A critical cornerstone of downtown's revitalization could fall victim to a Minnesota development group's sagging credibility with city officials.
Real Development's planned 17,000-square-foot Exchange Market & Deli, on the northeast corner of Douglas and Market, got a boost Monday morning when the Kansas Department of Commerce approved $2.5 million in federal bonds.
But city officials raised doubts a few hours later about the Minnesota developers' ability to untangle their financial problems in time to utilize the federal money.
The state's action gives the Wichita City Council authority to issue the Recovery Zone Facility Bonds to help finance the project, considered an essential piece of downtown Wichita's revitalization.
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The bonding authority is part of $92.3 million in Recovery Zone Facility Bonds and Recovery Zone Economic Development Bonds allocated by the state this week. The biggest beneficiaries are in northeast Kansas, which received about $73 million of the total.
Wichita Vice Mayor Jeff Longwell said Monday afternoon that he doubts that Real Development can address a string of financial problems in time to access the bonds.
"Although the state recognized that there's a need for a downtown grocer, I just don't know that these guys, with everything they've got going on, can pull it off," Longwell said.
Michael Elzufon, a partner in Real Development, acknowledged that almost two years of financial problems have eroded the company's cash flow and damaged its credibility with the City Council.
"I think that sounds accurate," he said.
As The Eagle reported last week, Real Development faces a string of still-pending refinancings, unpaid bills and loans that must be settled to pull off the 230-condo Exchange Place project, which was supposed to break ground this month. The market and deli would be on the ground floor of the building.
The first step is the multi-million-dollar refinancing of the Wichita Executive Centre, 125 N. Market.
That refinancing plan, on and off over the last nine months, is required to generate enough capital for the company to pay off about $1 million in unpaid creditors.
If those creditors aren't repaid, the company will lose $10.3 million in tax increment financing from the City Council.
The group also is waiting to hear from the Department of Housing and Urban Development on an application for a $30 million loan, the base funding for the $46 million Exchange Place project.
Council member Jim Skelton said that the Minnesota Guys have lost credibility with the city.
"I cannot in good conscience vote to support people with delinquent accounts," he said. "My concern is they've gotten behind on things needing to be paid and they've not been able to make good on the things they need to do.
"Staff thinks the council needs to be cautious about this. I'm reluctant to go any further with these people."
Public: Give us a store
A grocery store downtown is the first priority for downtown revitalization, the public said loudly and often throughout the nine-month process to develop a comprehensive downtown plan.
"This is the one project that resonated strongly across the community," said Jeff Fluhr, president of the Wichita Downtown Development Corp.
"It can be a catalyst for residential development, it can enhance downtown livability, and it furthers walkability because it serves as a destination."
Elzufon said he's ready to get started on the food market, although he declined Monday to identify the operator.
"We have everything from the operator to the resident chef in place," he said. "Supply chain management, distribution, it's all there.
"This isn't to say that all the T's are crossed and the I's dotted, but we've put forth a very substantial effort and energy into this project over the last year."
Fluhr said he's interested in learning more about the store's business plan and its long-term profitability.
"We're going to need to draw on the downtown market and the growing first-ring neighborhoods like Delano so it has not only downtown to draw from," he said.
"As they (Real Development) develop and work on their concepts, the store will have to have the items to draw those people and the downtown office market."
Elzufon pledged Monday to open the store and complete the Exchange Place project, with or without City Council support.
"Not even a chance," he responded when asked whether the project was in doubt.
"We have a world-class project that will come downtown in a very short period of time.
"Challenges — if I didn't have them, I'd be bored."