A developer hopes to lure foreign investors to Federal Way’s city center with a 45-story building.

Slated to open in 2014, the Sky Hotel and Residences will rise on a nearly 2-acre parcel at 31740 23rd Ave. S., site of the former Azteca restaurant. The development will include 400 condominiums, 120 three-star hotel units, a conference area, day spa, retail, restaurants, public plaza and more. At an estimated cost of $225 million, the project is scheduled to break ground March 2011.

Twin Development LLC will take advantage of Federal Way’s designation as a “regional center” by the U.S. government. Foreign investors who pump a minimum of $1 million into the area and help to create at least 10 new Federal Way jobs are granted permanent U.S. residential status for two years. Their spouses and unmarried children are also eligible for a visa, according to U.S. Citizenship and Immigration Services.

“By leveraging the opportunity presented by the EB-5 program, we can broaden access to foreign capital sources while providing a lucrative opportunity for international investors,” said Steve Smith, co-manager of Twin Development, in a news release. Also partners in the project are Korean-American businessmen Luke Hwang of Federal Way and Pom Qwak of Tacoma.

Although the residential units will be marketed to foreign investors, many buyers will come from this region, said Federal Way economic development director Patrick Doherty. Many wealthy residents from other countries buy second homes in the Puget Sound region, specifically Bellevue and Seattle.

“They have insights into Korean and Chinese markets,” said Doherty of Twin Development’s advantage in having a Korean-American culture support system already in place. “Their insights are telling them there’s an opportunity to market this product in other countries.”

The proposed condos will measure 1,000 square feet and cost $500,000 to $600,000. Assuming the new development is built, the surrounding area could attract more business growth.

“There’s a certain snowball effect,” Doherty said. “The energy and buzz and excitement that new development creates would bring more interest.”

City council member Jeanne Burbidge sees the development as another necessary step toward strengthening Federal Way’s economy and city center.

“We’re developing a significant hotel district downtown,” she said, noting the presence of Courtyard by Marriott, Evergreen Best Western and soon-to-open Hampton Inn.

“We think this will be quite a boon to our downtown,” said Mayor Linda Kochmar at the Feb. 16 city council meeting. “This will help us with our revenues.”

Investors wishing to take advantage of the EB-5 Immigrant Investor Program must undergo a background check. They must also document the source of their money and provide information about their investment to U.S. Citizenship and Immigration Services.

Funding

The city’s downtown is already recognized at the state level as an area in need of redevelopment. The state awarded Federal Way Local Infrastructure Financing Tool (LIFT) funding in 2007. This funding can be used to construct public infrastructure, such as roads, right-of-ways, sidewalks, parking, open space and bicycle or pedestrian trials, among other things.

Twin Development will seek LIFT funding for the Sky Hotel and Residences project, according to a statement issued by a public relations firm: “It is true that we will be pursuing LIFT funds to pay for the public amenity portion of our project. However we are not waiting on the city’s decision, we are proceeding regardless. In a few months we will submit the necessary documentation to the city to receive the LIFT funds but our project will move forward regardless of whether or not we are granted such funds.”

The state will compensate Federal Way an amount not to exceed $1 million per year for the next 25 years. The income comes from tax revenue earned in the city’s designated revenue development area (RDA) downtown. Tax revenue gathered in this area goes to the state. However, Federal Way, due to its LIFT status, gets a portion of the revenue reimbursed to it at the end of each year.

Mirror reporter Jacinda Howard contributed to this story.