The project is still a go, Valenti told the city Wednesday, but he still needs one critical tenant signing to put it over the top. He declined to say how much of the space has been leased, but did relate that one large retailer is likely to make a decision this month and that tenant would be enough to get construction financing completed. The lack of progress on the Gateway was an issue in this year’s city elections.
Higher-than-expected construction numbers caused the delays, Valenti said. After the development agreement was concluded with the city in early 2013, he said, bids from subcontractors came in “astronomically high.” When that happened, “We went back to the drawing board and looked at everything – we are not there yet.” He said the parking garage and residential over retail contributed to the costs. Tenants are used to being on pad sites, not in multi-story projects, which makes leasing more difficult, he added.
The critical tenant is based in Houston, Valenti said. Two other large retailers are making decisions this month. They round out the project, but are not as critical. He said negotiations with the Houston retailer have been ongoing for a year and Gateway has met all of their demands. If they do not sign, he would be “scrambling,” Valenti said. “If I get that deal done, I will be in good shape.”
“Nothing is more important to me than the successful completion of this project,” Valenti told the council. “I have a great deal of my own money invested in this project.” Valenti said he would like to make some money on the deal – or at least not lose a lot.
The already-signed anchor – Walmart – is still committed and “they are in a hurry to get out,” he said. Walmart will be moving from its Roeland Park location. Sprouts grocery is solid and is asking for more space, he added.
Councilor Dave Shepard raised the possibility of a new development agreement being required if the plan changes from that originally approved. Shepard pointed out that a new agreement for Tax Increment Financing – part of the revenue stream for bonds – would require a supermajority vote of the council. “I see that as a new hurdle,” Shepard said. The council makeup has changed after the April election.
The city’s financial advisor, told the council a new development agreement and modifications to the TIF plan are likely and the council would probably need to approve a new package for the financing.