Written by I was surprised to see an article in the Seattle Times today featuring a photo of one of Renton’s newest apartment buildings under a headline that included the words “Ponzi scheme.” The Seattle Times story (behind a paywall) describes the far-reaching bankruptcy of Bellevue firm iCap and their associated LLCs, including Colpitts Sunset LLC which developed the Sunset Terrace Apartment building in Renton Highlands.
Seattle Times iCap bankruptcy story features a photo of the Sunset Terrace Renton Apartment building overlooking the climbing pyramid at Sunset Neighborhood Park
The painful bankruptcy has apparently come as a shock to many investors, who believed that they were loaning money at a fixed interest rate to help build needed housing, and that the loans were safely secured with substantial equity in real estate.
Instead, iCap, Colpitts Sunset LLC, and their other inter-related business holdings have apparently been operating in the red for many months, and have allegedly used new investor cash to cover interest payments to past investors. This realization has led some investors to file a lawsuit against iCap, and even describe the arrangement as a Ponzi scheme, although the authorities have not called it that at this point.
The lawsuit filing describes the complex nesting of LLC’s that form iCap, and provide some background regarding why investors could have believed these were safe investments. There are people that have put significant savings into these companies, and have been severely hurt by this.
I’ve also attached the Colpitts Sunset LLC bankruptcy filing document, which includes a matrix of hundreds of creditors, investors, and tradespersons that might be left holding the bag for construction costs of the Renton apartments after the Colpitts bankruptcy.
While this is indeed a sad story for those who have lost their investment money or performed uncompensated work, I am hopeful the Sunset Terrace Apartments and their occupants will be okay. Colpitts Sunset LLC had sold this apartment complex to new investors last July, around the time they filed their bankruptcy paperwork. The new investors payed $44,000,000 for the building, and they seem to be doing a fine job of running it.
The details in the lawsuit suggest the apartments in Renton may have been completed in part with money investors thought was targeted at Senior homes in Kenmore and student housing at University of Washington, both projects that have apparently not even broken ground. If this is the case, this sad situation is another unfortunate reminder about how hard it is to put the money together to fund needed housing in today’s expensive, high-interest-rate environment.
I’m not an attorney, and it is up to the courts to decide whether this was a fraudulent scheme or a case of desperate money managers working to keep a real estate enterprise afloat. It’s grim news in any case.
Sunset Terrace was sold on July 25, 2023 to Olympia Hotel Group for 44 million dollars, per King County Records
Looking at the debtors, it could beit was a vehicle for fleecing mainland Chinese for EB-5 visas.
Frankly, if I were investing in something like this, I would like to see their list of debts. That would quickly tell you if there are, in the parlance of the field, “sophisticated investors” or mere rubes.
The caveat is that if you don’t know who the sucker is, it’s you.
Oh boy. I sure hope this doesn’t delay completion for the entire project. Construction is never fun but at least we know there will be an end when it finished. It would be awful to see progress stop while this mess is sorted out.
I hope the sale was done at ‘arm’s length.’ If so, the Renton will be ok, but if not, then the bankruptcy court could claw back the asset.