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Do IT this week: Layering
Akron, Summit arranging financing plan to jump-start new global headquarters in wake of faltering economy
By Jim Mackinnon
Beacon Journal business writer
Published on Sunday, Mar 15, 2009
Early last summer, it was becoming apparent that there was no easy private money to be found to finance the $900 million Goodyear global headquarters and East Akron redevelopment project, said developer Stuart Lichter.
That wasn't the case in December 2007, when the massive project was unveiled.
Lichter, head of California-based Industrial Realty Group, said at one point he had verbal commitments from lenders for 1.5 times the amount of money he needed to build a Goodyear headquarters and the related Riverwalk development.
But those lenders began getting skittish last June and July, and then things rapidly soured, he said.
''We thought we would get enough of those lenders to the finish line,'' Lichter said. ''But we also knew we were in a very, very difficult environment that was deteriorating.''
When fall 2008 arrived and with
the nation recession deepened, credit markets froze and the private money commitments dried up. As a result, Lichter, Akron and Summit County are revamping $17.2 million in financing, with the governments nearing approval on providing short-term bond money to jump-start the project.
The state, county and city governments got involved early in 2007 to keep Goodyear Tire & Rubber Co.'s headquarters and its approximately 3,000 well-paying jobs here.
Lichter, along with Chris Burnham, head of the Summit County Port Authority, spent time after meeting with the Summit County Council and Akron City Council last week to explain what led up to the need to refinance part of the project and what lies ahead.
Lichter said he is positive the project will move ahead once the new public financing is approved.
''I think we're good,'' he said. ''Assuming this falls in place, I think we're good.''
The new financing does not represent additional money on the county and city's part, Burnham said.
Parking deck delayed
Public money had been planned to build a parking deck for the headquarters. Instead, those funds will be used to start the overall development, Burnham said. Lease payments from Goodyear would repay the three-year bonds that IRG is seeking.
When private credit markets free up, the commitment will go back to the parking garage, Lichter said.
Right now, lenders in particular do not want to put money into any project associated even remotely with the automobile industry, as Goodyear is, Lichter said.
''I don't think Goodyear's a problem,'' Lichter said. ''One of the reasons we're in this mess is because lenders generally act like a herd. . . . I don't think there is a real issue with Goodyear. . . . The automobile industry is a toxic industry. And if you are related to it, you're considered toxic, whether it is justified or not justified. I'm not making a comment about Goodyear at all. I'm making a comment on the way the lending system has always worked.''
The money problems and the faltering economy also caused Lichter to rethink project priorities.
The initial game plan called for building the headquarters next to the Goodyear Technical Center on Martha Avenue by the end of 2010, then revamping and renovating existing Goodyear buildings for new uses. IRG would buy Goodyear's buildings and Goodyear would lease space from IRG. A new retail center and high-end hotel were also envisioned across the street from the new Goodyear headquarters.
Early on, Lichter and others said the project would take years — perhaps into 2014.
Goodyear continues to work with the city, county, state and Lichter on the project, company spokesman Scott Baughman said.
''We are looking forward to finalizing this agreement and going forward,'' Baughman said.
Reshuffling priorities
But the economy has imposed other changes on the plans that were announced with great fanfare — including an appearance by Gov. Ted Strickland — in early December 2007. ''We shuffled the priorities of the project to try to push it forward as fast as it can possibly be pushed forward in the environment we're in,'' Lichter said. ''That's why in some sense, we flipped it. . . . We feel we can get that done in this environment, and we push forward pieces of it as we can and in effect wait for a better day.''
So, work will begin first on fixing up Goodyear's current structures while employees are still in them, Lichter said.
Goodyear employees should not find the work intrusive, he said.
''We're probably looking at a lot of stuff that's fairly invisible,'' Lichter said. The work will involve making Goodyear's buildings more energy efficient and improving operating efficiency, he said.
