A price dispute between the city of Kent and Puget Sound Energy over a small piece of property delayed city plans to market its Naden properties to hotel developers.
The Kent City Council approved the purchase of two parcels (subject to final terms and conditions) owned by PSE for $200,000, which is the counteroffer the utility company made after Kent offered $148,400.
“Is the square footage price in line with what we were expecting?” Councilman Dennis Higgins asked Bill Ellis, city chief economic development manager, during the Feb. 5 council meeting and prior to the vote to approve the sale.
“It’s a little higher than appraised,” Ellis said.
The city in November offered PSE $20 per square foot, based on an appraisal. PSE responded in December asking for $27 per square foot for a total price of $200,000.
“Thanks Puget Sound Energy,” Higgins said after Ellis revealed the higher price.
Kent needs the two parcels, one of 8,486 square feet and the other of 1,495 square feet, in order to build right in, right out access to the large property that sits just north of Willis Street, aka State Route 516, and east of Highway 167.
Ellis said city staff decided against making a counteroffer to PSE because of the small size of property and the city’s plans to get the land on the market as soon as possible.
“It would penny wise, pound foolish to argue the point,” Ellis said during a phone interview.
A PSE spokesman said the utility company tried to get a proper price for the property.
“The land is a ratepayer asset and we are required to get fair value for it,” said Andrew Padula in an email. “PSE strives for fair treatment of all parties when working with cities, local jurisdictions, or the general public on real estate transactions.”
The sale isn’t quite done yet. The council agreed to the price but the city attorney and the economic development director still must sign off on the final terms. PSE also must go through a formal process. Ellis said he was uncertain how long that would take.
“It was authorization for the city attorney and economic development director to continue negotiations with the language,” Ellis said. “There is no clock on that.”
Hotel developers showed interest last spring in 2 acres on the south end of the 7.7-acre site along Naden Avenue South. The city even hired a real estate broker to help find a developer. But developers put any potential plans on hold.
“This little (PSE) triangle is the hang up,” Ellis said. “The hotel developers said, ‘Great, tell me when the city owns that.’”
Talks between PSE and the city about the property have gone on for several years, but became more formal about a year ago, Ellis said. Job turnover at the city and PSE contributed to a delay in negotiations.
Kent received clearance from the state Department of Transportation in 2017 to get access from Willis Street (SR 516) to the Naden property. That will allow right turns in and out of the property. The city also plans to build a roundabout at the Willis Street and Fourth Avenue South intersection to help improve access to the Naden property. The only current access to the property is from West Meeker Street to the north.
PSE in a letter to city staff, obtained by the Kent Reporter through a public disclosure request, explained its $27 per square foot offer.
“The ($27 square foot) valuation remains at the mid-level value range of the city’s appraisal and is supported, though not solely determined, by the unrecognized property purchases made by the city,” wrote Alex Malesis, PSE senior real estate representative. “As you know, PSE has concerns regarding methodology applied in determining the value of its parcel.”
Padula further explained PSE’s reasons to ask for a higher price.
“The type of appraisal done prevented more appropriate comps from being evaluated,” Padula said. “If those comps were considered in the appraisal, they would support the amount PSE negotiated for the property.”
The PSE parcels near the Interurban Trail are left over from property the company owns in the area and wasn’t being used, Padula said.
Despite the delay, Ellis said hotel developers are still interested in the property. City staff expects to finalize the PSE property sale soon.
The city started to purchase property along Naden Avenue in 2006 with plans to build an aquatic center. But the council later abandoned that proposal because of the recession and high costs of a new pool. City leaders then signed off on a deal with the YMCA, which plans to finish construction in September on a new facility on the East Hill at city park property near Southeast 248th Street and 104th Avenue Southeast.
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