Shocking News: Centre Point, Even As Modified, is Unmarketable and Can’t Get Financing

What’s not news about this story is that Centre Point, Lexington’s gaping square-block hole at the heart of downtown, is not marketable or able to be financed, even with the scaled down proposal coming up for approval next week.

What is news is the extent of the nationwide train wreck that is the U.S. economy. Delinquent loans up twentyfold. Failing loans and foreclosures are up a hundredfold from what they were in 2000. That’s near-depression levels.

From Beverly Fortune’s report:

As developer Dudley Webb seeks design approval this week for a scaled-down version of CentrePointe, independent experts say it remains nearly impossible to secure financing for a large luxury hotel-condominium project.
Even if money were available, they say, Lexington has no need for more hotel rooms downtown, and the city’s condominium market remains stagnant.
Financing is “very difficult because, around the country, we have many projects in default,” said Don Mullineaux, professor of the DuPont endowed chair in banking and financial services at the University of Kentucky. “That makes banks very reluctant to look at new projects when ones they own are under water in terms of the borrower being able to pay them back.”
The original $250 million CentrePointe design, unveiled in March 2008, showed a 40-story tower with 91 luxury condominiums, a restaurant, retail and office space, and a 237-room J.W. Marriott Hotel.
The new $200 million CentrePointe design shows a 25-story building with 14 small apartments and 49 “more traditional” condominiums, a 237-room J.W. Marriott, a spa and 53,000 square feet of office space.
…
Mullineaux said construction and development loans are “the hardest kind of loan to get today” because banks continue to see a high rate of defaults on commercial real estate.
Nationally, about 17 percent of those loans are more than 90 days past due, according to the Federal Deposit Insurance Corp.’s quarterly banking report in March. In the final quarter of 2000, the delinquency rate was 0.81 percent.
The failure rate — when banks remove the loans from their books and take a loss — is 5.5 percent in 2010, compared to 0.05 percent in 2000, Mullineaux said.
Even if a bank is willing to provide construction financing, it wants to know that somebody else will provide follow-up financing to pay off the bank as the project is completed, he said.
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Right now, there is no need for more downtown hotel rooms, said Dennis Johnston, vice president of sales for Lexington’s Convention and Visitors Bureau.
On average, hotel occupancy citywide is 60 percent, indicating a relatively weak market, he said.
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In 2008, UK announced its intention to build a new arena, upgrade Commonwealth Stadium and develop a baseball stadium. But UK spokesman Jimmy Stanton said Thursday that “there are no concrete plans or time lines for any of these projects at this time.”
If a new arena is built, Lexington Center would carve up Rupp Arena to add more convention space and a performance arts hall.
Until then, “a new hotel is just going to steal business from hotels we already have,” said Kristi Yahn, director of sales for Hilton Suites at Lexington Green.
In any case, Lexington is not a destination for high-end conventions, “so a luxury hotel probably is not the answer” whenever more rooms are needed in the future, Johnston said.
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A $200 million impossibility, even one that was obscenely railroaded in the most dubious of manners, is the least of Lexington and Kentucky’s concerns. When bad loans are up 100-fold, there is not a light at the end of the tunnel. Kentucky is going to need tax reform on a major scale, or it is going to need to come to terms with catastrophic, life-threatening failures in government at the national, state and local level. From each according to their ability, to each according to their need.

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