|By Jack Hagel, The News & Observer,
Raleigh, N.C.McClatchy-Tribune Regional News
Dec. 10, 2008 --RALEIGH -- The Soleil Center, the ambitious 43-story tower that was to be the icon of Crabtree Valley, is being redesigned as its developer grapples with a lending environment that doesn't smile on such projects these days.
Soleil Group now wants to build the tower in two phases, starting with a 300-room Westin Hotel, engineering the option to top the hotel with luxury condos once home sales rebound. If all goes well, it could still rise more than 40 stories, Dicky Walia, a partner in the project, said Tuesday.
"The condo market has completely evaporated," he said. "...We know there is a need for a luxury hotel in this market."
The developers hope that by spring they will be able to begin building a 14- to 16-story hotel -- instead of the 18 stories originally planned -- on the dead construction site off U.S. 70, across Creedmoor Road from Crabtree Valley Mall.
"In the future, if things turn around, we may be able to go up" with condos, Walia said.
The new strategy -- building in phases -- mimics what similarly snarled developers are doing as lenders, either out of caution or lack of liquidity, require more equity or pre-sales from borrowers.
The scenario has stopped some developments in the middle of construction.
Others, such as Soleil, have tried to press on by breaking big projects into little bits. "We have no choice," Walia said.
Soleil Group has spent $20 million on a foundation that would support a 43-story building.
Construction halted in June after a lender backed out of a $140 million agreement to finance the project. Soleil, which declined to name that lender, was forced to hunt for new funds as construction costs were increasing and money for projects was decreasing.
"It was a heartache," Walia said. "But given the current financial turmoil that we're all in, it is better where we stand right now, rather than have a project with these million dollar condos and people not being able to get any loans to close the deal."
Before the project was approved in 2005, it engendered controversy, becoming a symbol of this region's growth in a time of lax lending. Neighbors groaned at its sheer size. Competing developers questioned how deep the market would be for the 54 ritzy condos that would soar high above the hotel.
Indeed, the condos have been the project's biggest hurdle. To get financing, Soleil needed to pre-sell half of them. But their initial price -- starting just under $1 million -- was a tough sell.
In the entire Triangle, only six condos sold for $500,000 or more during the first nine months of 2008, about half the total sold during the same period last year, according to a Triangle Area Residential Realty report that tracks the luxury home market
With the condos removed, lenders might be more willing to finance the project. Crabtree Valley has historically been a strong hotel market because of its central location, proximity to shopping, major roads and the airport.
Without the condos, the project could cost roughly $53 million, Walia said. With them, it would have cost about $175 million.
Getting a loan for a $53 million hotel can still be a challenge, especially as business and leisure travel decline in a sluggish economy.
Meanwhile, the developers are facing loan deadlines and contractors who need to be paid.
As of June, the partners owed Regions Bank of Birmingham, Ala., at least $7.2 million, plus interest, in expenses related to Glen-Tree Investments, the company under which Walia and partner Sanjay Mundra own the property.
The payment deadline has been extended at least six times, according to documents filed in Wake County. Bill Dawkins, the local president of Regions Bank, declined to comment.
"I can assure you that we are not in default," Walia said.
Since July, contractors have filed liens against the property, hoping to secure payment for completed work.
Soleil settled with Long Foundation Drilling of Winston-Salem, which filed a lien, seeking $791,100 for work done at the site.
General contractor Hunter Roberts Construction Group also filed a lien seeking at least $931,320, plus interest, from Glen-Tree for equipment, materials and services related to the project. Bob Ferguson, the executive vice president in charge of Hunter Roberts' southeast division, said it was a perfunctory move to ensure it would be paid once the project is built -- and a decision that hasn't tainted his relationship with Soleil.
"We have no reason to believe that we won't be paid for this," he said. "We still believe that there's going to be a hotel built on this site. And we believe that we're going to build it."
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