New corp. to lead 40th St. development

The movie star and the market already committed to coming to campus. All the University needed was a way to manage and pay for all of it. To that end, the University Board of Trustees approved a plan Friday that would create a new for-profit corporation to handle the financing and development of the new retail and entertainment projects -- including Sundance Cinemas, a specialty-food market and a parking garage -- in the vicinity of 40th and Walnut streets. The University recently christened as Hamilton Square the area which will include the new construction and the existing stores in the Hamilton Village shops. The corporation, to be headed by University administrators, is called Hamilton Square Inc. Although no plans have been finalized, officials intend to secure outside investors to finance the debt stemming from design, development and construction costs of the project. Final cost figures have not yet been determined, though the Trustees authorized the University and the new corporation to borrow up to $35.5 million, or up to $19.5 million for the movie complex and other retail uses and $16 million to build the garage. Penn Vice President for Finance Kathy Engebretson said that by establishing a separate corporation, the project's revenue and debts are more easily differentiated from the University's other expenditures and revenues, she said. "In doing it this way, you can see what the project's cash flow is," Engebretson said. "Otherwise it might get lost in all the other University business and be a little murky." A month ago, University officials joined Robert Redford to announce that the movie titan, in partnership with General Cinemas, would open one of the first Sundance Cinemas ion the country in the Hamilton Village shopping center. Construction on the more-than-40,000-square-foot complex, which will include six to eight screens, a public meeting area, restaurant, outdoor cafe, bar and childcare center, is scheduled to begin in January and last a year. University officials also announced that a multi-story garage with a specialty food market on its ground floor, operated by area entrepreneur Pat Burns, would open on the northwest corner of the intersection. The new corporation will be led by a governing committee made up of Penn Executive Vice President John Fry, Treasurer Scott Lederman, Managing Director of Real Estate Tom Lussenhop and the University's associate general counsel, Roman Petyk. According to Engebretson, the University intends to initially fund all of the construction costs without using the outside loans. As a result, Penn will not need to secure financing in order to begin building. Sundance Cinemas and the market will not contribute anything to the construction costs, but will have to pay unspecified costs associated with moving in, Engebretson said. University administrators hope to secure all the necessary financing of the debt by the time the components open in January 2000, Engebretson said. The University is "currently evaluating whether to lock in the financing early. You pay an extra fee, but interest rates are attractive right now, so it's a trade-off," she added. If the plan goes through, the University would then use revenue generated by the complex to pay back the investors who are financing the debt. The ultimate cost to Penn would be nothing. Officials hope that the project's entire debt will be financed externally, although nothing is set in stone, Engebretson said. No investors have formally committed to the project. Engebretson said, however, that officials have talked to many potential parties who would be interested in participating in the project. Once the University secures the outside financing, the Trustees' Ad Hoc Committee will have to approve the terms of the deal. Other University administrators and officials from Sundance and the new market could not be reached for comment.

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