There won't be a huge visual impact on Market Street as a result of that work, he said. ''There will be a lot of things going on behind the walls.''
Lichter said he is ready to start the modernization project as soon as the deal closes — as he hopes in the next couple of months.
Work would start simultaneously at Goodyear's current headquarters, Goodyear Hall across East Market Street and at the Tech Center on Martha Avenue, he said.
''I know we've done bidding. I know how much it's going to cost us,'' Lichter said.
The new global and U.S. headquarters complex will follow at some point, he said.
''There is no less of an appetite for a new headquarters building on anybody's part that's involved in this transaction than there was three months ago, six months ago,'' Lichter said. ''Initially, our focus was going to be on the new building. We are going to wait until we are further along. It is pushed back. You cannot say how far back.''
Because of the impact of the recession, there are other companies and governments around the nation that cannot do such a project now, he said.
''The way I look at it, [here] you have a city, a county, a state, a company and a developer, all of whom still stand ready and capable to do this,'' Lichter said. ''I think in this case, all of the parties are still standing. The one thing we can't control is the financial system.''
Early project start urged
In part because Goodyear has not yet closed on the deal, the government agencies want the project to get started as quickly as possible, Burnham said.
''From a community standpoint, Goodyear's had an expectation that this deal was going to close,'' Burnham said. ''We keep extending that. And I mean, Stu will tell you, there's a lot of Class A office space coming online all over the country.''
And because of that, at some point, another state might try to woo Goodyear away, he said. ''So, we want to keep the project moving at a fast pace to satisfy that board.''
The Martha Avenue retail center is also being rethought in light of the economy, Lichter said.
''I think we still have a tremendous retail site,'' he said.
Early on, there was a lot of strong interest by retailers in the development, he said.
But in the current environment, most retailers aren't expanding, he said.
The $25 million hotel project, though, should move ahead more quickly than adding stores, Lichter said.
''I think the hotel is a different situation,'' Lichter said. ''We've been awarded the franchise by the Wyndham collection. They're very anxious to come here. I think that's a real feather in the cap of Akron, because that's a real high-quality hotel.''
Lichter said he is looking at nontraditional lending sources for the hotel.
''It wouldn't be bank financing. It would be a different source of capital,'' Burnham said.
It is also possible the hotel might go up before the headquarters, Lichter said.
''The demand's there now, because Goodyear's there now,'' he said. ''That's something we're looking at and evaluating. We haven't reached a conclusion yet. We could build the hotel tomorrow and the demand would still be there.''
There are other companies in the East Akron neighborhood that would benefit by having a quality hotel nearby, Burnham said.
Lichter acknowledged criticisms by some over use of taxpayer money for the development.
Taxpayer money needed
But taxpayer money, in the way of loans, is needed to get the Goodyear project started.
''Obviously, there's benefit to the community in this. It doesn't work on a private-sector basis,'' Lichter said. ''It wouldn't happen otherwise, because it doesn't make sense on a private-development basis. So, it's their choice — do we want this to happen or not? Basically, I'm a big believer that private developers should make their own developments work. . . . I do most of my developments with no public help. I'm really a private guy. And I've sort of taken pleasure in not having the public involved in a lot of my projects.
''But when we got involved in this particular project, we saw something that was of huge benefit to Akron, to the county, to the state. And the only way to do it was with public help, because you can't build parking structures and do a development like this on a private basis.
''All we did is, go to the public and say, 'If this is a public objective, right, here is what has to be done to make it happen.' ''
Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.
Early last summer, it was becoming apparent that there was no easy private money to be found to finance the $900 million Goodyear global headquarters and East Akron redevelopment project, said developer Stuart Lichter.
Get the full article here.
Comments
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Posted 05:59 AM, 03/15/2009
We better look out. i see a fleecing coming down the road
Posted 07:11 AM, 03/15/2009
Is Goodyear really committed to these local jobs and to the public? Businesses survive on the dollar, not public opinion.
