The renovation of Exchange Place downtown has taken much, much longer than anticipated to get started, but it could finally happen this spring.
“The transaction is very close to being closed,” says Harvey Sorensen, a Foulston Siefkin attorney who represents developer John McWilliams.
Sorensen says McWilliams last week “invested a substantial amount of money to lock … the rate on the bonds that are being sold to finance the HUD debt.”
“The rate lock is good for 90 days, and so we would expect the transaction to close within that time period,” Sorensen says.
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The rate is 3.55 percent.
McWilliams is a Dallas developer who joined the project to help with a HUD loan in 2012 when Real Development was involved in the project.
As the Minnesota Guys – the men behind Real Development – transitioned out of the project, McWilliams continued with it.
There was a holdup because of a lack of federal tax credit buyers for more than a year due to what’s known as the Boardwalk court case. That involved a development deal in Atlantic City and the Internal Revenue Service’s response to it.
That got resolved, but last fall McWilliams said there were a few things related to his $32 million HUD loan that had to happen before construction could start.
The HUD loan finalization had already been extended three times at that point and has since been extended once more as McWilliams and others involved in the deal rebid construction costs, updated a market study and completed administrative tasks related to the loan.
“This is an enormously complicated transaction,” Sorensen says.
“I don’t think I could draw a picture of it for you,” he says. “It’s one of the most complicated transactions I’ve ever worked on.”
He says the tax credits – especially the federal ones – are what complicate the deal.
Sorensen says there are seven law firms working on it nationally. He says he’s merely “one of the flagellas at the end of the amoeba.”
Once HUD approves the loan, Sorensen says that “it’ll close instantly.”
“By the time we get to that point, all the work will be done and all the documents will be signed.”
The approval will allow McWilliams to move forward with the $66 million development in the heart of downtown. It will revitalize two empty, deteriorating buildings – the pink marble Exchange Place and the white brick Bitting Building on the northeast and northwest corners of Douglas and Market – and add a new parking garage and apartment building where the Lerner and Michigan buildings currently are.
First, though, the paperwork has to be finalized.
“They are working desperately hard to get their documents into HUD for their final approval,” Sorensen says.
Though the rate is good for 90 days, he says he expects it to take less time.
“I would expect the transaction to close … in six to eight weeks after the submission.”