|By Bill Freehling, The Free Lance-Star,
Fredericksburg, Va.McClatchy-Tribune Regional News
December 30, 2008 --Housing prices must stop falling before Kalahari Resorts can get a financing package in place and start work on its planned Fredericksburg water park resort and hotel.
The Wisconsin-based Kalahari is proceeding with plans for a 700-room hotel and 200,000-square-foot indoor water park on 49 acres of Celebrate Virginia South, company President Todd Nelson said yesterday.
The financing problems will push back the start of construction, however, and could delay the planned 2010 opening, he said.
The estimated price tag for the project is $250 million, although Nelson said recent declines in oil and other commodities could lower that figure. Kalahari plans to put up $20 million itself and has been working to raise the other $230 million.
Nelson said he's "feeling real confident" about the financing coming through, and he's seeing banks loosen up a bit with lending. But his lenders have told him that housing prices must stabilize before he can get the loan.
He hopes that will happen by April, and that he can start construction by the end of the upcoming summer.
"We have never been more committed to a project," Nelson said.
The company's initial plan was to raise about $80 million by selling 150 condo units at the Fredericksburg park, and borrowing the remaining $150 million from Wisconsin community banks. That's the model it used to build the two parks in Wisconsin and Ohio.
But the economic downturn has forced Nelson to come up with a Plan B. Kalahari no longer intends to sell condo units, as that market has weakened significantly. The company is working with a couple of large financial institutions -- which Nelson declined to name -- to raise that equity portion of the funds.
Nelson said he plans to still work with the Wisconsin banks to finance the remaining part, but that a larger financial institution will take the lead.
The ongoing credit crunch has pushed back the project's timetable. In October, Nelson said he hoped to break ground by April 2009. He said the delays are allowing the company more time to design a better product.
But the delays are also increasing the chance that Kalahari might not open by the end of 2010, which is what it agreed to do as part of the performance agreement signed with Fredericksburg earlier this year.
The City Council approved an incentives package that includes a 47.5 percent rebate on all the park's local taxes for 20 years and more than $3 million in up-front fee waivers. The agreement includes a clause that allows Kalahari to push back the opening date in the event of an emergency situation.
Nelson said he would ask the city to change the deadline if that becomes necessary, and he said the global financial crisis meets the criteria of an emergency. But he hasn't given up on the possibility of opening by the end of 2010. He said the Fredericksburg park is the company's top priority in 2009.
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