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The New New Harrison Deal
And this time, they mean it…
By Michael Summers
Fort Wayne Reader
During his presentation to Fort Wayne City Council in mid-June on the new deal to complete the retail/residential section of the Harrison Square project, Tim Haffner, the City’s attorney, offered up a nugget of unintentional humor almost worthy of an episode of Parks & Rec.
When asked about the two-and-a-half-month gap before agreements are to be signed on August 31, Haffner answered “We would rather under promise and over deliver.”
Considering that this is Harrison Square we’re talking about, many people would probably agree that it’s about time the City pursued a more cautious tone when trotting out deadlines and due dates.
Just last February, Mayor Henry and Chris Schoen, CEO of Barry Real Estate, announced amid much hoopla that the residential/retail section of Harrison Square was finally “ a go,” with financing and tenants lined up and groundbreaking to begin May 1, two years after this section of Harrison Square was supposed to be completed, as stipulated during the heady days of late 2006.
The key problem causing the delays — financing — seemed to have been solved, with PNC coming on board as the lead bank; according to the City’s statement, Tower Bank and 3 Rivers Federal Credit Union — the latter also one of the new tenants — would step forward if needed. “With great partners and the support of the people of Fort Wayne, we finally have in place the pieces we needed to fulfill our vision for The Harrison and for Harrison Square,” said Schoen in a press release last February.
But tucked in all the celebratory language was an ominous phrase: “While the composition of the funding package has not yet been finalized…”
Indeed, the rose petals had hardly been swept away when it became clear that once again, construction on the project was not going to begin on time. In fact, agreements with PNC had not been signed and made official.
“With everything we knew at the time, it made sense to make the announcement that it was going to happen,” says Chris Guerin, head of the Redevelopment Commission. “PNC’s involvement was that they said ‘we’re in.’ But what subsequently happened — and this is a matter of record — was that as they continued to look at it, they decided they needed more ‘financial assurances’ from the developers. That delayed their signing off on everything.”
As has been said before, the financial crisis of 2008 hit developers hard, with many developers unable to secure financing. Barry Real Estate, the developer of the Harrison project, was certainly no exception. In 2010, Barry Real Estate sold its interest in developing the National Archives and Federal Building in St. Louis — one of four federal projects it was developing. It also ceded its ownership of the W Atlanta-Downtown hotel in Georgia (Barry is based in Atlanta).
The new Memorandum of Understanding unveiled in mid-June creates a new relationship between the City; the Fort Wayne Redevelopment Commission; Fort Wayne Professional Baseball, LLC; Hardball Capital, LLC; Barry Real Estate Companies, LLC; and New Harrison, LLC. This last is a partnership between Chris Schoen and two new, local investors — Mark Hagerman, CEO of the Hagerman Group; and Simon Dragan, President of Whitley Manufacturing.
Again, no letter of intent has been signed yet; August 31 is the date, though at the City Council meeting, Haffner said that he believed that agreements might be signed sooner.
And apparently, there’s a deep reserve of optimism somewhere in Citizen’s Square — the City appears confident that this new deal will offer those “financial assurances” that Guerin refers to above, and that this part of the project will move forward as planned.
Of course, we’ve heard this before. But what’s different this time around is two-fold. The first is the addition of Hagermann and Dragan. “We now have two highly respected, highly successful local investors who are also extremely knowledgeable developers in Mark Hagerman and Simon Dragan,” Guerin says. “That really is a game changer, as far as I’m concerned.”
The exact details of Dragan and Hagerman’s involvement have not been disclosed, and most people we talked to declined to speculate. Hagerman himself, whose company will act as the site’s general contractor, told us that he didn’t want to talk about it until everything had been finalized.
Simon Dragan was a little more forthcoming about the general reason he became involved. Dragan says he was somewhat skeptical about the overall project initially, especially the ballpark — for one, he would have preferred that it be a more flexible venue — but believes that, now that it’s built, it serves as an important addition to downtown. Like many people, he simply wanted to see it finished. “I looked at this deal for about four years,” he says. “It just became so political, with so many hands in it… it’s kind of frustrating to see that, because it looks like it would be a nice addition to what’s been done downtown. It just makes sense to have it there.”
“It looked like the time was right that, between myself and Mark Hagerman, we could do this,” Dragan continues. “Let’s face it: you want to do good things for your community, but at the same time, you don’t want to lose money in an investment like this. But I think it’s going to be a viable commercial investment.”
It’s been speculated that there might be some amount of civic-mindedness behind Hagerman and Dragan’s involvement, and maybe that’s a little bit true, but no matter what a hundred sitcom episodes have taught us, highly successful business people in the real world don’t put their money into Quixotic causes. That’s usually how they became highly successful in the first place. Or, to paraphrase something Tim Haffner said to City Council, “these guys aren’t doing this for sport.”
The second significant change is Hardball Capital, owner of the TinCaps, coming forward with almost $2 million of investments. “Originally, and there was an agreement in place, signed by all the parties earlier this year, that would levy penalties if the entire project were to fall apart, including this almost $2 million that would come from Hardball,” says Chris Guerin. “So what in January was a contingency, a penalty, they’ve made as a commitment to the project.”
That commitment includes Hardball paying the City $950,000 in 19 installments of $50,000 each, and investing no less than $1 million on Parkview Field capital improvements over a 10-year period.
The tenants announced in February — the law firm Carson Boxberger; 3Rivers Federal Credit Union; and O’Reilly’s Irish Bar, an Indianapolis-based restaurant — are still on board, and if everything goes as planned, construction should begin November 30 and be completed by March 1, 2013.
But while optimism seems to be the word of the day regarding the new arrangement, there are still some things that aren’t clear, and it bears repeating that no loan commitment letter has been signed yet. At this stage, Fort Wayne City Council doesn’t really have any practical leverage in whatever happens with this new arrangement — there’s nothing that council will be asked to vote on regarding the project.
That said, they can make things somewhat uncomfortable for the administration by pointing out — as many did during the June 14 meeting — that despite the addition of some high-profile local investors and the $2 million commitment from Hardball, there’s really nothing concrete in much of this so far. Pressed for details, the response is usually “this is a private business deal” and therefore exempt from scrutiny.
City Councilman President Mitch Harper (R-4), a frequent critic of the way the administration has handled the deal and subsequent delays in the last three years, says he doubts many of the perceived benefits of Harrison Square are going to be realized. “With a 10 year tax abatement that’s been delayed for three years, that pushes any potential TIF revenue out, and it also means the tax payers aren’t going to see any additional revenue generated for a very long time.”
But he argues that the way the administration has handled the issue has far larger and more serious implications than whether or not the residential/retail piece of the Harrison Square puzzle is put in place. “I think Fort Wayne has made a big mistake in the PR aspect of this, in that everything is billed as a catalyst project,” he says. “Nothing has been a catalyst project, nothing creates this organic momentum to the next one. What we should aspire to is critical mass, and you don’t know which individual project is going to do that. But I think it’s always part of the sale of whatever project is next up in the queue: ‘oh, this is going to be a catalyst project’.”
“We need to stop over-selling,” Harper adds. “We need to have an adult conversation with the citizens and taxpayers of Fort Wayne, call things by their real names, point out the advantages of doing these developments. But the real danger in how all this has been handled, particularly by this administration, is it effects the credibility of government to go forward with other projects.”
You can read the Memorandum of Understanding on the City of Fort Wayne’s website.