Posted Jan 11, 2008, 12:17 PM
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It's Hammer Time
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Join Date: Mar 2004
Location: Hamilton
Posts: 20,303
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Better deal? City ponders purchase of Lister Block
Andrew Dreschel
The Hamilton Spectator
(Jan 11, 2008)
The Lister project may not be dead yet.
Mayor Fred Eisenberger says the city is prepared to discuss buying the downtown landmark instead of leasing it.
And MPP Ted McMeekin, Hamilton's voice in cabinet, says the province will consider using its $7 million grant to offset the purchase price, if it means restoring the heritage building.
According to the developers, it makes more economic sense for the city to buy the Lister outright than enter into a long-term lease.
Under their proposal, LIUNA and Hi-Rise would renovate the skid-row building and then sell it the city at a fixed price of $25 million.
Hi-Rise president Warren Green suggests the city could use the $7 million from the province as a down payment and then borrow the remaining $18 million, which could be amortized over a 20-year term.
Green says that will bring the price down to about $23 a square foot. That's a far cry from the deal-breaking $37 a foot rental rate that would have cost the city $44 million over 20 years, which council rejected out of hand.
Green says the proposal to sell has been the developers' preferred option since they realized the high cost of restoration would drive leasing rates "ridiculously high. We didn't think it made sense to lease under any conditions," said Green, speaking in a telephone interview from his vacation in Thailand.
But the purchase option gained no traction when it was presented to council this week.
That may be because finance manager Joe Rinaldo told councillors it would end up costing the city about $30 a square foot if they bought the restored building.
But Rinaldo didn't factor in the possibility of using the province's $7 million as a down payment. He says he didn't because conditions stipulate the grant is to be used to offset leasing rates.
"The money is there to lease," said Rinaldo.
Nonetheless, Eisenberger believes the province will be amenable to using the money as long as it results in the Lister's restoration.
"I think there's an opportunity to continue talking seriously about how we're going to move forward," he said.
But Eisenberger cautions city staff will have to carefully assess the proposal and any deal has to make economic sense for the city.
Rinaldo notes any purchase price would have to include at least another $2 million in "tenant improvements."
The mayor is meeting today with LIUNA's Joe Mancinelli, McMeekin and Liberal MPP Sophia Aggelonitis to discuss all options.
"If the city has a specific proposal it wants to make involving restoration, we would be prepared to hear it," said McMeekin.
Both McMeekin and Mancinelli are surprised that in an 8-5 vote council refused to take advantage of the province's offer to verify the accuracy of the developers' figures.
So is Councillor Brian McHattie, the Lister crusader who unsuccessfully urged his colleagues to keep the process going.
"It's all about trying to figure out what the right number is," said McHattie.
"I don't think we can afford to say that $37 a square foot is too high or that $25 million is too high to buy it, so don't even talk to us.
"This is a very important building for the future of Hamilton. It's an icon of downtown, good or bad."
Meanwhile, in a blistering letter to councillors, Mancinelli expressed shock about the way they dealt with the Lister deal, from refusing the independent review to not seeking LIUNA's input.
"Is it any wonder why we can't attract significant investment into our core when council reacts and/or overreacts in this way?" he asks.
But it's clear LIUNA and Hi-Rise have had communication problems of their own.
For example, a peeved Mancinelli apparently had no idea that the $37 a foot figure came from Hi-Rise, not city staff.
Mancinelli says he knows $37 is not "politically possible," but he's convinced there are other "innovative options" available.
If the city doesn't want to buy Lister, he says it could ask the province to put the $7 million toward the construction costs, which would lower the leasing rate.
For his part, after talking to Mancinelli, McHattie is convinced LIUNA is committed to restoration and he's more optimistic that a deal can be salvaged.
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