In early January construction on the Museum Plaza project in downtown Louisville was halted. By the end of February cranes and other equipment had vanished from the site and it could be months or longer, before construction resumes.
At 62 stories, Museum Plaza will be the tallest building in Kentucky. The tower will house condominiums, offices and retail space on Louisville’s riverfront. Original plans called for it to open in 2011.
But at the site there’s no activity, and there hasn’t been for two months. There’s no plan to resume construction.
“We have delayed our efforts to close financing,” says Craig Greenberg, one of Museum Plaza’s four developers.
The developers had planned to pay for part of the 490 million dollar project with bonds. But the subprime mortgage crisis has driven up bond interest rates.
“If we sold the bonds in today’s market it would be extremely more expensive, with a lot more interest owed on the bonds which means less money to pay for the public infrastructure,” says Greenberg.
Given that increase, Greenberg and the other developers are postponing their bond issue request, meaning nothing will happen on-site until interest rates drop to an affordable level.
“We don’t know how long it is, but we will be prepared when the market does improve to be ready to act very quickly,” says Greenberg. Adding that they’re prepared to wait however long it takes for bond interest rates to fall.
The developers have guaranteed the Metro Council, which would issue the bonds, that the project will continue, but the guarantee doesn’t include a completion date.
So how unfavorable are bond interest rates?
“You’re talking 60 to 80 million dollars in additional interest that wouldn’t be owed as recent as three months ago,” says Greenberg.
Greenberg says interest rates need to drop about two percentage points before construction can resume. But that’s assuming other problems have been resolved. Construction first stopped in January because of problems digging the foundation.
“We were installing caissons which are large pillars that provide part of the foundation 85 feet down into the ground,” says Greenberg. “And the method of installing those caissons created an unacceptable level of vibration.”
“It felt to me like a pretty good earthquake although I’ve never experienced one,” says Sharon Richardson, the building manager of Harbison Condominiums next to the Museum Plaza site. “A neighbor called me and was asleep and wanted to know if we’d had an earthquake, so it certainly felt like an earthquake to him.”
Concerns about those vibrations possibly damaging nearby buildings stopped construction while developers looked for a new subcontractor to install the foundation.
Greenberg says delays in ordering building materials could save the project money, since the cost of concrete and steel could be on the decline. But architect Steve Wiser of JRA Architects, across the street from the Museum Plaza site, says prices are rising.
“I got an update on pricing the other day from some folks and I sent that out to my clients saying, ‘Look, things may be going up five, ten percent so we need to react fast on some of these things.’ Yes, material prices are still going up,” says Wiser.
Greenberg also says it will take extra money to bring cranes and work crews back to the site, and a safer method of digging the foundation could be more expensive, too. Despite those potential costs, Greenberg says Museum Plaza will be built. Even if it takes much longer than originally planned.