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Through its trustee, the project’s primary lender, Frontier Bank, has started foreclosure proceedings on the 1,250-acre property after saying a loan was in default. The trustee is scheduled to auction the property to the highest bidder on the Thurston County Courthouse steps June 5.

Steve Chamberlain, a local developer and the managing member of the property owner, Thurston Highlands Associates LLC, said he secured interim financing totaling $12 million to start developing the property with the intent of refinancing in three years, when the project moved into the construction phase.

But Frontier Bank of Everett, facing its own fallout from the financial meltdown, was unable to lend more money. In March, Frontier signed a cease-and-desist order to change its lending practices after a review by the Federal Deposit Insurance Corp. and state Department of Financial Institutions concluded that it was under capitalized. No other banks were willing to step forward.

“The banking community has dried up,” he said. “There’s nobody financing these kinds of projects. That’s not just here; it’s all over.”

With the principal coming due and refinancing not available, Chamberlain watched as the bank began the process to foreclose on the property. With interest, the bank says the total owed is $12.4 million. Chamberlain said he’s weighing options to maintain ownership, including attempting to settle the debt by the May 25 deadline to stop the auction or negotiate with the bank if no one bids on the property during the sale.

Thurston Highlands would be larger than the city of Rainier and would make up one-third of Yelm’s geographic area. It’s envisioned to include 5,000 homes, apartments and town houses, shopping areas, a regional sports complex and public parks and trails. Thurston Highlands was annexed into Yelm in the 1990s.

Depending on how much is bid at auction, consultants owed for their work on the project could come away with nothing. Three consultants have filed liens against the property totaling $217,280, county records show.

Charles Ellingson, principal hydrogeologist at Pacific Groundwater Group Inc., one of the creditors, said his company had received a letter from Thurston Highlands Associates outlining its financial difficulties and intent to pay for the work.

“I don’t want to tell you it’s written off,” Ellingson said. “We’ve talked to the lawyers about it. There’s no good option for us.”

Also, other bills still need to be settled. Yelm is owed $121,500 for last year’s staff work to process an environmental impact statement.

Grant Beck, the city’s community development director, said his department will not process any applications related to the project until the bill is paid.

“We’ll get paid eventually,” he said. “It’s just a matter of when.”

Thurston Highland Associates owes more than $57,200 in back property taxes, including interest and penalties, that were due last year, county records show.

“With them not paying those property taxes, that is a loss to the city” and other taxing districts, said Shelly Badger, Yelm’s city administrator...MORE...

Read the Full Story Here in the Olympian Newspaper

See Also YELM COMMUNITY Blog. - THURSTON HIGHLANDS IN DEFAULT - AN OPPORTUNITY TO REMAKE OUR COMMUNITY IN OUR MIDST - Read Story Here