ALCO developer facing financial headwinds

Struever Bros. Eccles & Rouse, the Baltimore-based construction company now starting the second phase of its American Locomotive Works project, owes local contractors at least $1 million for work already completed and is at risk of defaulting on millions more in loans.
Since September, five contractors, four of which are Rhode Island-based, have filed mechanic’s liens against SBER with the Providence Recorder of Deeds, according to city records. Those companies have filed about 14 mechanic’s liens – for failure to pay for work completed – amounting to $1,001,166 in unpaid bills on the ALCO project. At least three more liens were filed last summer, but have since been discharged, according to the city.
Providence late last year approved a $7.3 million tax-increment financing (TIF) bond deal for the ALCO project.
“I talk to a lot of those [subcontractors] regularly – they have my cell phone number – and I apologize profusely. It’s terrible. They need to get paid,” CEO Bill Struever said in a phone interview last week. “I wish I could give them a definite date.”
A call to the lawyer representing at least three of those subcontractors was not returned last week.
For the city, the developer’s financial situation warrants another look at the TIF bond that has been approved, but not yet issued. Under a TIF deal, a developer pledges a portion of tax revenue generated by improvements on the property to pay back the city-issued bond.
“We are aware of the financial concerns that Struever Bros. is having, and we’re watching those issues and those concerns very closely,” Providence Director of Planning and Development Thom Dheller said recently. “We have a meeting scheduled with Struever in the coming weeks, where we will sit down and talk about the ALCO project and will decide how we may or may not move forward with it.”
He added, “We have authorization from the council to [issue] the TIF bond and in order to move forward, we need to have assurance that the TIF bond will be paid.”
Judith Reilly, a Providence resident who has been outspoken about the use of TIF bonds, last week said the bond was “railroaded” through the Providence Redevelopment Agency, City Plan Commission and City Council, “before Struever’s finances fell apart completely.”
The bond was approved in December, when all but one of the subcontractors had already filed liens with the city.
Struever said he’s not worried about the bond. “The source of repayment of the bonds is not us,” he said. “The source of repayment is property taxes.”
At least a portion of SBER’s financial problems can be traced to the decision by state leaders last year to pare the R.I. Historical Preservation Investment Tax Credit and make up-front fees mandatory for the program, Struever said.
He said the company had to come up with more than $5 million in processing fees for the revised program, adding that the change in finance structure caused “gaps of over $10 million in projects that were closed and under construction.”
“I believe we were, by far and away, the most impacted by it,” he said. “I guess we were doing more historic rehab than anybody, so we got the blessing of getting hammered more than anybody on this. To have relied on the state’s legal and moral commitment to fund the credits – we have never seen anything else like this happen anywhere in America in the 35 years we have been in business.”
Struever said his company has for the most part worked out all the financing problems – including assuring investors that the project is stable – and now is waiting for funding to come in for its Rhode Island projects, including the next phases of ALCO and The Dynamo House. That will also allow SBER to pay subcontractors that are owed money, he said.
SBER also faces loan defaults, including a $5.3 million commercial loan payment to National City Bank, which filed a lawsuit in Baltimore Circuit Court for unpaid principal and interest, according to reports by the Baltimore Sun. That newspaper also reported that another lawsuit filed in the same court shows that SBER is in default of more than $557,000 on a $5.5 million American Communities revolving loan approved by Fannie Mae in 2004.
Struever declined to comment on the extent of possible defaults. &#8226