Bow hit by credit crisis
EnCana's future home in danger of being halted
Gina Teel, Calgary Herald; With files from Canwest News Service
Published: Saturday, November 15, 2008
In a sign the global credit crunch has found its way to downtown Calgary, construction of The Bow, the $1.4-billion landmark skyscraper and future home of EnCana Corp., is in danger of being halted as the owner and developer attempts to secure construction financing.
H&R Real Estate Investment Trust said it has no financing arrangements in place on any of its development projects, including The Bow, and current economic conditions have affected its financing strategy.
"Banks today are being very cautious, making smaller commitments . . . and are taking no underwriting risks," said Tom Hofstedter, president and chief executive of H&R.
"(Banks) are focusing their time and their capital on long-term relationships," Hofstedter said in a conference call to discuss the company's third-quarter financial results.
The Bow, an edgy steel and glass arc-shaped tower designed by renowned architects Foster and Partners and, at 247 metres high, set to be the tallest building in Western Canada, still requires $1.1 billion in funding.
Analyst Neil Downey of RBC Capital Markets suggested H&R could face a $300 million shortfall even if it secures a construction loan, and that selling The Bow or a partial interest it may be an alternative way to raise funds.
H&R is exploring four alternatives to finance its commitments, including selling an interest in The Bow or selling or refinancing other assets. H&R has about $300 million invested in The Bow to date.
However, Hofstedter told analysts he's "optimistic" that by the end of the first quarter of 2009 H&R will secure construction financing, citing the strength of the company's strong relationships with its banking syndicate, the 100 per cent pre-lease status of the project and the capital it's already committed to the project as drivers.
Developers in Calgary may not be as lucky. Many are having a tough time accessing money due to the global credit crunch.
In Calgary, building permits on five projects are set to expire from inactivity, and the Gateway Midtown condo site in the Beltline is idle.
City officials have had to seal empty construction pits from the public, as soaring costs see more of them pulling the plug on projects.
Last week, the city had to take on the responsibility of safeguarding the Manchester Station condominium project site at 2nd Street and 53rd Avenue S.E. on behalf of the owner. Construction had ground to a halt and the land has sat empty for months.
In the call, Hofstedter refused to discuss further details pertaining to The Bow.
EnCana spokesman Alan Boras deferred all questions about development and construction of The Bow to H&R. EnCana sold the project to H&R last February for $70 million.
EnCana's 3,200 employees, currently spread out in five buildings, are slated to move in by 2011.
"We are a future tenant, we have a long-term lease and we expect to move into The Bow when it is completed," Boras said.
Even EnCana, Canada's largest oil and gas producer, has felt the wrath of the global credit crisis. Last month, EnCana postponed plans to spin off its oilsands unit into a separate company, blaming crumbling financial markets for the delay.
The split, which was supposed to take effect in early 2009, will likely wait until clear signs of stabilization return to global equity markets, the company said.
EnCana's shares have fallen nearly 19 per cent this year, sending its market cap down to $41 billion.
Sorry, I managed to destroy my Foot (tore all the ligaments and a couple tendons), and I havent really been mobile since July, I will try to get some new photos soon, they are above grade and they just assembled the second Favco Crane.
I can't find the link, but the company that owns the building, decided to add 70,000 sf of more office, so the atriums are now 5 stories deep I believe, and there will only be 3 sky gardens. if I can find the link I'll post it. and as I have posted elsewhere, the Bow is NOT on hold, construction continues, and will until 2010 when it will be complete.
Umma, I don't believe anybody said construction was not continuing, but that the financing of the project has become an issue. I hope this project will continue, but nothing is certain in this market. Don't count your Bows before they have been tied.
Agreed, hopefully this is so. As for construction continuing, there are costs involved in stopping construction and mothballing the site. They are no doubt continuing construction on an interim basis, hoping that financing can be secured. If it is not secured, within a reasonable time (a month or two?), construction will sooner or later come to a halt.