Electric Works is on life support.
In a unanimous vote Monday, the Fort Wayne Redevelopment Commission terminated an economic development agreement with RTM Ventures, ending public involvement in the $280 million mixed-use redevelopment project south of downtown.
But the development team is adamant the deal isn't dead.
The move eliminates $62 million in public funding – $10 million of which would have come from the city's Legacy Fund. As proposed, the project would redevelop the abandoned General Electric campus on Broadway with new commercial and retail space.
In an email Monday night, City Spokesman John Perlich said the agreement is also nullified for the Allen County Fort Wayne Capital Improvement Board and the Allen County Commissioners.
But the project's supporters might have a glimmer of hope.
Christopher Guerin, the Redevelopment Commission's president, said the city would consider “any new or additional or other proposal” brought forward by RTM or another developer in the future. Guerin, who made the motion to terminate the agreement, attended Monday's meeting via telephone.
Perlich said the city and RTM Ventures would have to enter a new economic development agreement – with new funding commitments – if they find a way to go forward.
RTM Ventures owns the site, having purchased it from General Electric for $5.5 million in September 2017.
In a presentation to the Redevelopment Commission, Nancy Townsend, the city's redevelopment director, and Jon Bomberger, an attorney for Faegre Drinker Biddle & Reath LLP, said RTM Ventures was missing about $30 million in construction loan commitments and about $21 million in private equity.
Bomberger said the city had received a construction loan commitment letter from Midland States Bank, stating it would lead a “syndication of up to $62 million, of which Midland States Bank would take $12 million.” The city had also received written commitments from 3Rivers Credit Union and Lake City Bank for $10 million each, Bomberger added.
Syndication involves multiple lenders funding portions of a loan to a single borrower.
“There was the suggestion,” that First Merchants Bank and Old National Bank had committed to $10 million and $12 million toward construction financing respectively, but no formal commitment letter had been delivered, Bomberger added.
“We have received emails that reference a commitment will be coming,” he told the commission.
The project did secure the necessary state and federal tax credits, but Bomberger said the city found the developers had a “shortfall in the amount of purchasers” for the federal New Markets Tax Credits designated for the development.
Bomberger also said the developers had suggested that Octagon Financing – which holds the mortgage on the site – might exchange the mortgage for equity in the project. However, he said the city had “no written commitment from Octagon to do that, or anything else, other than an email.”
Bomberger acknowledged that RTM Ventures has provided the city with copies of leases, which are under review. New Haven-based Do it Best Corp. recently signed a lease for 200,000 square feet as Electric Works' anchor tenant. A message left for Do It Best seeking comment for how Monday's decision affects its lease agreement was not immediately returned.
Progress has been made over the course of several extensions, Townsend said. However, she noted that public funding has been in place since November 2018 and said the city has a responsibility to protect taxpayer money.
Townsend said the project was a “heavy lift from the beginning” and the developers had trouble convincing the private sector to buy in.
The economic development agreement was signed in August 2018 and was amended five times to extend key deadlines for financing and closing. The latest extension, approved in April, gave the developers until July 30 to meet the financing requirements to move the public-private partnership to closing. If all the requirements were met by July 30, the city and RTM Ventures would have until Sept. 30 to close the deal.
In a statement through spokesman Kevin Erb, RTM Ventures' development team expressed surprise at the Redevelopment Commission's decision.
But the team said the deal is still alive, stating the firm owns “40 acres and the most historic buildings in Fort Wayne,” with full construction drawings, a shovel-ready site and more than 60% of available space under pre-leasing commitments.
“With the support of local investors and civic leaders, businesses big and small, the Indiana Economic Development Corp., five local and regional banks, and federal and state tax credit investors nationwide, we have met the conditions of the Economic Development Agreement,” the firm said. “We're ready to move to closing this $280 million deal and getting people to work. We hope the city and Redevelopment Commission will come back to the table.”
No one from RTM Ventures attended Monday's meeting. Attorney Peter Mallers, of Beers Mallers Backs & Salin, was allowed to speak on behalf of the firm, however.
Mallers disputed Townsend and Bomberger's assessment, and said the construction loan shortfall was not $30 million but closer to $8 million.
Mallers said the commitment letter from Midland States Bank for a construction loan included commitments from First Merchants Bank and Old National Bank. Mallers added that the development team is working to obtain commitment letters from each bank individually, per the city's request.
“Admittedly, we wish we had that (by last Thursday's deadline), but they're working on it, and it's in underwriting and we should have that answer very soon,” he said.
City Councilman Geoff Paddock, D-5th, was present for Monday's meeting, although he is not a member of the Redevelopment Commission. Paddock, who represents the area that includes the Electric Works site, has been a proponent of the project.
“It's a real disappointment to me,” Paddock said. “Obviously, this is something we have to work through. I want to emphasize to the citizens of the 5th District that I am committed to continuing the efforts for renovation at the old plant.”
Explaining his vote, Commission member Nathan Hartman said regardless of whether the construction loan gap was $30 million or $8 million, “that's still a lot of money and unable to keep the project going.”
“We don't need more public money in this project. We need more private capital to keep it going,” Hartman said. “I'm more in favor of a project that leverages more private funds than public ones.”
Should RTM try to renegotiate a deal, he'd be willing to consider it, Hartman added.
In a statement, Perlich said Mayor Tom Henry “recognizes this was a difficult decision for the Redevelopment Commission to make,” but trusts the board's expertise and decision.
“It's vital that taxpayer dollars are protected and not be at risk of potentially losing more than $60 million on an initiative that wasn't going to be able to move forward under the (economic development agreement) that is no longer in effect,” Perlich said. “The local public funding partners did everything possible to try to help bring the project to fruition, but the private development side, as it currently stands, wasn't able to complete the private sector portion of the partnership.”
Perlich also said Henry “wants to assure the supporters of Electric Works that the enthusiasm and interest in the former GE site is still there.”
“Mayor Henry and his leadership team are optimistic that there will be a significant development there in the future,” he said.