Fingers crossed for financing
Mega-project developers hope to weather credit crunch
Rod Nickel
The StarPhoenix
Friday, October 17, 2008
The developers behind three major construction projects in the city's core are confident of getting bank financing despite the global economic crisis.
Stoneset Equities is designing the province's tallest building, a $66-million, 28-storey residential tower next to the police station downtown. Lake Placid Developments plans to start moving dirt this year in River Landing on its $200-million-plus Urban Village, while a development corporation is planning an environmentally sensitive housing project at Avenue C and 19th Street.
All three need to borrow, but haven't yet secured bank financing.
Whether Stoneset can borrow what it needs "is a million-dollar question," said Tony Argento, CEO of Stoneset Equities.The Stoneset project includes $13 million in provincial government funds for assisted-living units, which should help bring a lender onside, Argento said.
Banks are now demanding developers come up with 40 per cent of capital costs themselves, with financing available for up to 60 per cent, Argento said.
Another factor in favour of local projects finding financing is the strong economic outlook for Saskatoon, he said. TD Economics forecast on Thursday that Saskatchewan's economy will continue to grow at rates well above the national mark for the next two years.
"(Saskatoon) doesn't seem to have slowed down," Argento said.
The Stoneset tower will include 120 assisted living units owned by the Lighthouse Supported Living Inc. and 116 market-rate housing units owned by Stoneset. If the slowdown hits any segment of the Saskatchewan residential sector, it's likely to be the cottage market, not condos and apartments, Argento said.
"As long as there's willing buyers, we should be OK."
Stoneset officials will be in Saskatoon next week, hoping to sign an agreement with Sask. Housing to build the tower.
Lake Placid CEO Michael Lobsinger is planning the costliest private sector project in Saskatoon's recent history. He won't say how he plans to finance the hotel-residential-office-retail project, but doesn't expect any obstacles.
"I'll finance it my own way and that's none of anybody's business," he said. "I'm very optimistic or I wouldn't have spent $3 million to $4 million already just on plans and getting as far as I have."
The company starts taking deposits on condos next week. Sales manager Richard Lobsinger, the CEO's son, has moved to Saskatoon.
An agreement is "very close" with a hotel chain to build a 12-storey inn at the Urban Village, Michael Lobsinger said.
"We've had an incredible reception on all facets of this project . . . from hotel flags and hotel operators, commercial tenants, retailers and just a phenomenal response on the residential component."
Prairie Ecovillage Development Corp., like Lake Placid, has attracted great interest but still needs to raise the money.
More than 100 prospective buyers have placed $1,000 deposits on 67 to 70 environmentally friendly housing units to be built at the west end of River Landing by 2010. The development corporation will look for financing of the $30-million project early in the new year after completing design work.
"The economic situation that's currently happening has not clarified itself," said Rick Olmstead, co-development manager of Rivergreen Ecovillage.
"Everyone's in the same boat. Lenders are changing rules for borrowing, market conditions are shifting.
"The current situation is causing everybody to give their head a shake." Banks might be more hesitant to loan money, but the financing they are approving is at reduced interest rates, a major benefit to Ecovillage, Olmstead said.
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Should hear something next week about this!