News

Construction issues delay big Vergennes eldercare project

VERGENNES — It now looks like groundbreaking on a major downtown Vergennes eldercare project, once expected for early this summer, will not occur until sometime in 2022, according to its owner-developers, Shelburne residents Daniel and Rebecca Hassan.

Spiraling construction costs and difficulty finding contractors, in part due the ongoing construction boom and a simultaneous labor shortage, have pushed the original project cost estimate from around $18.5 million to roughly $20 million, according to Daniel Hassan.

Hassan told the Independent that of that total about $13 million are now “hard construction costs,” an increase of about $1.5 million, and he and Rebecca Hassan will be looking for more local investment in a project to which he said they remain “totally committed.”

The Hassans propose to create “Vergennes Grand Senior Living,” a major expansion and renovation of Vergennes Residential Care on the city green that is projected to employ 48.

Their plans call for transforming the existing 18-bed property at 34 North St. into an interconnected 53-room, four-building eldercare home capable of accommodating up to 82 seniors.

The project will include 40,000 square feet of new construction, followed by a historically sensitive renovation of the existing 10,000-square-foot building, first erected two centuries ago.

The Hassans, as they have with their similar eldercare properties in Vermont and New Hampshire, will cater in Vergennes to an elder clientele they refer to as the “forgotten middle” — those not on Medicaid, but who also cannot afford high-end retirement communities — as well as those who are eligible for federal benefits.

But the current reality of the construction sector has delayed their original summer timetable, Hassan said. Not only are costs increasing, but also he said suppliers told him it could take six months for some materials to be delivered.

And estimates from already busy subcontractors were coming in high.

Some “have so much work they could quote high and hope they get it,” without worrying if they didn’t, Hassan said, while at the same time, “some of them were actually having trouble attracting labor.”

It all added up to the higher costs and delays.

“It’s tough to swallow in terms of costs of materials and supply line of materials, not just the costs, but when those things could be provided,” he said. “And so that has us really concerned. It really did put us in a position to recalibrate when we could take the next step to start the project.”

FINANCING

As well as the start date, the increasing costs and delays inevitably affected the financial end, Hassan said.

“In the process we needed to revisit how we were funding the project as well as our timeline. Both of those really directly tied to each other,” Hassan said. “About a month ago it became really clear to us, but sitting here in late September, there’s little chance we can break ground this year.”

The Hassans purchased Vergennes Residential Care from Barbara and Tim Buskey in 2019, with an eye on these expansion plans all along. But he said the plans would work better if more local investors stepped up to lower the institutional financing percentage in the project.

“They would be getting an ownership equity share,” Hassan said, saying he hopes that eventually roughly 25% of the $20 million project will be investment equity, essentially an ownership stake.

“We have a significant portion of that pledged already by ourselves and our local investors,” Hassan said, but now he hopes to replace “some of the institutional equity” with that from local investors as the cost rises.

With that in mind, the Hassans plan to meet with potential investors privately in the near future to explain the project benefits not only to investors, but also to the community at large.

“I think people do know about our project, but don’t have a lot of details about it,” Hassan said.

Part of their pitch will be that there are specific advantages for local investors in this project because Vergennes is a federally approved “Qualified Opportunity Zone” that confers tax breaks on project participants. For instance, investors with capital gains elsewhere can earn tax credits to defer or offset them.

The project does have support from city officials and the Vergennes-area business community. According to estimates accepted by the city’s development review board, Vergennes Grand would add about $390,000 annually of civic and commercial revenue to Vergennes, including property taxes, water/sewer fees, and visitor and staff purchases at local businesses.

The city was also awarded a $181,000 grant based on the project’s completion. It would be used to fund re-paving of the streets that surround the city green next door and the green’s sidewalks, plus pay for new park lighting.

Thus, Hassan is hopeful that a combination of financial benefits and civic-mindedness will help persuade potential investors.

“The local investors on our project said there are a lot of local folks who would be community-minded and would be interested,” he said.

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