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Salt Lake City's urban-renewal agency has approved $3.5 million in loans for a private builder struggling to finish his high-profile development on State Street.
Utah-based architect and developer Ben Logue and his company Tannach Properties broke ground on Plaza at State Street in May 2012 in a venture to replace two run-down hotels and an aging theater with upscale shops and affordable housing built around a European-style plaza.
But engineering problems, bad weather, subpar accounting, spiraling costs and cash-flow issues have conspired to delay work at 255 S. State St. by more than two years and push its estimated budget from $32.5 million to $55.2 million.
To salvage the project, Logue has reorganized management, chipped in $2.6 million of his own money and lured several other new investors, according to city documents.
Loans from the city's Redevelopment Agency (RDA), approved Tuesday, are meant to further help the developer bridge what now is a $15.45 million funding gap for continuing construction. Amid warnings that the latest plans might collapse without added taxpayer backing, the RDA voted to loan $2.5 million in permanent financing and another $1 million drawn from an RDA revolving-loan fund.
Logue, president of The La Porte Group based in Salt Lake City, told RDA board members, who double as City Council members, that he has secured a major new partner, Michael Weinholtz.
"With his help," Logue said, "we can get this thing finished, finally. It's been a long time."
Weinholtz is longtime CEO and current executive chairman of CHG Healthcare Services, a Utah-based medical-staffing company. The New York-born executive will kick in $11.2 million, become an equity partner in Plaza at State and bring "substantial organization development skills,'' according to documents prepared by RDA staff.
Under its loan agreement, the RDA will require that Weinholtz guarantee the $3.5 million loan in case of default and will review his personal finances before closing to confirm he has the money.
The RDA also will make Tannach hire a project-management firm to shore up accounting practices, provide regular reports to stakeholders and identify and troubleshoot on-site problems.
RDA board members have said they remain optimistic that the plan, heralded as a boon to downtown redevelopment, will get back on track.
Tannach bought the State Street site from the RDA in April 2012 after the land languished on the market for several years without any takers.
The project ran into setbacks almost as soon as construction began as errors in site surveying and architectural design, difficulties in preserving parts of adjacent buildings and higher-than-expected groundwater levels forced costly modifications and delays.
Tannach has since replaced the site's construction superintendent and architectural staff, city documents said.
In addition to retail shops, restaurants and a plaza extending east to a newly revamped segment of Edison Street, Plaza at State is supposed to add 180 residential units to the city's housing stock, including 136 serving low- and moderate-income households.
City officials are especially eager to replace nearly 50 single-room occupancy units of low-income housing wiped out when the aging Regis and Cambridge hotels on State Street were torn down to make way for the new complex.