Tacoma has a preliminary deal with a Chinese firm to develop the largest city-owned parcel downtown. Also, Red Lion Hotels executives are given an advance payment on their 2015 annual bonus, which a compensation expert calls “unheard of and absolutely unacceptable.”

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A Chinese real-estate firm has signed a preliminary agreement with the city of Tacoma to build a big residential and commercial project on the largest undeveloped tract in the city’s downtown, near the University of Washington’s Tacoma campus.

The deal was inked before Chinese President Xi Jinping’s recent visit to Tacoma — but at least now many of his countrymen might recognize the city’s name.

The project, on 6.4 acres of vacant, city-owned land, will be developed by North America Asset Management Group, a Bellevue-based firm managed by Chinese developer Xunkun Luo.

He is the CEO of Wuhan Boshengshiji Real Estate Development Co., a privately held company with an annual revenueof about $31 million that has developed more than 7.5 million square feet, according to its proposal. Wuhan, the capital city of central China’s Hubei province, has a population of 10 million.

His firm agreed to buy the vacant land for $3.5 million and construct the center in two phases, according to a preliminary agreement signed in August.

The mixed-use project, called Town Center, includes 360 residential units, 90,000 square feet of offices and 200,000 square feet of commercial space. It will also have some ground-floor retail and about 480 parking stalls.

The Chinese developer has hired Puyallup-based Absher Construction and Tacoma architecture firm BCRA.

It’s the latest example of Chinese developers using the EB-5 visa program to finance developments in the Seattle metro area. The city said it didn’t receive any proposals from local developers.

Tacoma assembled the vacant land about 15 years ago for a new police headquarters, but then those offices moved elsewhere.

Since then, the city has sought a development partner with the cash to revitalize its historic Brewery District, where warehouses and industrial buildings have left few traces of the breweries that dotted the landscape from the late 19th century until Prohibition.

“It reminds me of SoHo back in the ‘80s,” said Ricardo Noguera, a New Yorker who became Tacoma’s economic development director in 2012. “The foreign investment is definitely filling a void.”

Noguera said the total cost of developing the vacant land is upward of $125 million. The project will create a neighborhood not only for UW Tacoma students, he said, but workers who want to live downtown.

North America Asset Management is expected to contribute $25 million in cash equity, and finance 30 percent of the project’s costs with capital raised through the federal EB-5 visa program. EB-5 enables foreigners who invest at least $500,000 in a commercial project to get fast-track access to permanent-residency visas for themselves and their immediate family.

The developer’s effort to raise EB-5 capital is managed by Albert Sze, who also manages Yareton Investments, a U.S. subsidiary of Shanghai-based Minqiang Investment Group (MIG) that is raising EB-5 capital for a two-tower project — a hotel with at least 300 rooms and a high-rise residential tower — next to Tacoma’s convention center.

Noguera said that project likely won’t break ground until early 2017.

The quest for Chinese investors could be complicated by national politics: Congress has extended until Dec. 11 the law that authorizes EB-5 promoters to give lawmakers more time to consider reforms, such as where these funds may be used.

Neither Sze nor Luo could be reached for comment.

Luo’s team has until mid-December to conduct a feasibility study and mid-February to secure financing and submit development plans to the city. Should Luo decide to move forward, the deal’s closing requires City Council approval. If all goes as planned, Noguera said, Luo could break ground at the end of next year.

Noguera views the project as an example of how EB-5 can be used to bring investment to the inner city and support local jobs.

“If it can happen in cities like Seattle, Vancouver, Los Angeles, San Francisco and even Oakland, why not Tacoma?” he said.

— Sanjay Bhatt: sbhatt@seattletimes.com

Unusual bonus deal for Red Lion execs

Red Lion Hotels may have just invented a new executive-pay sweetener.

The Spokane-based hotel company’s revenues per room are on the rise, but it lost nearly $2 million for the second quarter and its six-month revenues declined more than 10 percent.

Nonetheless, the board’s compensation committee this past week awarded its top five executives an “early bonus payment” — a 20 percent advance on their targeted year-end bonus.

President and CEO Gregory Mount got $58,388, and the others collectively received $118,880, according to a Securities and Exchange Commission (SEC) filing by the company.

The company’s reasoning was that “results thus far in 2015 reflect substantial achievement of the executive officers’ individual, department and company goals” for the calendar year.

The deal is unusual: The phrase “early bonus payment” doesn’t occur in any similar SEC filing going back 15 years.

“This is unheard of and absolutely unacceptable from a corporate-governance point of view,” executive pay consultant Fred Whittlesey of Seattle-based Compensation Venture Group said when shown Red Lion’s filing.

“As if annual incentive plans are not already problematic in promoting short-term thinking and gaming of financial results, this company had to give partial credit for the year?” Whittlesey said. “What if they have a disastrous fourth quarter?”

Asked about the early bonus, Alex Washburn, a Red Lion board member and co-founder of its second-largest shareholder, Seattle-based Columbia Pacific Advisors, said in an email that “the board is pleased with the job that RLHC management is doing and pleased with the momentum of the business. This partial payout of the 2015 cash incentive compensation plan is an effort to recognize, reward and continue to motivate the executive management team.”

The decades-old Western lodging chain, which has raised its profile and restructured its operations in the past couple years, has a rigorous-sounding bonus plan.

Among other requirements, it directs that “no bonus will be payable … unless our actual EBITDA for 2015 exceeds 90 percent of the budgeted amount.”

On the surface, growth in EBIDTA (its earnings before interest, taxes depreciation and amortization) for the first six months of 2015 was eye-popping.

The figure, essentially operational cash flow, rose 72 percent from 2014’s first half, to $17.7 million.

The jump, however, included $16.6 million from selling its Bellevue and Wenatchee hotel properties (while keeping their management contracts).

Factoring out such special items, the company said in its August quarterly report, the adjusted EBITDA for 2015’s first half was $4.5 million, barely ahead of last year.

Red Lion hasn’t yet reported third-quarter results.

It did have some notable milestones this year. An April deal to acquire GuestHouse International brought two new hotel brands under its management umbrella and more than doubled its portfolio from 57 hotels to 130, spread across 30 states.

Chinese hotel and transportation company HNA Group, which operates Hainan Airlines, acquired a 15 percent stake in Red Lion from Columbia Pacific.

And in January it sold 12 hotels into a joint venture intended to lighten its debt load and focus on expanding via franchises. Such deals helped lift its stock price 50 percent in the past 12 months, while the shares of many hotel chains stagnated.

A spokesman for Columbia Pacific also pointed to an August analyst’s report that said Red Lion’s recent growth in revenue per room “substantially exceeded our expectations.”

Pay expert Whittlesey said it would be better for stockholders if Red Lion’s executive compensation was structured to encourage long-term results. Currently, he says, its execs get most pay from salary and bonus, with “an extremely low emphasis on long term incentives … making this early bonus payment even more of a problem.”

— Rami Grunbaum: rgrunbaum@seattletimes.com