| The much troubled Winslow Landing property located immediately north of the Winslow ferry terminal was purchased at a recent bankruptcy court auction by a Seattle development firm.
Security Properties paid a reported $6.084 million, outbidding local developer Gale Cool and his firm, Bainbridge Holdings, by $2.174 million for the prime 4.33 acre site. A spokesman for Security Properties said the new owners have no specific plans for the property at this time.
Security Properties is also the developer of Poulsbo Place, a highly praised high-tech wired, village-style development on the site of a collection of dilapidated World War II houses known as “The Project” in downtown Poulsbo. After years of wrangling with several development groups, Security was able to come in and successfully put together a project that met a myriad of conditions other developers couldn’t.
The sale marked the final chapter of a litany of financial troubles that have plagued Winslow Landing for the past several years. Security Properties didn’t actually pay the $6.08 million it bid for the property, and the story of its acquisition, unfolded in a manner a mystery writer could be proud of.
Cool had been seeking approval for what would have been the largest mixed-use development ever on the island. His plans called for 60,000 square feet of commercial and retail space and 225 residential units surrounding a central plaza. The plan also called for 525 parking spaces — most in an underground garage.
The bankruptcy auction stemmed from the purchase of the property by Poulsbo developer Jason Lowe, who was 23 at the time. In 1998 he filed an application for a mixed-use project that was to include a hotel, tavern, retail space and condominiums. Cool had been Lowe’s project manager. But financial and personal problems finally forced Lowe to deed the project to Cool.
However, while he owned the property, by structuring a series of multiple mortgages Lowe managed to borrow $4.5 million, using the property as collateral. In the end there were at least seven mortgages on the land.
Using the bankruptcy court action as a way to get rid of the mortgages, Cool’s firm purchased the interests of the first three lien holders. It established in bankruptcy court that the value of the loans against the property, including interest and attorney fees, was $3.864 million. Under bankruptcy law, that became Bainbridge Holdings’ bid. Had no other bidders appeared, the company would have received title to the land, with the court voiding the other claims.
Although it was not a party to the bankruptcy proceeding and had not loaned money on the property, Security Properties legally maneuvered around Bainbridge Holdings before the auction by making deals with mortgage holders four, five, six and seven to assume their claims.
The terms of its dealings with those mortgage holders are not matters of public record, and were not disclosed, but the total face value of the interests Security Properties bought was $2.174 million. According to bankruptcy law, Security Properties therefore outbid Bainbridge Holdings by that amount.
But in order to take title to the property, Security Properties still must pay the $3.8 million that Bainbridge Holdings was owed, in cash. | 
