The backhoes and crane have been quiet at the site of the mostly demolished Burlington Town Center. Developer Don Sinex has lacked the construction financing necessary under a development agreement with the city to move ahead with the next step: pouring the foundation for the 14-story CityPlace Burlington.
The Burlington City Council voted 8-2 Monday to alter that agreement in order to get things moving again. Mayor Miro Weinberger had requested in a letter late Friday that the council allow Sinex to build the foundation before he has a contract for the rest of the project.
City councilors raised questions in interviews Monday about what the changes would mean for the project, and whether approving the changes would put the city at greater risk if the project were to fail.
If Sinex ran out of money, would it be worse to have a foundation or an empty lot?
And would a no vote — essentially forcing Sinex to wait to start the foundation work until he had certain legal agreements and a full construction loan — potentially delay the project and risk deals with future tenants such as the University of Vermont Medical Center?
“There’s a lot of things we still need answers to,” said council president Kurt Wright (R-Ward 4), before Monday’s meeting.
Currently, Sinex has $56 million in financing, from his own pocket and from Rouse Properties. In April 2017, Sinex’s group Devonwood Investors agreed to finance a portion of the project.
The remainder would be financed by a roughly $200 million construction loan. Sinex hasn’t yet secured that deal, according to the mayor’s letter. Sinex said in April 2017 that he “was highly confident” he’d have that cash in hand the following month.
Now, 16 months later, Sinex asked the city to allow him to build the foundation with his $56 million, rather than wait for that additional cash.
Another hiccup: Under the previous development agreement with the city, Sinex could not proceed with foundation work until he had figured out the costs of the streets next to the building and for the building itself.
Specifically, Sinex doesn’t have a guaranteed maximum price contract for the public or private improvements, which would cap the amount that can be spent on the project. It’s a contract that provides legal protection to the city; without it, there’s the possibility that if Sinex spent more than he originally predicted the city could be held liable for the additional cost, said councilor Jane Knodell (P-Central District).
Sinex attributed the delays to a tardy city design for the streets. He also said he hadn’t bid out the work to contractors for construction of his own buildings. “I’ll satisfy all the conditions — just probably in four months time,” he said.
Knodell emphasized that figuring out why Sinex is behind isn’t the council’s job. “For me, the question I have to figure out is: Is the city better off letting him lay the foundation or not?”
That question, said Councilor Dave Hartnett (D-North District), may take time to answer. “It’s my responsibility as a city councilor to pause and take some time,” he said in an interview Monday. “I don’t think a no vote puts the project in jeopardy.”
Hartnett voted against the measure, as did Max Tracy (P-Ward 2), who said he was “deeply concerned about the continued viability of the project.” Richard Deane (D-East District) abstained.
Weinberger portrayed the vote as a necessary bureaucratic step in a complicated project. Sinex and his investment partners “want permission to spend their equity building this foundation. At this point, barring something unforeseen, we should allow them to do that,” he said.
Weinberger said the council’s involvement is holding Sinex to a high standard. “This is the development agreement working as it was intended, protecting the city, and giving the city visibility into what’s going on,” he said.
Sinex, too, contended that he was adhering to the development agreement, and should be granted permission to move ahead — for the benefit of both the city and his project. “Issuing the foundation permit now as opposed to later will not in any way affect the City but will enable the project to move ahead,” he wrote in an email to Seven Days.
The project fell behind schedule last winter after workers found asbestos in a layer of glue used for a rubber roofing membrane. Amendments to the project in March sparked a flurry of objections from the public and a citizens opposition group. The foundation work was supposed to begin in July.
Sinex has also had disputes with his contract manager, South Burlington firm PC Construction.
“We are aware of disagreements between PC Construction and Don Sinex, have been monitoring the situation, and have encouraged both sides to sort out their differences, if possible,” Neale Lunderville, acting director of the Community and Economic Development Office, wrote in an email to Seven Days in mid-August. “We have some concern that an ongoing dispute could impact the schedule.”
The city council met to discuss the issues in mid-August and again Monday in executive session. Ultimately, it’s Sinex’s job to manage the project, Lunderville added.
Jay Fayette, president of PC Construction, did not return a call for comment.
The council voted to allow the city to fully take over the design of the Bank and Cherry streets portion of the project. Previously, the city managed a portion of that, and Sinex had the bulk of the responsibility.
The city requested the change, Weinberger said, “to minimize the possibility of error and to make sure the city gets the streets it wants.”
Councilor Adam Roof (I-Ward 8) downplayed the long-term implications of this vote on the project as a whole.
“There’s no indication that I’ve seen that this project is at great risk” — or, at least, no greater risk than has been present since the start, he added. This change “is reasonable within the context of the overall project, which is large,” he said. “We shouldn’t be screaming that the sky is falling.”
Read the mayor’s letter here:
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Wow, never could have seen THIS coming. ::eyeroll::
But at least we have those lovely and slick propaganda posters, complete with polished stock photography, adorning the chain link fences around the site while we wait for the highly confident Sinex to secure his financing. I agree with Bob B: the best-case scenario here is that the project fails completely, and we can turn the space into a public park.
