As Madison officials continue negotiations with JDS Development and Exact Sciences Corp. for the major Judge Doyle Square development downtown, key pieces of the project like private financing and traffic flow are still in limbo.
The city has been operating on an accelerated schedule to meet Exact Sciences’ deadline of having a development agreement signed in August and occupancy of the new headquarters by July 2017. But that timeline has left many unanswered questions as City Council members continue to accept reports and extend negotiations.
“I’m comfortable the negotiating team is doing a good job and taking things and making sure that we have what we need to make a decision,” said City Council President Denise DeMarb. “I am uncomfortable with the fact that things aren’t a little bit more ironed out by now.”
The large development on two downtown blocks would involve 250,000 square feet in office space for Exact Sciences’ headquarters and research facility. The biotech company has been growing quickly since obtaining U.S. Food and Drug Administration approval for Cologuard, a noninvasive screening test for colorectal cancer. It wants to relocate its headquarters to a single building as soon as possible.
The project will also include a hotel, retail space, private parking, public parking to replace the Government East ramp and an additional 107,000 square feet of office space for possible expansion.
“We’re making progress, and the key for all of the parties is to have a solid financing package in place,” Mayor Paul Soglin said after last week’s Board of Estimates meeting. The board accepted initial framework at that meeting for a preliminary development agreement.
Soglin said the city’s part of the financing package is in place but more information is needed from the developer, a sentiment echoed by many council members on the Board of Estimates.
“We’re just negotiating really with ourselves,” said District 15 Ald. David Ahrens. “We’re kind of designing in a fantasy box, because we don’t know how much money is really there. How can you design something if you don’t know is there really $200 million or is there $150 (million) or are we the whole show here?”
The preliminary financial outline consists of more than $60 million from the city in various forms of contributions and more than $130 million from JDS Development, a joint venture of Hammes Company and Majestic Realty Co. JDS Development’s contribution would consist of $46 million in equity and $91.7 million in debt, according to the preliminary development agreement.
“One of the bigger risks is the ability of JDS Development to secure the necessary funding commitments within the timeline,” said Project Manager George Austin. “And they understand if they can’t do that, there isn’t a project.”
Hammes Company president Robert Dunn said he is comfortable right now with the $46 million equity piece because Hammes and Majestic will be supplying that financing. For the debt component, he said, an initial development agreement must be in place with the city before he can obtain commitments from lenders.
“Until we have a clear structure and framework for the public/private interest here, it’s hard to get any real structure on the private financing side,” Dunn said.
He said that framework is nearly in place, after which he expects it will take 30 days to pare down to a shortlist of lenders and another 30 days to have a first pass at a commitment out of multiple lenders.
“We can’t take it to that next level until we’ve got a definitive structure in place with the city,” he said.
That 60-day timeline for financing falls right around the next major deadline for the city: approval of a final development agreement. The Board of Estimates will take up the agreement Aug. 24 and the full City Council would then vote on it Sept. 1.
Between now and then, there are many significant factors that need to be determined, going beyond financing to issues like parking, traffic flow and hotel details.
“There’s so many, I guess, open items that still need to be gone over,” DeMarb said.
Board of Estimates members raised questions about the amount of parking, whether it is sufficient and how the development will impact traffic.
The plans include 600 stalls of public parking to replace the 520-stall Government East ramp and 650 stalls of private parking to serve Exact Sciences and the planned hotel. The ramp configuration as proposed, however, poses multiple issues in regards to traffic in and out, circulation and layout, according to the negotiating team’s report. The report says significant changes are under way and the developer will be required to undertake a transportation demand management plan as part of the process.
Planning, Community and Economic Development director Natalie Erdman said she thinks there is enough time to work on design elements, but it will take a concerted effort on the developer’s part to address concerns about traffic and to redesign the parking so it’s a smaller structure than the original proposal.
“I think there’s enough time,” Erdman said. “It’s going to really take some focus.”
There is also concern over losing the 520 Government East parking spaces for 17 months during construction, a prospect that will stress downtown parking and traffic.
“We know we’re going to have a very tough … 17-month period where that parking facility will be gone,” Soglin said during the meeting. He pointed to strategies used in the past, including differential pricing and diverting drivers toward other garages around the Square.
The hotel piece of the project, meanwhile, is the least specific, with a commitment of 210-250 rooms and an unknown operator. Austin said during Monday’s meeting that the developer is not willing to commit to 250 rooms in part due to possible market changes by the time hotel construction begins in spring of 2017. A hotel operator and franchise likely wouldn’t be settled on until November.
With all of these pieces still in progress, Board of Estimates members were unsure how they felt about the proposal Monday evening due to lack of detail. They still accepted the report and forwarded it to council, a process that Ahrens worries leads council members to get in above their heads before they know what the full project will look like.
“First you kind of put a toe in the water, and then an ankle, and after awhile you find yourself that you’ve gone up to your neck, and now you’ve got to swim. You’re in,” he said.
Ahrens also said the elephant in the room is: “Who lost Epic?”
Referring to the loss of Epic Systems’ headquarters to Verona in the 1990s, Ahrens said there is concern that something similar would happen with Exact Sciences if someone were to pull the plug on the project.
Exact Sciences CEO Kevin Conroy has said the company is also considering headquarter sites in Fitchburg, the town of Madison and University Research Park for its expansion, raising the prospect of losing another major employer to outside the city.
Dunn said he hasn’t spent a lot of time focusing on the other location alternatives for the development as they had early on, instead focusing almost entirely on Judge Doyle Square. He and Exact Sciences spokesman J.P. Fielder said they’re pleased with how the negotiations have gone so far.
“I think the opportunity that’s in front of us is a nice one, and so of course we want to investigate it to the best outcome,” DeMarb said.
DeMarb said the city still needs to be careful and calculating and understand that city money is going toward this, but that all needs to weigh with the payoff for the city.
“Sometimes there are calculated risks that are taken,” she said. “That’s how people grow, that’s how our cities grow.” ￼
￼We’re making progress, and the key for all of the parties is to have a solid financing package in place.” Mayor Paul Soglin
￼I’m comfortable the negotiating team is doing a good job and taking things and making sure that we have what we need to make a decision. I am uncomfortable with the fact that things aren’t a little bit more ironed out by now.” Denise DeMarb, Council president