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Squared Away?

Greg Leatherman on the status of Harrison Square

By Michael Summers

michael_summers@fortwaynereader.com

Fort Wayne Reader

2011-01-24


Greg Leatherman, the City of Fort Wayne’s Executive Director of Redevelopment, has just returned to work after a three-day weekend in which he made a concerted effort not to talk to media, read the editorial pages, or visit any local political blogs. “I think I gave a dozen interviews in one day last week,” he laughs. “I thought, ‘okay, that’s enough for now…’”

The occasion for this flurry of media activity: a meeting of the Redevelopment Commission scheduled for January 12 was supposed to yield news (real news) of progress (significant progress) on the long-delayed retail/residential portion of Harrison Square. After increasing pressure on the City to put the screws on developer Barry Real Estate, the Redevelopment Commission meeting was going to be a bonanza of signed contracts, ratified agreements, made deals… and maybe, just maybe, names of financiers and even possible tenants.

In other words, parties were supposed to emerge from the meeting with solid, concrete evidence that, yes Virginia, progress was being made on the retail/residential phase of Harrison Square.

But… it didn’t happen. The meeting was cancelled, and so Leatherman spent January 12 telling every interested local media outlet (and practically everyone was interested) why the meeting had to be postponed at what seemed like the last minute. “The Redevelopment Commission — and this is the truth — decided that if there’s really going to be any kind of big decisions made, everything needs to be signed off by everyone else first, with the Commission’s signature last,” Leatherman says. “Not everything was in that form yet.” Leatherman hopes to reschedule the meeting in the next week or two.

As we said, Leatherman spent an entire day the previous week repeating that or something similar to every available media outlet.

And fair enough. Complicated deals are… well, complicated. Getting all the details in order, translating from English to legalese, the dots and crosses in their proper place…

All sarcasm aside, it sounds like a perfectly reasonable explanation. That said, to a big chunk of the public who follows such things, it also sounded like a variation on a common theme, one the City has been singing for a couple years as seemingly one deadline after another slipped by, and the developer failed to produce even an estimate of a possible start date for the retail/residential phase of Harrison Square.

Leatherman understands the frustration. “What’s the most difficult thing about this is that while the City is involved — we publicly funded the ballpark and the garage, and we put the project together — this is a private development between developer Barry Real Estate and its tenants,” he says. “The City really isn’t in the middle of that relationship, because ultimately it’s a debt-financed, equity-financed, privately-financed project. It appears to a lot of people that’s it’s our deal. It’s not our deal. It’s their deal. And we want to make sure it comes together properly.”

“I have a hard time as Redevelopment Director keeping things confidential in a very public setting, and what we want is not to be confidential anymore,” Leatherman adds. “What the public deserves, and we want, is for the parties who have stepped up privately saying they’d be interested in providing debt as a bank, or equity as a private investor, or tenants that want to sign leases or have signed leases, to be identified. Those are some of the things we’re pressing for right now. If we were negotiating the deal, I think we’d already have said who we’re negotiating with, but it’s Barry negotiating with the banks and the equity people and the leases.”

Like we said, Leatherman knows that people are frustrated — he gets some pretty striking “fan mail.” And he admits that his self-imposed moratorium on reading local political blogs and editorial pages over the weekend didn’t last. “I keep getting pulled back in,” he laughs.

The fact that Leatherman would read some of the stuff at all speaks either to a spine of steel or a masochistic streak. For various reasons, Leatherman has become the City’s public face for Harrison Square; he’s usually the one standing up in front of City Council explaining the latest delay, or talking to media about the status of the project. But considering the public frustration at the delays and the heavy criticism from some members of City Council, “public face” might be too innocuous a phrase to describe Leatherman’s role. Some might suggest “lightning rod.” Or “flak-catcher.” Or rodeo clown trying to distract the snorting bull of public opinion…

Though he’s well aware of this perception, Leatherman looks just a little exasperated when it’s brought up. After all, he’s the Executive Director of Redevelopment — it’s his job to be the “go to” person for projects like this. But at the same time, he doesn’t seem entirely comfortable with some aspects of the role. He explains that one of the reasons he appears to be the City’s front guy on Harrison Square more than might be normal is that the project’s governance is primarily handled by the Redevelopment Commission, a body made up of five unpaid volunteers. “The contracts that are signed, the development agreements… while the Mayor and other people sign off on these things, it’s primarily the Redevelopment Commission making these things happen, and as the director (of the Redevelopment Commission), I’m responsible for that. If this were a straight City decision, I guarantee you’d see more people from the City talking about these issues.”

He adds: “Unfortunately — and I do use the word unfortunately — I’m usually the one out there, because for one, it’s a complicated deal; and two, with some significant exceptions, a lot of people who were here four or five years ago that signed this deal aren’t here anymore, so for the sake of continuity, I’m the one doing it.”

And he would have loved to have been able to make some of the details of these new agreements public, because significant progress has been made. Really. “It has come together very quickly,” Leatherman says. “A month and a half ago, two months ago, I don’t think we had very high expectations of working with Barry Real Estate. I can say that all of us — the commission and the administration — have been pleasantly surprised with the progress accomplished in the last month or so by the developer in obtaining the critical components… these are the kind of groups that can make this happen.”