I also agree with RB: “Keep digging, 7D!”
And would a no vote essentially forcing Sinex to wait to start the foundation work until he had certain legal agreements and a full construction loan potentially delay the project and risk deals with future tenants such as the University of Vermont Medical Center?
Why let developers like Sinex and the 800 pound gorilla that is UVM Medical center push you around like this is the better question.
Here comes the blackmail. Here comes the emergency “special treatment” and dispensations. Here comes the malfeasance .
Sinex has suddenly turned his pockets inside out and is “stuck”? Miro is scrambling to cover for him ( no surprise). And we have a whopper of a hole in our “vibrant” downtown. This sounds more like that big project in the NEK by that crook Quiros which left a gaping hole in the middle of Newport, among other places.
Miro, CEDO, the Chamber of Commerce and all the city councilors who supported this monstrosity of a Tumor project should personally front Sinex the money so he can continue.
I’m getting the impression that the folks calling the shots down at City Hall all used to work at Enron, or worse, Goldman Sachs after the Crash of ’08 ( none of whom faced any consequences for their greed).
“Making Burlington Great Again”, eh, Mayor Trump?
2/2-
12-month LIBOR (the global standard interest rate benchmark) has risen some 130 basis points. The money market is getting tighter and so the window developers have to borrow money cheaply for big projects is rapidly closing (if not already too late).
If Sinex wasn’t able to secure an economically-feasible financing package in the last 18 months there is no reason in hell to expect he will be able to secure a $100M+ credit line in the next 6 months. Macroeconomic headwinds have surfaced that were not on anyone’s radar in 2016. I remember 2+ years ago I asked Sinex directly at an NPA “Interest rates are dirt cheap right now and could rise. What will happen if they rise, 40, 60 or more basis points in the next 12 months?” Sinex replied defiantly “We see no indication that interest rates will rise and there will be no impact on this project.” Well Don, interest rates have risen, a lot.
The Mayor has done great work in courting Sinex and helping push this ambitious project along, but the administration and the City Council are complacent regarding the likelihood Sinex won’t be able to put the money together needed to pull this off. Taxpayers, businesses and community stakeholders deserve to see a contingency plan.
The saddest part is we put Sinex’s project in peril on our own accord. There are things the City Council could’ve done–waived parking requirements, exempt the project from inclusionary zoning, etc–that would’ve helped Sinex’s pro-forma cash flow, thereby alleviating the pressure he is likely facing from creditors on The Street. Sad!!
1/2-
This is very worrisome. I don’t think most Burlingtonians understand how dire this situation is and how easily this much-celebrated downtown development could fall apart.
There is no “Other developer” as many have referenced! Never before has anyone come to our city with such an ambitious, capital-intensive and transformative proposal. We can be complacent and expect some new deep-pocketed investor to save this project. Who’s going to step forward; Ernie Pomerleau? We will find no investor(s) with both the financial capacity and risk-appetite to take this project on.
Sinex has had well over 2 years to scrape together the ~$160M needed for construction. In the first 5-months he secured $56M in equity from his own private REIT and Rouse, another privately-held REIT (the oft-mentioned $225M figure was a prior estimate and includes the TIF-funded public improvements and the initial purchase price Sinex paid for the mall). Since that time, more than a year-and-a-half ago, he has made zero progress securing a penny of collateralized debt.
What is going on here? We were initially led to believe Sinex had his financing in place thru a (Boston?) private equity firm and now no construction loan? And Pizzagalli Construction (a reputable local firm) sounds like they are pulling out? And why is Richard Deane abstaining on such an important vote?
Keep digging 7 Days…
The overriding question here is why this project was allowed to proceed BEFORE Sinex had ALL THE MONEY NECESSARY to complete it!?!?…Perhaps Burlington’s Mayor/Chief Developer can enlighten us?
I said before that it was a stupid move to tear down the old mall but did anyone listen? They believed Miro and that was a stupid move. Don the con should have proven he had the financial backing before even starting this project. Now Burlington is stuck with another empty space and losing out on money due to the dumb ass mayor making this alleged deal. He should be made to pay out of his own pocket for the rest of the project. If not, I’m sure he has plenty of rich friends he can get it from.
So all of you dumb asses that voted Miro back in and for the project you fell for it hook line and sinker. Miro is the typical politician, he’s out for the money and does nothing in return.
Like I said in the past, it was a stupid move to have the old mall torn down. Don the con should have proven he had the financial backing before even starting this project. Now that it’s a mess what’s Miro going to do about it besides nothing. Miro talks a lot but has done nothing to improve Burlington! He should have never been voted back in as mayor but obviously people were to blind to see how he is. He is just a typical politician that wants power and is greedy…
I’d rather have an empty lot than a big slab of cement.
https://www.marketplace.org/2017/10/12/wor…