September 9, 2009

Check into cash

Cordish may have spent less of city loan on downtown club than estimated

“They made a fortune,” the developer says, looking over the unwieldy mass of blueprints for the Sports & Social Club over lunch at neighboring Ri Ra’s. With decades of experience in the commercial construction business, the developer looks me in the eye and smiles. “This is a no-bid contract,” he says. “In my line of work, that’s always a good way to make a lot of money.”

After sporting what looks like a sense of both amazement and amusement regarding how cheap the project looks on paper (“These schematics are pretty much blank. There’s no detail.”), the developer decides he wants to see the place for himself. Blueprints in hand, we stroll down to the Sports & Social Club. It’s a warm, breezy Friday afternoon, and the restaurant/bar is slow in its post-lunch rush. I wait outside, and after a few minutes he returns, smiling.

“I think I may have overestimated, too,” he says.

In the week since LEO Weekly published its estimate of the actual cost of construction for the aforementioned Fourth Street Live nightclub, numerous parties have, on the condition of anonymity, come forward with information suggesting the estimate, while generally accurate, was far too generous. Regarding that estimate, LEO found The Cordish Cos. spent $725,000 out of a total $950,000 forgivable city loan — given to the company by the Mayor’s Office with no accounting requirement, unusual for this type of deal — to renovate the former Lucky Strike bowling alley, leaving a $225,000 donut hole of unaccounted-for funds. The methodology used was both exhaustive and generous, and afforded Cordish great leniency concerning unknown figures (i.e. construction labor, kitchen equipment, etc.) and consequently inflated the aggregate calculation above and beyond what is most likely true.

With new information in hand, however, it appears Cordish may have spent roughly $500,000 — about half the loan amount — with much of that difference coming in the form of lowered infrastructural (aka “hard”) expenditures. Our initial estimate gauged the combined price tag for the building/demolition at $200,000, a number that made up the lion’s share of $364,510 in total hard costs[1].

According to a new estimate by an anonymous developer, this price tag should be substantially lower, as the demolition and contractor charges would cost approximately $35,000. Of course, without the actual invoices this is still an approximation, as many variables — including the demolition of the bowling lanes themselves and the nebulous “Developer’s Fee” surcharge that Cordish levies on its own behalf — still remain outside public purview.

Yet a source involved with the Sports & Social Club’s renovation claims that Cordish made away with at least $250,000 all told, which would corroborate a revised net expenditure of only $200-$250,000.

And many of the non-construction outlays aren’t as expensive as originally reported. An employee of the club tells LEO Weekly that aside from new silverware, china and a refurbished $500 Hobart mixer, virtually no new kitchen equipment was purchased after the renovation.

“I would estimate not more than $3,000 being spent on that,” the source says. This is a far cry from the $20,000 in our preliminary figures; in fact, much of the start-up costs can be negated since the Sports & Social Club was a pre-existing business: Of the initial $60,000 starting inventory bill, we can now reduce that number by as much as $45,000.

“It’s pretty simple,” the developer tells me. “If you’ve already got starting inventory, then it’s highly unlikely that any bank will loan you money for stuff you already have. I don’t know of any bank that would do that. The idea here is to borrow as little money as possible, that way you can start your cash flow right out of the gate. Because in this business, you don’t make your money from building.”

Additionally, the architect and developer fees LEO utilized — $55,000 at 6 percent and $95,000 at 10 percent, respectively — reflect higher charges than is the norm for the current recession-impacted market, and therefore should be taken into account when factoring surcharges such as these.

All told, it appears Cordish has spent as little as $500,000 (and as much as $725,000) on the entire Sports & Social Club renovation, top to bottom, inside and out, hard and soft costs. No matter the metric — whether generous or stingy, biased or fair — hundreds of thousands of taxpayer dollars seem to have vanished, like so much smoke, into the great ether.

This comes on the heels of Attorney General Jack Conway’s decision that Mayor Jerry Abramson acted in accordance with the law when he single-handedly transferred $950,000 of a $1.8 million city loan to The Cordish Cos. to refurbish a bowling alley. Nowhere in Conway’s decision does he necessitate a need for transparency, a caveat that, if included, would render this entire article — and the ongoing public outrage over how and where this money was spent — largely moot.

With Conway’s tacit blessing, the city has legally granted Cordish and its subsidiary property management firm, ECI, a veritable fiefdom in Fourth Street Live and the soon-to-be Center City project. And there’s still $850,000 remaining in unused Cordish-granted city loans.

All they have to do is ask for it.

[1] This number now includes the electrical, plumbing and fire suppression costs, so as to follow contractor orthodoxy.

 


Check Into Cash

By EdenSprings
Oh, come on! You guys are so uptight! Didn't you watch the WHAS interview today? It wasn't Jerry's fault! No, seriously, dudes. It's all on those goons at Metro Council. You know--like David Candy and his pals who wrote the checks! What were they thinking? Didn't you READ Jack Conway's official statement? Man, he's like the smartest lawyer in the whole state (except for Jerry Abramson, of course). I'll bet he even looked at the tightest laws in the state of Kentucky, like, our state constitution, man. I like trust him TOTALLY dudes! And if you don't, then you don't know Jack! The heck with Beshear, I think Jerry and Jack ought to run together. Just think what they can do for the rest of this state when they get together. Dudes, we'll be ROLLIN' in jobs and everybody'll get edjekated, too!