For a brief moment, it seems a juicy scoop is forthcoming — names, maybe tenants — but Leatherman repeats that he can’t name names yet. But he does say that there is now a lead bank involved in the project. Securing a “lead bank” — a larger bank that has experience at doing construction lending and converting it to more permanent financing — has been one of the biggest obstacles in the delay so far. There are other banks involved, of course, but none of them wanted to take on the lead role. “They said, ‘we want to lend money, be part of the overall package, but we don’t want to be the lead bank’,” Leatherman says. “When we were talking to the developer a couple weeks ago, they told us the bank they were speaking with, they thought there was reason to be optimistic, but they didn’t have approval. They got that approval, a tentative term sheet, to be the lead bank, in that two week period of time.”

So, with a lead bank in place and other banks agreeing to be a part of the project, Leatherman expects that news of a public commitment will happen sooner rather than later. And as Leatherman has said in the past, the difficulty securing financing was not a matter of Harrison Square itself, but more a symptom of the economic climate. “We just hit it at the wrong patch,” he says. “There are several others projects like this happening around the US, and they’ve stopped because of what we’ve been through as a country. Unemployment is still high, but banks are now looking at deals that they said ‘no’ to a year ago.”

As far as tenants for the ground floor, the retail section, Leatherman concedes that those probably won’t happen soon. He expects there will be more interest once there’s a confirmed start and end time for construction. That was one of the reasons that one interested tenant — Scotty’s Brew Pub — gave for not committing to the project. The owner signed a letter of intent several months ago, but was already working on an establishment in Indianapolis. “(The owner) had to borrow a significant amount to build out his space per the lease proposal,” Leatherman says. “In order for it to be credit worthy to a bank, all that money had to be locked in place. If you ask a guy to lock money in place that it’s hard to get in the first place, and you don’t know for sure when you’re going to spend it, it’s tough.”

The same goes for the residential floors of the building. The initial idea of condominiums has been abandoned, and the entire residential component sort of took a back seat while the developer was trying to secure financing, since that wasn’t the part banks were going to underwrite their debt on. But there will be a residential component to Harrison Square, most likely in the form of apartments. “There is a market for downtown living; it’s just not condos,” Leatherman says. “If you’re going to buy a condo, you have to sell another house. But if you look at the occupancy rate of apartments downtown, it’s not that people don’t want to live downtown, it’s just that there’s not a lot of product available.”

“People often think of their own situations,” adds Leatherman, addressing a frequent criticsm of the residential plans for Harrison Square. “’Well, I wouldn’t want to do that, therefore no one wants to.’ But this isn’t for a family with two kids who want a yard and a dog. This is for singles or young couples recently out of college.” He thinks the building will have maybe 40 residential unit — not too much for the market to absorb — and envisions a Wrigley Field atmosphere with the building’s proximity to the ballpark.

To critics, however, the far more egregious offense has been the City’s seeming willingness to let Barry Real Estate slide as deadlines passed and agreements went unmet. There’s a perception that the City has been way too “soft” on Barry, with calls for punitive measures like fines, which were part of the City’s initial agreement with the developer. After all, critics argue, the City bought that land with the understanding that Barry was going to buy it — missed deadlines means lost revenue.

But Leatherman maintains that the developer was making a very real and honest effort in an economic climate that had suddenly become extremely tight at a key time during the project. “We do not have another developer who could possibly get to the point where Barry is now. If we were to turn the page on Barry as a developer right now, it would take us quite some time to get to this point.” Besides, he adds that any other developer would run into the same difficulties. “There’s been no other project started like this in the last two years anywhere in the area. I can list you a number that have been mentioned, but none of them can get to the finish line for the same reasons that it’s difficult for Barry.”

“Right now, banks are talking about loaning maybe 40% of the total project cost. Three years ago, a developer might have expected 70-80% of that project being debt. What’s happened is that for every project, a significant amount of private equity must be brought to the table in numbers three or four times what it used to be.”

But while banks have begun to loosen up a bit with lending, the economic climate is still a far way from what it was a few years ago. In fact, these tighter lending practices are often referred to these days as the “new normal.” Maybe that’s a good thing in some aspect, but it does make accomplishing these sort of development projects more difficult. I ask Leatherman if, considering the local political and economic climate, he thinks it will be a zillion years before Fort Wayne sees another project as ambitious as Harrison Square. “The answer is probably no,” he says. “This was a very dynamically lead project, with the Graham Richard administration and then Henry administration and the Redevelopment commission… But I think that Fort Wayne can figure out how to bridge that gap between what banks will lend and what a project costs. There’s some loosening, there are people lending, but that gap is bigger than ever now. Once we figure out as a community how to close that gap, I do believe people will want to build on what has clearly turned downtown around. I see people focusing on those issues. What happens after that is pretty hard to imagine.”

My question isn’t entirely innocent: the interview comes at a time when some big and credible rumors are swirling about the almost-forgotten North River property, the land just north of the city center and the Saint Mary’s River, encompassing the OmniSource property between Harrison and Clinton streets. The City had an option to buy several years ago but let it lapse. Now, chatter says that the City has reached an agreement, and that the announcement will be part of the State of the City address. If it’s true… well, the City would hardly just let that prime piece of real estate just sit there, would it? “I’ve heard those rumors, too,” Leatherman says, laughing. “All I can say is that the last two administrations have recognized that those 30 acres have a lot to do with how our city is going to grow. As Redevelopment Director, it would be great to have some say over the development of that site, but I don’t know if there’s an agreement, and if there is, I haven’t been involved.”

Besides, it’s Harrison Square that Leatherman is most focused on, and he remains optimistic. “This project has been delayed for a long time,” he says. “In a lot of people’s minds, it’s doubtful that it will ever occur. But for those people who have followed it closely and had the opportunity to see what’s going on, once the financing can be shown to be in place, I think people will take a second look. Having it laid out will help people say ‘this is where I want to invest my money and my time’.”




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