By Jennifer Eisenbart
Staff Writer
There was a time when putting together the final piece of the City of Burlington’s downtown redevelopment project looked feasible, and perhaps even easy.
In fact, that time wasn’t that long ago.
But in the last five to six years, every market involving retail space has seemingly conspired to keep that final piece – the planned retail building next to the downtown parking garage – from completion.
At least, that’s how Tom Stelling and Bill Stone – both members of Burlington Core Upgrade II (the group holding the option on the land right now) – see the situation.
“The terms became different,” explained Stelling, of Stelling and Associates Architects. “(Banks) wanted no risk whatever.”
With financing options changing, the planned development has been stalled for the last three years since the completion of the downtown parking garage.
Now, the Core Upgrade II group is looking at options which include purchasing the property from the city so they can deal directly with interested parties and also the possibility of constructing the building in phases.
The economy
As Stelling and Stone have taken pains to explain – publicly at the Community Development and also to anyone interested – the downtown in the economy from 2008 on forward came with not just a price, but with consequences.
Specific to real estate development, Stelling said a development would get a site plan, then go to a bank and get financing with 20-30 percent down.
When the economy went sour, not only did banks want the same amount down, but they wanted personal investments secured, three-fourths of the space committed to a lease for two years and to lock down personal assets against any risk the bank felt it was taking.
“That’s not how commercial development works,” said Brad Lois, also involved with the project. “That’s why nobody here is jumping for joy. It doesn’t happen that way.”
As a result, while the development group has been able to develop interest in leasing about 40 percent of any given space, it hasn’t been able to take the next step.
Different designs
Stelling explained that his firm has done three different designs on the planned retail development since 2008, with the city marketing the plan.
One part of the plan has remained steady, though – everyone involved wants to keep the space as a retail development.
“Both the city and the group want to keep this compatible with the downtown,” said Stone.
The reasons are straightforward. While there is a market for apartment housing, the placement in the downtown area would require more parking than is feasible, even considering the parking garage.
“It’s not suited, necessarily, to this site,” Stelling said.
So that leaves the retail option. Unfortunately, because of existing retail developments that were built before costs began to rise in 2009, it’s cheaper to rent in buildings that have already been built.
To feasibly fill a new retail development in Burlington, all the existing space would have to be filled, the building would have to rent space at a financial loss – or they’d have to come up with renters who are extremely interested in the location, Stelling said.
“You end up with a supply and demand situation,” Stelling explained.
The future
The end result is an undeveloped lot sitting in the heart of downtown Burlington. Stelling and the group have options, though.
One could be developing a portion of the space, and leaving room for a second phase. The question there is where to place the first phase on the lot.
There is also the option of purchasing the property and developing it under a plan that, as Stelling said, “protects everyone’s interests.” The idea would be to build into any contract what the city wants in the space.
And there is always a mixture of the two. As Stone said, “we all have different opinions.”
Stelling said the Core Group II continues to work with interested parties on a daily and weekly basis.
“All have the same development challenges,” Stelling said. “They have their world they’re trying to deal with.”
Added Stone, “we’re a microcosm of what’s going on everywhere.”
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