Tulsa could lose $1.3 million due to Blue Dome project delay
BY P.J. LASSEK World Staff Writer
Monday, February 13, 2012
2/13/12 at 11:22 AM
Officials are closely monitoring the development activities of First Street Lofts, the first Vision 2025 downtown housing project, which began in 2007 using $1.3 million in public funds.
After several contract extensions, the once-estimated $3 million project, at 310 E. First Street, remains unfinished with an unresolved foreclosure hanging over it and an increased project cost of roughly $5 million.
If the project ultimately fails, the city will likely lose the $1.3 million in Vision funds, which is actually a loan to be repaid and redistributed to other downtown residential housing projects, said Jot Hartley, attorney for Tulsa Development Authority, the city's contracting entity for the projects.
"The best action by the authority to protect the public's money is to have a little bit of continued patience with Mr. Sager," Hartley said. "It isn't going to cost the city any money, and it may result in a completed project, which is everyone's goal."
Developer and owner of the property Michael Sager, principal of Blue Dome Properties LLC, said he is confident his project will be realized.
Sager said he has redesigned the project to have 23 rental units, 32 parking spaces, and a ground floor that houses S&J Seafood Cafe and Oyster Bar restaurant, the Whiskey Business liquor store and an artisan bakery, he said.
Sager's First Street Lofts was one of four projects to receive a portion of the $10 million in Vision 2025 downtown housing funds, which were allocated as 10-year interest free loans to be repaid in a lump sum at the end of the loan period.
Hartley said the city set up the $10 million as "gap funding" or "seed" money for downtown housing projects. The other three projects - Mayo 420 Building, Mayo Hotel and Lofts and Detroit Lofts - started after Sager's project began and are completed.
"The others projects that have gone on to completion may have been better funded and perhaps not had some of the obstacles that Mr. Sager says he's encounter in the rehabilitation of the building," he said.
Hartley said it is not the authority's "responsibility to defend Mr. Sager's performance or nonperformance of his commitments."
But the authority "is very cognizant of the difficulties that have occurred in completing the project and we are trying to closely monitor Mr. Sager's activities and stay on top of it, requiring information on a monthly basis to determine whether there becomes a point it is no longer a viable project, and if so, what TDA should do in the best interest of the public's money," Hartley said.
In October, the authority granted its fifth amendment to Sager's contract, extending the project completion date to Feb. 13, 2013.
Sager said the bulk of his issues in completing the project has been the national financial credit crisis.
"We've had to weather the real estate market just like everybody else in the country, but we're moving into a better economic period," Sager said.
There also have been unforeseen construction issues that needed to be repaired, and there were added amenities to the project such as a rooftop deck to view the ballpark, a "hospital cart" elevator to ease movement of furniture and other large items, and used-brick walls and wood-framed open ceilings, he said.
"I would suspect there are people out there thinking they are really glad I'm still here fighting because other people might have already quit," Sager said about the difficulties he has had. "My personal commitment is to never walk away here."
In July, American Home Mortgage Co. filed a foreclosure lawsuit in Tulsa County District Court, claiming Blue Dome Properties LLC has defaulted on a loan of $850,000 to redevelop the First Street Lofts and now owes $1.15 million because of accruing interest.
Sager said he is working out the foreclosure issue with the bank and once the leasing agreements and building permits are finalized for the commercial tenants, the lawsuit will be dropped.
Sager said he plans to use the revenue from the commercial businesses "as an economic engine" to get a loan that would be dedicated to not only paying off the first mortgage, but completing the project.
Howard Smith, consultant over the construction of the restaurant, said the lease has been executed for the restaurant and they're just waiting for the city to issue the building permits with the opening of the business around May 1.
"We're very excited to be downtown and a part of this project," Smith said.
Hartley said the issue for the authority is whether Sager has "a viable solution to his lack of funding. Which is obviously the problem. He has presented to us the he does have that solution."
Hartley acknowledged that out of all the downtown residential projects the authority has overseen, this project "has some warts on it."
Sager said he understands how there are questions and speculations over his incomplete project, "but I want it clear that none of the public's money has been misspent."
Kirby Crowe, principal of Program Management Group, who oversees the Vision projects for the county said the money is paid out through invoices, which he reviews.
While this project has taken longer than expected, "the $1.3 million appears to have been appropriately spent," he said, noting there was activity matching the invoices occurring on the site.
Vision 2025 downtown housing
Mayo 420 Building
Developer: Chuck Wiggin Mayo Redevelopment LP
Total project cost: $27 million
Vision funds: $3 million
63 residential rental units
Vision funds to be repaid in 2021
Mayo Hotel & Lofts
Developer: Tori Snyder Brickhugger LLC
Total project cost: $30 million
Vision funds: $4.9 million
70 residential units
100 hotels rooms
Vision funds to be repaid in 2021
Developer - Tori Snyder Brickhugger LLC
Total project cost: $5.5 million
Vision funds: $769,000
16 residential rental units
Vision funds to be repaid in 2019
First Street Lofts
Developer: Michael Sager Blue Dome Properties LLC
Total project cost estimated at: $5 million
Vision funds: $1.3 million
Proposed 16-23 residential rental units
Completion deadline: February 2013
Vision funds to be repaid in 2016
Source: City of Tulsa and Tulsa Development Authority
Original Print Headline: City keeping close tabs on Blue Dome project delay
P.J. Lassek 918-581-8382
Developer Michael Sager is pictured in front of the First Street Lofts at 301 E. First St. After several contract extensions, the project, once estimated to cost $3 million, remains unfinished and faces a possible foreclosure action. Project costs have increased to roughly $5 million. JAMES GIBBARD / Tulsa World