Monday, June 23, 2008

Shartenberg project enters crucial phase

New contract manager set for mixed-use site; work may begin in August if numbers add up

By Mary E. O’Leary
Register Topics Editor
NEW HAVEN — It’s crunch time for Becker and Becker’s mixed-use downtown project, as it goes out to bid for a second time to try to make the numbers work.
Changes have already been made to cut the number of parking spaces, increase the number of apartments and reduce the number of residential floors as the Fairfield developer firms up its financing for a potential construction start in August.
A spokeswoman said the number of apartments will be closer to 500 than 460 as it brings in a new contract manager, Suffolk Construction Co. of Boston, to replace the Fusco Corp.
The development on the site of the long-demolished Shartenberg department store at the corner of Chapel and State streets will continue to have a day care center, grocery store and other retail uses, while the garage will handle some 530 spaces, although it was approved for 660 spaces.
The spokeswoman said during pre-construction work it was found the site had a higher water table than expected, so Becker eliminated the lower-level parking, leaving only a loading dock for trucks.
"Every space is being utilized more efficiently," she said of a redesign that reduces the total height from 35 to 31 levels, 25 of them for a recessed residence tower, although the 700,000-square-foot area (gross) remains the same.
Lynne Fusco, president of the local corporation, said the firm had finished its pre-construction work on the site and had hoped to move to the next phase, but couldn’t reach an agreement on a price with Becker.
"The risk was not commensurate with the gain," Fusco said. "It was a hugely risky deal for my company."
The spokeswoman for Becker described Fusco as "an outstanding firm. They are an excellent company, and we have nothing but the highest regard for them." Both agreed that the break was a business decision for each.
Becker’s spokeswoman continued that the project engineers with Suffolk are looking to see where they can achieve savings, and the final design is likely to have "less bells and whistles."
They are still aiming, however, for LEED (Leadership in Energy and Environmental Design) silver designation, with the use of fuel cells, but geothermal wells are proving problematic and they need to bring the cost down on photovoltaic arrays.
The development, across from the State Street train station, was estimated to cost $160 million and officials still hope the final expenditure will be close to that amount.
The spokeswoman said it is routine to make revisions to projects of this size, and the developer hopes to have the numbers firmed up by the end of July, with construction started by August.
"All construction projects have their ups and downs," she said of the development, which is believed to be the largest private new construction project in the history of the city. Originally hoping to close on the deal by March was "too optimistic," she said.
"Becker has millions already invested in the project, and we are very close to a resolution on the financing," she said, referring mainly to various applications for state grants that haven’t come through yet. "We need state help to finalize this. It’s a very, very long process in Connecticut."
The development already has a commitment of $9.9 million in Urban Act funds to help with construction of the garage on the site, which will be the first thing built. An additional $3.1 million in Section 8 funds from the Housing Authority of New Haven is also in the mix.
Becker is also seeking a fuel cell grant from Connecticut Innovations. Matching up funding with the final product "is the last piece of the puzzle," she said.
Becker officials need the funds in hand before they can close the deal with Suffolk and the investors, Kennedy Associates, who are expected to put $100 million into the deal as part of a $6 billion union pension investment fund. Kennedy requires a 7 percent return on its investments.
"There is always a way to do things differently," said Kelly Murphy, the economic development director for the city, as developers move from what they would like to include, to what they can actually afford. She said the present situation with Becker is not a cause for alarm, but is unusual in New Haven, where institutional players such as Yale University and Yale-New Haven Hospital don’t have to guarantee a profit margin.
The job of the contract manager is to find savings in materials and construction methods at a time when steel prices have jumped 50 percent since January.
Tom Roger, vice president of Gilbane Construction, said the price on all metal has gone up considerably in the last few months, as has everything petroleum-based, from asphalt to plastics. Add to this the cost of transportation and it is a tough time for contractors generally, he said.
"It is pretty bad," said Roger, who is also project manager for the New Haven school construction projects.
He said it is a matter of demand and supply with a high demand for materials coming from China and India.
Roger said commercial construction hasn’t been hit as hard as residential housing, which is facing high costs and low demand.
Generally speaking, Roger said, contractors have to build in 10 to 15 percent inflation yearly. In the end, many projects have been canceled because they couldn’t get additional funding, or scale back any further.
Waiting around for costs to drop isn’t a solution either, he said. "I’ve only seen costs go down once in the last 10 years," Rogers said.
Mary E. O’Leary can be reached at 789-5731 or

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