A Tri-City developer has shelved The Nineteen, a luxury office-and-apartment project planned for downtown Kennewick, after a key lender cut funding by more than two-thirds.

Andrew Klein and Brian Griffith, operating as Klein Griffith Properties Group, said the project was “effectively killed” in October when the Hanford Area Economic Investment Fund Advisory Committee reduced its $1.1 million loan to $345,000, citing a “change in scope” for the project behind Washington Hardware.

“The HAEIF Advisory Committee’s decision to renege on their loan commitment to our project effectively killed The Nineteen and has prevented it from moving forward. Their later than 11 o’clock decision to hold a special meeting, with notice that failed to meet even HAEIF’s bylaws, made recovery from their action nearly impossible, and we have suffered considerable loss and damages as a result,” Griffith said in a written statement in response to an inquiry by the Tri-Cities Area Journal of Business.

Klein and Griffith intended to break ground in June 2021 after securing a $9.7 million agreement with New York-based ICON Realty Capital and the HAEIF loan.

HAEIF’s money was the “linchpin,” Griffith said.

Without it, the groundbreaking didn’t happen and the building permit expired. The developers could apply for a new permit, but the project would have to be redesigned to comply with new building codes adopted in the interim.

The new codes and design fees would add too much cost to the project. Griffith described it as being “mothballed.”

It could be revived in the future. In the interim, the building that was to be demolished to make way for The Nineteen will be rehabilitated and marketed to retail tenants. It has about five usable spaces.

“Downtown Kennewick continues to see investment and improvements, and we’re committed to being a part of that,” he said.

HAEIF is a public entity that invests in projects that build the local economy, funded by the Legislature from fees on hazardous waste deposited at the Hanford site.

The HAEIF board reduced its commitment to The Nineteen following a private executive session in October, saying the scope of the project had changed and it needed more information that it said was not forthcoming.

The HAEIF board remained enthusiastic about the project and pledged to restore full funding once it has a clearer picture of the “changes.”

But Griffith said the board misunderstood commercial development and provided ample documentation that the scope hadn’t changed.

Skip Novakovich, chairman of the HAEIF board, remained hopeful the project will go forward. HAEIF has the money to restore the full $1.1 million.

“They’re saying they’re not going to do anything with ground floor commercial, which is what we thought was included in the original,” he said. “So, the scope has changed and that’s the hang up. We don’t have the documentation to assess the current project.”

Griffith said the project isn’t altered and the “change of scope” complaint left him and his partner puzzled.

He explained that the company applied for a permit that would have let it build the shell of commercial space on the first floor of The Nineteen but not an improved space ready for a tenant.

Tenant improvements – the walls, floors and other aspects of interior spaces – would be constructed under a separate permit. That is standard for the industry.

“Despite our testimony over multiple meetings and vast documentation proving otherwise, the committee baselessly doubled-down on this false narrative that there was a ‘change of scope’ on the first floor,” he said.

Novakovich said he was disappointed.

“Everybody on this board to the last person wants it to go. Everybody wants it to go. And we never received a response. Everybody wants to work with them, but we need information they’re not providing,” he said.

In a written statement, Klein Griffith Properties described the funding cut as a “breach of contract.”

Klein and Griffith acquired four parcels totaling 0.67 acre in a pair of transactions in 2018 and 2019.

They dubbed their project The Nineteen for its future address, 19 W. Canal Drive, at Auburn Street, and went public with their plans: A five-story brick-and-steel building with 40 upscale apartments above streel-level commercial space.

It would have been the first significant new private construction in downtown Kennewick in recent memory.

The Nineteen was slated to be available to renters on Jan. 1, 2023, with rents at $1,675 a month for a 1-bedroom unit and $1,975 for two-bedrooms.