Posted 07:17 AM, 03/15/2009
He had private investors until the money dried up. That happened because the private investors called Bernie Maddoff for some money and the rest is all history. Now he is eyeing public money. So is every other crook on the beat. Take your dreams back to California pal. Their is all kinds of empty office space in this neck of the woods already.
akron, oh
Posted 07:35 AM, 03/15/2009
Martha ave. a "tremendous retail site." Maybe Stu can partner with Developers Diversified, one of the largest retail developers in the country. DD is seeing brand stores close left and right in their developments. Stu, retail ain't going to work on Martha Ave. GoodyeaR HQ is not a destination unless you let race car fans use the test track and build a huge Summit Racing retail center. Maybe even a drag strip. You absolutely have to have a draw that people are interested in or you will have another Inventor's Hall of Fame,
a 38M Plusqellic boondoggle that is now being converted to a school.
Tallmadge, OH
Posted 08:04 AM, 03/15/2009
"It wouldn't happen otherwise, because it doesn't make sense on a private-development basis." from Stuart Lichter.
The above statement is very telling. This project will not pay for itself financially. That means we the taxpayer will have to pay for it, and I for one do not want to do that in this bad economy with any tax increases while the county is struggling to cover it's other costs with a $10 millionm deficit. Meanwhile Goodyear is in the tank along with Ford, GM & Chrysler because of the auto industry crisis.
Mayor Donny Boy & Puss Pry really fouled this one up on behalf of the taxpayer. Those to Demo-rats have got to go.
Rome, OH
Posted 08:35 AM, 03/15/2009
''I know we've done bidding. I know how much it's going to cost us,'' Lichter said.
How much did all the bidding add up to?
Is lichter in this because he just wants to work on a "public project"? What does his contract with cty, city, and port auth say? Anyone know?
Verbal committments don't always work out i guess. How many verbal committments to this project remain/are left?
Wadsworth, OH
Posted 09:09 AM, 03/15/2009
"The new financing does not represent additional money on the county and city's part, Burnham said."
Case closed. The deal just restructures how the money is being used. Quit crying about Pry and Plusquellic.
akron, oh
Posted 09:27 AM, 03/15/2009
Lebo, I think the public wants to see what it is going to cost them, can fault them for that. Can you explain using actual cost what the dollars will be that the taxpayer's will be responsible for, please include contigency cost?
Akron, OH
Posted 09:51 AM, 03/15/2009
I think the bottom line here, is that we are now bein' offered a pared down version of the original plan for the same money.
For my $100 million dollars, I want the whole deal as originally presented, and in the time frame offered.
Excuses are only that: excuses.
Tallmadge, OH
Posted 10:05 AM, 03/15/2009
The Big Lebowski - do you know how to read? the next thing you know the county council will be imposing a 1/4% or 1/2% sales tax to pay for this project like they did in Cuyahoga County for their Medical Mart project. They can't get financing from private sources period because it can't fund itself.
akron, oh
Posted 10:19 AM, 03/15/2009
Just put it up Like the Stow Court... THen go OOPS it isnt paying for itself... Lets bill the city.
Sorry about that folks.... Pony up more dough..
Wadsworth, OH
Posted 10:31 AM, 03/15/2009
Wah! Wah! Wah!
Someone call wah-one-one to get the wahmbulance, OldManGrump didn't get his his way. While you're there get him a wahmburger!
Akron, OH
Posted 11:13 AM, 03/15/2009
Big L,
I'm with you on this as well. Most of these folks don't even know what all of this means, so I wouldn't get too worked up over their misplaced Plusquellic hatred.
To the whiners,
The alternative of no investors looking Akron's way is much, much worse than all of your conjured up conspiracy theories. What exactly is the root cause of all of the anger and bitterness in your lives? The sun is shining, your heart is beating and this project is an INVESTMENT in the area. Why are you so cynical????
akron, oh
Posted 11:25 AM, 03/15/2009
Hey old factory buildings Make Great retail space.
