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Originally published October 31, 2008 at 12:00 AM | Page modified October 31, 2008 at 6:07 AM

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Eight months after arson, Street of Dreams is a ghost town

Nearly eight months after someone set fire to four Seattle Street of Dreams houses in a fledgling Snohomish County development, the builders of the destroyed million-dollar homes are dealing with the aftermath of the fires and the downturn of the housing market. The FBI has no suspects in the arson.

Seattle Times staff reporter

MALTBY, Snohomish County — Nearly eight months after three million-dollar homes were destroyed and a fourth damaged in an unsolved arson, the builders and developer behind the 2007 Seattle Street of Dreams are struggling to keep the neighborhood from becoming a graveyard of mansions.

Only one home — the one that was damaged — has been sold. The lots where two homes were burned to the ground remain empty as the builders sit out the housing-market downturn.

One builder, compelled by his insurance company, is rebuilding, but he expects to sell the home for far less than its original price tag.

"It's a little bit of a ghost town out there," said Grey Lundberg, whose home, Urban Lodge, won the tour's Best of Show seven months before it was reduced to charred rubble.

The Quinn's Crossing development in South Snohomish County was supposed to showcase a model marriage of luxury and green-building practices. But in the early morning of March 3, someone set fire to four of the tour's five homes and left behind a spray-painted sign bearing the initials of the Earth Liberation Front, an underground group of militant environmentalists that has claimed responsibility for multiple destructive acts in the past 10 years.

The FBI has made no arrests in the case.

For the individual builders and the developer, YarrowBay Group, the timing of the fire couldn't have been worse.

Even as tens of thousands of people paid admission in the summer of 2007 to tour the five Street of Dreams homes — priced up to nearly $2 million — the housing market was tipping. YarrowBay placed on hold its plans to begin a second phase in the 48-lot development, said project manager Michael Huey, who helped plan the neighborhood.

The company has sold only eight of its 17 first-phase lots — none since the fire.

"We haven't sold any lots since then, but I'm not sure that we would have without the arson," said Brian Ross, managing partner at the Kirkland-based development company. "It's hard to say for sure because the arson isn't the only thing that happened."

What happened, builders say, was the credit and mortgage crisis. People seeking mortgages and construction loans faced more scrutiny, higher down payments and more conservative lending.

As a result, people aren't buying or custom-ordering homes, especially in the $1 million to $3 million range, and homebuilders aren't buying new lots, leaving builders and developers sitting on empty land, they explained.

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"In general, the market's in a hold pattern," said Lundberg, president of Grey Lundberg Inc., formerly CMI Homes. "There's just not anything going on right now."

Some of the builders had potential buyers lined up before the arsons. Some sunk their own money into the houses.

The $1.9 million home built by Lundberg's company was insured, he said. "But that doesn't insure the land and the value of the property, so not everybody can get made whole from the insurance company."

Todd Lockie, whose $1.9 million home, Copper Falls, was destroyed, said the insurance covers only the portion of his expenses funded by a bank loan. A chunk of the original cost came out of his own pocket, he said.

"[Insurance] doesn't cover the monies that I bring in," said Lockie, president of Lockie Homes. "It's quite a loss."

Steve Pak, owner of Metropolitan Construction & Design, began rebuilding his Greenleaf Retreat in late September. He knows the current market isn't favorable, but the insurance will pay out only if he rebuilds.

"You don't have a choice," Pak said. "The insurance money is [provided] to build. What are you gonna do? You have to rebuild the house."

Pak said he expects to sell the new house, which will be a near-exact replica of the old one, for 20 percent to 30 percent less than its $1.85 million price tag last year.

For YarrowBay, the arson's aftermath is difficult to pinpoint.

"Our losses are more intangible," Ross said. "Did we lose a lot sale or five lot sales? We'll just never know."

The company has suffered in the economic downturn, reducing its staff by 20 percent over the past year, Ross said. For Quinn's Crossing, the strategy is to wait things out and work on future marketing ideas, Ross said.

"We're not aggressively trying to sell anything in this market right now. Our best investment is owning the land we have," Ross said. "If we don't sell a lot in the next year, it hurts, but that's part of business. ... It's painful to go through it, but we'll make it."

In its early stages, Quinn's Crossing was controversial after neighbors complained the development was being built above an aquifer. YarrowBay argued that its water-quality safeguards far exceeded what was required by law, and that its rural-cluster development plan, which situates houses close together and preserves more native habitat, was a better use of land than typical multi-acre lots.

YarrowBay and the Echo-Paradise Community Group that opposed the project reached an agreement that would give the group until May 2009 to buy a portion of the land. (The company will likely extend the deadline to allow the group more time to raise funds, Huey said.)

Nonetheless, whoever set fire to the Street of Dreams homes left a sign condemning the development. The sign read: "Built Green? Nope black! McMansions in RCDs [rural cluster developments] r not green. ELF."

"It was gut-wrenching," Ross said. "It made no sense at all because we worked so hard to minimize the impact of development."

Seattle Street of Dreams didn't host a 2008 tour, instead launching a magazine that spotlights local luxury houses and condos. Strapped by current economic conditions, organizers are considering other events, such as a waterfront tour or a holiday tour of homes or condos to continue supporting children's charities, said President John Heller.

Street of Dreams also is evaluating potential future home-tour sites, though Heller concedes "the arson fires will now call for future events to include increased security measures."

Special Agent Robbie Burroughs, spokeswoman for the Seattle FBI, says there are no suspects in the case.

"It's difficult, because they're not an organized group," she said, referring to ELF. She cited the 2001 firebombing of the University of Washington's Center for Urban Horticulture, which took years to solve. Three ELF members were sentenced to jail time last summer for their roles in the UW arson.

The Building Industry Association of Washington is offering a $100,000 reward in conjunction with the FBI for information leading to the arrest and conviction of the Street of Dreams arsonist. The Northwest Insurance Council and Arson Alarm Foundation is offering an additional $10,000.

After the fires, Lockie said an FBI agent told him, "You would have been better off paving the whole thing over. With these radicals, you're never going to be good enough."

But Lockie said he doesn't "worry too much about those wackos."

And if he could do it all over, he would follow the same green standards, he said, only this time, he would arm the security system.

"The cleaners and Realtors didn't like it," he said. "I kind of kicked myself on that one."

Pak, faced with the immediate task of rebuilding, said he's no longer focused on the arsons.

"Right now, we're dealing with the loss of it, so whoever did it, it doesn't really matter," he said.

Noelene Clark: 206-464-2321 or nclark@seattletimes.com.

Copyright © 2008 The Seattle Times Company

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