At the Lexington Forum this morning, CentrePointe's developer updated the public on the status of the faltering project in the center of our city. As he has done in other venues, he laid much of the blame for any CentrePointe controversy at the feet of bloggers and the media.
In his presentation, he revealed a few new details about the secretive project, along with several layers of backup plans. In this post, I'll outline some of my notes and some questions which arise from the developer's presentation. In a future post, I'll share more of my thoughts on the development in the wake of this morning's presentation.
- The dead financier (call him Mystery Investor 'A' - or MIA, for short) was introduced to the developers by a pre-eminent, distinguished American who was heavily involved in the Justice Department.
- MIA was committed to 5 such projects around the world involving some $800 million, including 3 in the US worth some $550 million.
- He went into some detail on the reason that MIA's estate was held up. He characterized it as a chicken-and-egg problem. The heirs aren't sure they wanted access to the 'numbered Swiss bank accounts' until they knew whether those accounts had enough to cover the estate's liabilities (like CentrePointe). The accounts and the liabilities seem to be a package deal, but the heirs are blind to the numbered accounts: They can't know what the actual assets of the estate are unless they also accept the liabilities.
- Question: If MIA's heirs don't have confidence that MIA had enough assets to cover these deals, then what makes CentrePointe's developers so confident that the money is there?
Plan A Minus
- If the developer's 'Plan A' falls through, he has an intermediate plan ('Plan A Minus'?). In the last couple of days, he has talked with someone who happens to have 20 to 30 thousand cubic yards of dirt for free, so filling in the site is an option if the current plans fall through. He also mentioned that he had talked with someone who hydroseeded strip mine sites who might be willing to help seed the place.
- The developer claimed "It is not our intent to embarrass the community" for the World Equestrian Games. He hates to do it, but is tempted to backfill the pit and plant seed "even for 60 to 90 days, just to shut those people up". The friendly crowd roared with laughter. Later he said he thought about "putting in a liner and turning it into a lake". More laughter.
- CentrePointe now has a 'Plan B', complete with a Mystery Investor 'B' (MIB) who has recently come forward to express interest in the project (should 'Plan A' with MIA's estate fall through). They are "ready to go" if 'Plan A' does fall apart.
- Question: If MIB is so "ready to go", then why not relieve the heirs of MIA's estate of their burden and allow MIB to take over financing for the deal?
- Even though MIB is ready to go, there is also CentrePointe 'Plan C' involving a Mystery Investment Bank 'C' (MIC) who will put up $30 million, and the developer briefly mentioned some sort of 'bond arrangement' to finance the rest of it.
- Question: If Plans A and B are really viable, then why does CentrePointe need a Plan C?
- Question: What kind of bond issue supplies the other $220 million needed to build the project, if the investment bank is only ponying up $30 million?
- If one of the financing options lines up today, CentrePointe would begin construction in the fall. 15 months after the initial demolition began.
- The developer claimed that 65 of the 91 condominiums at the top of CentrePointe had been committed to by many people, including horse farms in Ireland and Dubai. (He didn't mention Napa Valley wineries this time.)
- He took pains to correct Herald-Leader writer Beverly Fortune for reporting that the 91 units had an average price of $1.2 million. "That's just the average... The units will start at $600,000 and go up from there."
- "Hard Rock Café was one of the first to call us" when they heard about the project, strongly implying that they were lined up. (Since the meeting, I have learned that the developer really talked with 'House of Blues' - not Hard Rock - and that they are anything but 'lined up'.)
The plethora of mystery investors and backup plans might have been intended to reassure his audience. But they actually raise troubling questions about the future of the project, the developers' ability to obtain financing, and the financial viability of the development's business model.