4.2 million to finish construction.
Dargey has endorsed the receiver’s proposal.
In May, Robart approved a deal to restart construction on Potala Tower, a 41-floor skyscraper in Seattle’s Belltown neighborhood. The deal is expected to close by the end of this month.
Dargey financed Potala Place in Everett and Potala Tower in Seattle in large part by raising money from foreign investors through a federal investments-for-visa program, known as the EB-5 program. The program offers foreign citizens and their families a shortcut to a green card in exchange for investing in projects creating jobs in the United States.
He raised at least $123.5 million from Chinese investors — $83.5 million for Potala Tower and $40 million for Potala Place.
The SEC accuses Dargey of diverting investors’ money to projects they had not agreed to back in Shoreline and Kirkland, and using it to buy a house in Bellevue and fund spending sprees and trips to casinos.
The name Potala is a nod to Dargey’s native Tibet. He arrived in the U.S. in 1997. After working in the telecom industry, he moved into real estate development. Along the way, he married the sister of tennis superstar Andre Agassi.
Dargey got his start in Everett, where the offices of his companies, including Path America and Dargey Enterprises, are located. In Everett, 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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