Last month Sinex hired a Boston-based firm Holliday Fenoglio Fowler LP to serve as a capital intermediary, meaning they will solicit the lenders and investors who will finance the proposed redevelopment.
The news did not get picked in local media, where every step of the project’s public approval process has garnered headlines, but it was reported by a number of trade publications.
Sinex said he hired HFF because he needs to focus on completing designs for the mixed-use redevelopment, courting tenants and shepherding the project through the approval process — not to mention simultaneously operating the current mall.
HFF has some familiarity with the Burlington market and have helped finance similar mixed-use developments, Sinex said.
While much uncertainty remains — the project could be scaled back or nixed completely — Sinex says he is looking for lenders and investors now because getting them to sign on is a long and difficult process.
“They are very methodical, very slow, turn up every rock, look under every rock, make sure that their risks are properly mitigated,” Sinex said.
Were the project to be scaled back, Sinex said HFF could recalibrate and continue to solicit fewer lenders and investors.
“What we end up with may not be what was in the pre-development agreement (between his company and the city), in which case we have to modify our capital request based on the new costs,” he said.
Currently, Sinex said he’s looking for a $150 million first mortgage from a traditional lender. Real estate equity funds “are the big player in today’s marketplace,” Sinex said, which generally means private equity firms, real estate investment trusts or family wealth offices.
To obtain such a large mortgage, Sinex said HFF will first have to secure $50 million to $75 million in other equity investments. These are likely to come from institutional investors, such as bank endowment funds or pension funds.
“They’re more careful than anyone else involved,” Sinex said, because they’re investing “somebody’s hard earned money.” There are, however, a number of factors that Sinex said he believes will make the project financially attractive.
The proposed redevelopment sits on five acres in the downtown core of Vermont’s largest city, with economic anchors such as the University of Vermont, the University of Vermont Medical Center, Champlain College, government offices and state and federal courts.
One of those institutions, the medical center, has signed a lease for 110,000 square feet of office space, and Sinex said he has “active letters of intent from other institutional office users,” that will largely fill the planned 325,000 square feet of office space.
Champlain College is also expected to sign a lease for 80 of the more than 270 units of housing. He said he’s received proposals for more than 150,000 square feet of retail, including two local businesses — which he declined to name — interested in 50,000 square feet of retail space. The project has 180,000 square feet of new retail space.
Being “substantially preleased” is a crucial factor in wooing cautious investors, Sinex said.
“If this project were a speculative development, it would be almost impossible to finance,” he said.
That allure could be scuttled if Sinex and the city aren’t able to adhere to a timeline for the project’s approval and construction, because UVM Medical Center plans to move workers from offices where its current leases end in January 2019.
That means the project must have the necessary approvals in order to complete construction of much of its first phase — which includes the office space the medical center plans to lease — to sync with the end of those existing leases.
A predevelopment agreement between the city and Sinex put in place a timeline that will allow Sinex to honor his commitment to UVM Medical Center, but that schedule is already in jeopardy.
At the same time, a committed group of project opponents are urging city officials not to approve a zoning change that would allow the building height Sinex has in the current design. One of the two new buildings would include towers reaching 160 feet, making it the tallest structure in the state.
Opponents argue that the redevelopment is out of scale and out of character with Burlington’s downtown, and the proposed zoning, though it covers a larger area than just the mall, is being considered specifically to accommodate Sinex’s project.
Opponents say the redevelopment should follow existing zoning rules, which allows buildings up to 105 feet if they offer public amenities. Those rules more closely adhere’s to Burlington’s downtown development plan, they say.
“We want redevelopment, but we don’t want this,” said Steve Goodkind, a former director of Public Works and mayoral candidate. “It’s like we asked for a four-door car and he came back with a Chevy Yukon.”
“If (Sinex) came back with a plan that stays within the existing rules, he’d be a hero in this city,” Goodkind said.
