A court order freezing the assets of Path America CEO Lobsang Dargey has stopped work on the $190M Potala Tower in downtown Seattle and left a deal with the Seattle Housing Authority up in the air.
Construction on Path America’s $190 million Potala Tower in downtown Seattle ground to a halt Wednesday, two days after a court temporarily froze the firm’s assets amid a federal fraud investigation.
Meanwhile, a long-awaited redevelopment project near the Othello light-rail station in Seattle’s Rainier Valley, on land a Path affiliate is buying from the Seattle Housing Authority, also appears to be in jeopardy.
The fallout stems from a court order obtained by the U.S. Securities and Exchange Commission as part of a civil fraud suit against Path America and its CEO, Lobsang Dargey.
Dargey hasn’t responded to requests for comment since Monday, and hasn’t responded in court. Sam Kanner, Path America’s chief operating officer, said Wednesday he had no comment.
For the Potala Tower at 2116 4th Ave., Dargey raised about $85 million from 170 Chinese nationals, with each investing $500,000 plus a $45,000 administrative fee, the SEC alleged.
The company said its tower would feature 342 apartments and a 142-room Hotel Indigo, a boutique brand from InterContinental Hotels Group.
Last August, Path America held a glitzy groundbreaking for the project with Seattle Mayor Ed Murray. The program included a traditional lion dance and the signing of red tiles in gold lettering — traditions “performed to bring good luck and blessings to the property,” said a company press release.
But on Wednesday, shoring and excavation work came to a sudden stop. A worker on the site said the high-rise construction crane is being dismantled.
“We’re suspending the work,” said Tom Doig, vice president and Seattle district manager for Denver-based PCL Construction, the project’s general contractor. “We’re hopeful that a quick resolution to the issues can be reached.”
A Path America affiliate also has a pending deal with the Seattle Housing Authority to buy several parcels totalling 3.2 acres near the Othello light-rail station for $7.5 million.
Dargey committed to build two mixed-use, market-rate apartment buildings — a 6-story building with 465 apartments and a four-story building with 71 apartments — financed in part by EB-5 visa investors, according to the March purchase agreement.
The site is on the southwest corner of Othello Street and Martin Luther King Jr. Way South.
“The community has been very excited about this project given its anticipated delivery of market-rate housing and farmers’ market space,” said Anne Fiske Zuniga, deputy executive director for the housing authority, in an e-mail Wednesday.
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The plans submitted to the city for design review showed a larger scale project than outlined in the SHA agreement. There was a 210-unit apartment building with 10,000 square feet of retail space and a 17,000-square-foot farmer’s market on one parcel, and a 225-unit apartment building on another parcel with 7,800 square feet of retail. A third parcel would have 65 apartments and five live-and-work units.
None of the apartments would be subsidized. The agency sold the property to raise funds for its public housing projects, said Kerry Coughlin, a housing authority spokeswoman, in an interview earlier this year.
Based on other new apartments built in Seattle, the total development cost for Path’s Othello station project likely would run in excess of $100 million, experts said.
In asking for a freeze on Dargey’s assets, the SEC said he’d recently notified the federal Citizenship and Immigration Services agency of his plans to raise another $95 million from foreign investors through the EB-5 program.
The housing authority’s deal with Path America is contingent on Dargey meeting a Nov. 1 deadline for receiving city permits, raising enough capital to get started and starting to sell securities in the project to EB-5 investors, according to the purchase agreement. The authority has $270,000 in earnest money from Path America, which is forfeited if it fails to meet its responsibilities.
“We are currently considering all of our options, which include termination due to failure to meet milestones,” the housing authority’s Zuniga said Wednesday.