by Beth Duckett – Apr. 14, 2009 01:23 PM
The Arizona Republic
The shaky economy has forced project leaders to delay the $140 million Fountain Hills Town Square development, a high-profile mixture of condominiums and businesses intended to serve as the centerpiece of the business district.
The multiphase, multiuse development was envisioned being anchored by a 12-screen cinema on 13 acres southwest of Avenue of the Fountains and Saguaro Boulevard in downtown Fountain Hills.
Groundbreaking was supposed to occur early this year.
However, developer and managing partner George Kasnoff filed for bankruptcy protection. The owner of Fountain Hills-based Kasnoff Investments filed for Chapter 7 protection in U.S. Bankruptcy Court in Phoenix on March 18.
In his filing, Kasnoff estimated he had between $1 million and $10 million in individual assets and liabilities. In a separate filing for Kasnoff Investment LLC, the liabilities were estimated at between $100,001 and $500,000. Calls made to his office and attorney were not returned.
Project partner Dave Fackler, with Tempe-based Nielsen-Fackler Planning, said the bankruptcy will force the group to reorganize.
“We’ve yet to work out how that can be done,” Fackler said.
Kasnoff recently asked for a six-month exemption in a development agreement with Fountain Hills.
Fackler said the extra time will allow them to secure financing and close escrow on the property – something originally scheduled for last fall. In addition, the project will be divided into “sub-phases” to facilitate the lending process.
“The banks are just not lending money,” Fackler said. “Really, what we’ve run into is essentially a redlining of commercial loans in the state.”
Most banks have a lending limit of $25 million, he said. Splitting the project into smaller phases would make it easier to secure financing from one lender.
“That seems to be our biggest problem right now – is getting at least two banks who can work together to fund the whole thing,” Fackler said.
The first “sub-phase” would include a 12-screen cinema building with an estimated construction cost of $19 million.The theater project manager is California-based Haffar Entertainment Group.
Fountain Hills has agreed to limit the cost of development and permit fees to $1 million during the first five years of development. The town will reimburse the developer up to $1 million for public improvements along the southern edge of the property and Avenue of the Fountains.
Mayor Jay Schlum has said Town Square could “raise the tide of all economic ships in the area.” Nearby business owners have backed the project as a way to lure potential shoppers to downtown Fountain Hills.
The property has been in and out of escrow several times. Previous plans to develop a commercial center never came to fruition.
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