If you think Electric Works is an incredibly complex project ... you're underestimating how complex it is.
That's how Josh Parker, a partner in developer RTM Ventures, described the $248 million first phase in redevelopment of the former General Electric campus. He and partners Jeff Kingsbury and Kevan Biggs met with The Journal Gazette on Friday to share next steps one week after raising concerns that the project is in jeopardy.
The partners submitted a letter that the newspaper published May 26 contending that Electric Works “will not move forward” unless something changes. It included a call to action directed at local supporters and a request for a few unnamed critics in powerful positions to stop trying to sabotage the developers' efforts.
RTM Ventures has leasing commitments for more than 100,000 square feet but needs at least 330,000 of the 700,000-square-foot total spoken for before bankers will sign off on the deal.
Friday's 90-minute interview included Eric Doden, Greater Fort Wayne's former CEO. RTM Ventures hired Doden, who is also a former Indiana Economic Development Corp. president, to promote Electric Works to potential national, state and local tenants. He began consulting for the developers Tuesday.
Parker on Friday joined the interview by phone and took the lead in outlining two alternate approaches for securing more tenant commitments. The developers also addressed concerns about the project some critics have raised since last Sunday's letter was published.
“This is not about needing more public money or trying to change the deal materially,” Parker said. “What we're doing now is recalibrating and adjusting the strategy.”
It's also not a ploy for more time, he said, although he said “modest changes” might need to be made to the project's timeline. Parker's goal remains to close the deal in November and complete construction in 2022.
The partners plan to update the Fort Wayne City Council on these issues during a public meeting June 11.
After securing grants from federal, state and local sources to preserve and redevelop historic brick buildings on the abandoned industrial campus, the developers needed to sign on private investment secured by leasing agreements.
Their initial “eds and meds” anchor tenancy strategy is not playing out like they'd hoped. The region's universities and health care providers didn't commit to enough square footage for lenders to greenlight the project.
One alternative is for Doden to secure a philanthropic commitment from a nonprofit or business willing to sponsor a section of the space.
An example might be a nonprofit committed to encouraging residents to eat healthier sponsoring the food hub and public market areas. Another example might be a university or manufacturer sponsoring the designated Innovation District. The developers would love to see both.
The organization's commitment would involve either signing the lease and taking responsibility for leasing out smaller spaces to sublessors, or guaranteeing the lease with the organization's credit history, acting as a co-signer of the loan.
Kingsbury, the other partner to join Friday's conversation by phone, explained that one of Electric Works' goals is to bring entrepreneurs together with larger tenants. The challenge comes when the developers try to get a bank loan backed by leases signed by startups with no credit history. The same is true for the planned public market, he said, where family farms will be invited to sell fresh produce, meats, cheese and other products.
Signing on as a benefactor organization could allow the sponsor – or sponsors – to advance its mission by supporting those startups, the developers said.
Similar partnerships already exist locally. For example, HEAL, which stands for Healthy Eating Active Living, was created as a jointly funded collaboration between Parkview Health and the St. Joseph Community Health Foundation to improve access to high quality, fresh food in low-income areas.
The developers are simultaneously pursing an approach to signing on private investors. They are marketing the project as part of a newly designated Opportunity Zone.
An Opportunity Zone, according to the IRS website, “is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.”
The Tax Cuts and Jobs Act, signed at the end of 2017, added the zones to the tax code. The first zones, which were nominated by individual states, were designated in April of last year.
RTM Ventures successfully lobbied Indiana leaders to ensure Electric Works' census tract would receive the designation.
Opportunity Zones were created as an economic development tool “designed to spur economic development and job creation in distressed communities,” according to the IRS.
Investors can defer paying capital gains taxes if they invest those gains in an Opportunity Zone development – even if they don't live, own a business or work there, according to the IRS.
Doden said additional profits are tax-exempt if the capital gains remain invested for 10 years, which could prove an attractive incentive to investors who can make a long-term commitment.
The developers are courting such “patient capital” to sign on to Electric Works as investors.
Electric Works could be successful with a combination of private investors taking advantage of the Opportunity Zone and philanthropic organizations signing or backing a master lease for space, the partners said.
Doden is reaching out to local, state and national contacts to pitch both options, as appropriate.
Parker said the developers “felt the loss of Eric's leadership” when Doden left Greater Fort Wayne last year, the area's economic development organization.
“We need that type of bulldog mentality that believes in the project,” Parker said.
In the meantime, last weekend's letter from the developers to the community has prompted some response. Parker said the developers' phones have been ringing with calls from people wanting to know how they can help get the deal done.
Pushed to consider some worst-case scenarios, the partners and Doden declined to specify a deadline for when the 330,000-square-foot leasing threshold must be met. But Parker did make clear various funding commitments could begin to unravel like an old sweater at the end of this year.
“If the project is not closed this year,” he said, “it will be a very different conversation next year.”