Nomura Asset Capital Corp. has taken over the financing for one of the most cantankerous real estate projects in Rhode Island's recent history.
Commonwealth Development Corp., developers of Providence Place mall, a 1.25-million square-foot retail center planned for downtown Providence, said last week that Nomura had agreed to lend it $280 million to finance the project's construction.
Originally, Fleet National Bank had agreed to lend Commonwealth $260 million for the project. At that time, Nomura also agreed to supply $65 million of mezzanine financing and a $260 million loan for after the project was completed.
Commonwealth put up $5 million of equity, and prospective tenants contributed $100 million. But the project ran into difficulties, and Fleet's commitment expired in June.
Michael Doyle, a Commonwealth spokes-man, said the decision to expand Nomura's role was "more of an administrative and financial decision" to consolidate the financing with one lender.
Construction of the $450 million project began eight months ago, but a legal dispute emerged last summer between some of the partners in Commonwealth.
A federal court issued a ruling in that case Nov. 7. Just a few weeks later, though, Commonwealth reached an impasse with Gilbane Building Co., the Rhode Island-based general contractor that had been working on the project, over pricing and construction deadlines.
The parties agreed to walk away amicably, and Morse Diesel International was brought in. Now Commonwealth has a contract with Morse to complete the project in August 1999 at a guaranteed maximum price.
While these difficulties were going on, Fleet had been working with the developer to reach new financing terms, and Nomura had provided Commonwealth with a $49.5 million mini-construction loan to keep the project going.
Mr. Doyle attributed the larger size of the new $280 million construction loan to increased foundation expenses, expansion of the mall to include a movie theater, and the additional costs incurred by the litigation.
"Our relationship with Fleet is excellent," Mr. Doyle said. "They have been nothing but cooperative in trying to advance the project, but ultimately the evolution of the project dictated a certain course of action.
"We hope that Fleet will have a major role in the syndication," he added.
Kenneth Witkin, a managing director and head of commercial real estate finance at Fleet, said it was disappointed only in that it had been "very active in the redevelopment of Providence" and would have liked to remain involved in the project. Mr. Witkin added that Fleet will review the terms of the new loan and consider whether to participate.
Providence Place is the focal point of an effort to rejuvenate the city's downtown.
"The only way to succeed is to make this a convention city, and you need a good retail base as part of your delivery package," said William A. Farrell, an attorney with Brown, Rudnick, Freed & Gesmer, and general counsel for the Rhode Island Bankers Association.
Providence suffered the same pains as the rest of New England when the real estate market crashed in the early 1990s. The biggest bruise to Providence was the collapse of the state's credit unions.
"Rhode Island is slowly coming out of the doldrums," Mr. Farrell said. "Especially in downtown Providence, there's been a stronger resurgence of value than has taken place in the suburbs."