Feb. 17, 2010--The developers of what would be the tallest building in downtown Federal Way are banking on foreign investors to fund much of their development.

Called the Sky Hotel and Residences, it would be a 45-story condo tower anchored by a three-star hotel and retail space. It's planned for two acres at 31740 23rd Ave. S. on the site of a former Azteca restaurant.

Steve Smith, a Seattle developer and partner in Twin Development LLC, the group behind the project, estimated it will cost from $225 million to $235 million.

He and his partners are hoping to take advantage of Federal Way's designation last fall by the U.S. Citizenship and Immigration Service as a "regional center." That program ultimately grants foreign investors permanent legal resident -- or green card -- status in exchange for putting money into local developments.

Smith joins two Korean-American businessmen -- Luke Hwang of Federal Way and Pom Kwak of Tacoma -- who have been working on the project for the past few years.

"We expect most of our investors to come from Korea, though of course the project is available to everyone," Smith said.

Hwang is a commercial real estate agent from Federal Way. He helped encourage the city to seek out the regional center designation with his condo development in mind. Hwang noted the area's large Korean community and said that there are a lot of Koreans and other foreigners who would like to move to the U.S.

The required investment under the EB-5 Immigrant Investor Program is substantial -- $1 million, though it could be less if Federal Way meets certain criteria regarding its levels of unemployment, city economic development director Patrick Doherty said.

Hwang was confident that there are enough foreign investors with that kind of money.

"We aren't going to have any problem raising the million per person," he said Tuesday.

The tower's condos would be 1,000 square feet and cost from $500,000 to $600,000 each. Smith said the hotel will likely be three stars -- "as luxurious as possible, without overbuilding for the market."

The project's timing seems bad given the dour state of the real estate market, but Smith thinks the opposite. The condos are scheduled to be done in 2014.

"There's a good argument to be made that we will actually have a housing shortage in four years because of the lack of development today," he said.

Doherty of Federal Way said the project fits with the city's long-time plan to redevelop its downtown core into something more urban. The area is now filled with mostly low buildings, including several strip malls and shopping centers.

At 45 stories, the Sky Hotel and Residences would be the tallest building downtown. The tallest building there now is the nine-story Courtyard by Marriott.

"It would certainly be a dominant feature in our emerging skyline," Doherty said.

The developers own the land and have started the city's permitting process. Smith declined to say how much money they needed to raise from investors.

Kelly Kearsley: 253-597-8573

[email protected]

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