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HomeMy WebLinkAbout01/20/2004 Adjourned Meeting 111 ADJOURNED MEETING JANUARY 20, 2004 - 7:30 A.M. COUNCIL CHAMBERS - CITY HALL Roll Call Present: Council: Mayor Paul George, presiding, Council Members Ron Bonlender, Dave Edler, Neil McClure, Mary Place, and Bernard Sims Staff: Dick Zais, City Manager, Bill Cook, Director of Community and Economic Development, and City Clerk Roberts Absent: Council Member Susan Whitman 2. Study Session on Section 108 Loan for M/W, LLC (Morrier/Walji) • Purpose of Meeting Bill Cook stated the purpose of the meeting is for Council review of the proposal submitted by Mr. Joe Morrier and Mr. Munir Walji, to develop a new hotel downtown. Mr. John Finke from the National Development Council has been assisting the development team and was also present. Staff is not requesting a decision from Council on this proposal today, however, on this afternoon's agenda there is an item that would begin a 30 -day comment period to amend the Community Development Block Grant budget, a step necessary to begin this process since they are seeking a Section 108 loan for their project. • Presentation of Proposal Joe Morrier, 402 E. Yakima Avenue, introduced his partner in this venture, Munir Walji, an individual he described as having great experience in the hotel business. He displayed a rendering of the proposed 402 -room hotel that would locate in the space formerly occupied by Mervyns department store at the mall. Munir Walji, 200 W. Mercer, Suite 201, Seattle, CEO of Camden Hospitality Group, told Council his firm manages over 3,000 rooms, mostly franchised properties within the 11 western states, consisting of facilities with 125 -350 rooms each. He said his decision to partner with Joe Morrier was due to the merits of the project and the constant occupancy rates in Yakima. He stated that the project also had to have a strong brand associated with it. He introduced Shawn Hatch, who was available to provide information on the hotel brand. Shawn Hatch, 844 41 Ave. E., Seattle, informed Council that his role is to take the project from its conception and coordinate interior designs. He has a hotel degree and has been in the industry over 20 years. He has worked with any range of brands from Holiday Express to the Westin in Seattle. His opinion is that the Hilton Garden brand will fit with business travelers and give flexibility to the operator to take advantage of 1 1 2 JANUARY 20, 2004 — ADJOURNED MEETING weekend leisure travelers. This hotel will have a meeting room, a three -meal restaurant, and open rooms, although it won't have a grand ballroom size room. It will have a business center, spa and salon area, and retail. The hotel lobby will have decor between luxury and economy. The guest rooms will have a hospitality center refrigerator, microwave and a small counter area. He spoke about the proposed parking plan, which will have a parking flow that works easily for the guests. Mr. Morrier stated that a parking design plan has not been finalized. Mr. Munir advised Council that they do not have a contract with Hilton yet because, if the project does not pan out, there is a credibility issue. The Hilton is ready for us, however, and we are prequalified to be a Hilton franchisee. • Section 108 Loan Process is Outlined John Finke said that if this project goes forward, the process would involve the City applying to Housing and Urban Development (HUD) for an additional $3 million of. Section 108 money and amending the existing Economic Development Initiatives (EDI) fund. The project would include a number of risk mitigations: good collateral, personal guarantees and underwriting; and, in addition, a loan loss reserve out of the EDI fund reserves. Those funds would be used to keep the City's loan obligation to HUD current, if necessary. The City borrows the funds from HUD and then lends the money to the project without pledging the City's General Fund money. Requirements for the project included: 1) a feasibility study (draft supplied in packet), 2) that it be professionally managed, and 3) that all sources of financing be in place. We are hoping to bring this back to Council on February 17. In addition to the $3.56 million of HUD Section 108 money, they would seek $3 million of financing from a bank. The goal is to divide that into a $2 million debt and $1 million from new market tax equity. It involves a new Treasury program where they award tax credits for new market equities. The bank would lend the money and in exchange would receive a new market tax credit fund, receiving a reduction of 5% of the aggregate amount of the investment for the next three years and 6% the following four years. The bank gets their return through the 39% tax credit received over the seven years. Council Member Bonlender asked how much money is being personally invested into this project. Mr. Finke replied that the value of the property owned by Mr. Morrier will be appraised, but is anticipated to be valued at $1 -1.5 million, and there will be additional cash. If the appraisal of the property is not that high, or the feasibility study is not good, they will not come back to Council to proceed with the project. The principals are paying for the appraisal and the feasibility study. Mr. Morrier added that the Hilton corporation will also review the project to make sure it meets their franchise needs and dictate what they have to do to get the franchise. They will have to pay a $100,000 non - refundable fee plus $100,000 for computer connection to Hilton, but before they do that, they want to make sure they have the finances lined up. Mr. Finke stated they are looking at a November date to finalized the plans and expect this project to break ground in June or July, 2005. 2 113 JANUARY 20, 2004 — ADJOURNED MEETING • Council Questions Council members asked questions about: ❖ The impact the new Fairfield Inn would have on the market study ❖ The anticipated occupancy rate ❖ The security of the partnership ❖ The collateral and who would be first in line in case of default; ❖ The equity involved, including the additional building as security ❖ The number of employees generated by the project (80 -81) Council Member McClure asked for specific details on the loan process, repayment process, and ratio protection. City Manager Zais recommended that Council move forward with the next phase of this project (amending the Section 108 Loan amount). 3. Adjournment The meeting adjourned at 8:50 a.m. READ AND CERTIFIED ACCURATE BY 11 6 1 COUN 411 EMBER DATE %NI. 1 2 - 4 ?-61 1 7 C4 17' I - MEMBER DATE ATTEST: n CITY CLERK PAUL P. GEORGE, MAYOR • An audio and video tape of this meeting are available in the City Clerk's Office • 3