BY: Gerry Cantlon, HOWLINGS
HARTFORD, CT – With the election looming on Tuesday, the XL Center’s future is likely to hang in the balance as this long-running, five-year-plus, soap opera is likely to see more cliff-hanging chapters, depending upon the outcome.
The lone bidder to buy the XL Center, Oak Street Capital, LLC, (OSC) which is based in Chicago has been told things are on hold.
“We let them know things are going to remain on hold until the election passes because, to be honest, in the end, the legislature is going to have the final say in how everything will proceed in the process on this project. To date, the legislature has been very reluctant because of the budgetary constraints to make the long-term, big investment in the XL Center and if we proceed on this bid, there will be required to have a significant new statutory rewrite of the public-private partnerships if we go forward,” remarked CRDA Executive Director Mike Freimuth.
The CRDA Board is made up of appointees from the Governor and the legislature; a change in the legislative composition will affect both personnel, and likely the direction of the CRDA in terms of what it will be involved in, its portfolio, and its scope. They could all change. There will be a new Governor, and clearly, the XL will be among the first items addressed once the dust settles.
In terms of the bid to buy the XL Center, there are questions that have been sent by the CRDA to the bidder. Their responses reflect some deeper long-term issues as the CRDA seeks a long-term (30-year) deal with Oak Street. A key caveat Cantlon’s Corner has learned from a governmental source familiar with the matter is what acts in a similar fashion to a variable rate mortgage. OSC prefers a 7.5% interest on the $250 million for the XL Center for the first five years of the deal with an adjusted sliding scale in the outer year payments for the length of the deal.
Freimuth was cautious in his answer.
“There are some CPI points of interests in the bid. It’s a very detailed and complex proposal and the proposed deal has many more facets and features to be discussed and fleshed out. We are still very early in this process.”
Translation: CPI stands for Consumer Price Index. Clearly, OSC is factoring in a future rise in inflation and interest rates as part of its calculation and is front-loading the $250 million for this project. That is surely going to be a sticking point for the legislature that’s already dealing with serious debt issues in the state budget. In the coming three-to-four years, that problem is expected to rise exponentially.
One intractable area of concern is the atrium.
Finding some common ground with Northland Corporation, the current title holder of the atrium area, which was ceded to them in the building of Hartford 21 by the Peters administration to execute the original deal. There may be the slightest of openings there, but is still a very long way from signing any paperwork.
Freimuth shot down published reports in other media outlets that the CRDA was looking to buy the Century 21 apartment building owned by Northland.
“Oh, God no. We’re not doing that,“ Freimuth said in a half-mocking voice clearly indicating that acquiring an apartment building with tenants was the last thing they wanted to be doing, “We are looking to buy the Trumbull (Street) block. We got their appraisal back and before you ask if the figure in our ballpark, let’s just say we would have a better chance of buying ‘The Egg’ in Tokyo.”
Freimuth was referring to the 55,000 seat stadium in downtown Tokyo that is home to the baseball team, the Yomiuri Giants. The building is shaped like an egg.
Northland hasn’t shot down anything down as it has vociferously done in several interviews the past few months. The question arises if there is any flexibility?
“We’re still in negotiations. That’s always a good thing. However, this process, like with Oak Street, is at the whim of the election cycle, and the budget, neither of which are settled.”
It seems there also has been a switch in the proposed building design that may be more palpable to a new legislature and Governor to support renovating the XL Center.
The new emphasis is on eliminating the second concourse and designing the lower bowl as a premium seating area and upper bowl to be more suited for general public seating. The cost savings are significant but do reduce the size of the building.
“You take the concourse out and its more like $125 million, a 50% reduction in construction costs, and we can maximize our revenue stream better without the added costs. We can spread out things across the arena in making amenities and concessions even more efficient and spectator friendly. We’re trying to marry and mix various formats here.
“One is we have to reconfigure our entry security system given the times we live in. I hope we can get movement in some of the areas under negotiation so we can secure things and give an architectural firm more firm data to work with in the design phase. Like I’ve said many times, a lot of pieces have to come together and we’re just hoping Tuesday can allow us to advance things and really begin the process of rebuilding the XL Center. We’re in overtime with this building.”
Tuesday holds the fate of the XL Center and several teams operating in the building in its hands.