Look at what a Thriving success Canal Place is...
akron, oh
Posted 11:49 AM, 03/15/2009
Yeah Fong, Licky did that deal too!
Wadsworth, OH
Posted 01:32 PM, 03/15/2009
Seems to me that Canal Place is doing just fine. AES, TimeWarner, Malone Advertising, Spaghetti Warehouse, and others. Do you want to tell us how Canal Place has been a bad thing for Akron?
Akron, OH
Posted 01:44 PM, 03/15/2009
{{{Wah! Wah! Wah!}}}
Comin' from the coward, that's funny.
@TOJ - I think y'all confuse bitterness and hatred, with folks with enough savey to be concerned about where their tax dollars go.
A difficult concept for y'all to assimilate, I agree, but none the less, more factual than the city hall hero's last expense report.
akron, oh
Posted 01:47 PM, 03/15/2009
Lebo, I think Fong was talking retail, I didn't know Spaghetti Warehouse was open, hadn't been therein years. I prefer Luigi's.
Wadsworth, OH
Posted 02:46 PM, 03/15/2009
@McDonald: Regardless, Canal Place is a success. An abandoned factory has been turned into a nice mixed-use facility and has brought many jobs back into downtown Akron.
Tallmadge, OH
Posted 04:35 PM, 03/15/2009
The Big Lebowski - Canal Place is a loser. {{{Wah! Wah! Wah!}}}
Wadsworth, OH
Posted 06:16 PM, 03/15/2009
@Old Man Grump: Canal Place a loser? Really? You are showing what a complete dullard you actually are. I suppose you would rather see the old Goodrich buildings sitting vacant, as opposed to being filled with employers that are adding to the local economy.
Posted 07:22 PM, 03/15/2009
To anyone who opposes this deal, what is your solution? Do nothing?
akron, oh
Posted 05:15 AM, 03/16/2009
Lebo, When Fong was talking retail, she meant retail. Canal place has no retail that serves the outside world, nobody jumps off 77 to go shop at Canal Place.
I truly do not see Martha Ave. as retail. NEO has 45 sq. ft. of retail and the national average is 19 sq. ft. It is not needed, end of story.
akron, oh
Posted 05:16 AM, 03/16/2009
Sorry lebo, that is 45 sq. ft. per person in NEO and 19 sq. ft. per person Nationwide ave.
Akron, OH
Posted 09:26 AM, 03/16/2009
"There are other companies in the East Akron neighborhood that would benefit by having a quality hotel nearby"....
...Flashdance Caberet?
Well, at least his project would improve a section of Akron other than downtown. Let's hope this project is just a puzzle with a few pieces missing and not a house of cards ready to blow down.
Akron, OH
Posted 10:01 AM, 03/16/2009
Actually, several other areas have been improved...
....Highland Square (despite the loss and continued lack of a small grocery)...
...and the area on W Exchange/Maple- (despite the fish hate crime)- hopefully the car dealerships will weather the poor economy...
...the North Side with the condos, redeveloped housing, CVSRR, Stairstep Locks park...
...actually there a lot of good things that have happened (and are happening), even though we can quible about the city being a $1 billion in debt....
Akron, OH
Posted 10:09 AM, 03/16/2009
Lichter and Madoff. They deserve each other. Sharing a cell.
Posted 11:19 AM, 03/16/2009
Goodyear developer revamping project. Sooo, that why Goodyear is laying off any staff with 35 year of SERVICE.
akron, oh
Posted 12:29 PM, 03/16/2009
Maybe Donny boy can get some more of that scholarship money to pay for it.
akron, oh
Posted 12:30 PM, 03/16/2009
Martha ave. is so gangsta son!!!!
Posted 07:43 AM, 03/19/2009
i'm still glad to be retired from gt and still buying lots of their stock as long as its under 10.00. now I'M so rich i make money in spite of myself-too!
