Hotel Project To Be Slaughtered
First, Kent County announced on June 10 that it wouldn't move from the plaza to make space for a 400-room downtown hotel that would cater to the convention business the new exhibit center is expected to draw. Prior to that announcement, county officials said they would wait until the city, owner of the Calder property, made its decision before making one.
Then, just two days later, the DeVos family, which owns two of three hotels downtown, held a press conference to announce they would explore the possibility of building another hotel downtown.
The day after the DeVoses met with the media, city staff met with Blue Bridge Ventures LLC. Blue Bridge is one-half of the development firm trying to put a 24-story hotel on the plaza across Monroe Avenue from the new convention center.
At that meeting, according to Blue Bridge CEO Jack Buchanan, a city staff member told the developer to drop the exclusive option the firm has to buy the plaza or get ready to be slaughtered in front of the City Commission at a public meeting.
"We're going to slaughter you," said Buchanan of what was told to him.
Buchanan said he refused to drop the option, for which he paid $25,000 and which expires in October, and failed to get the meeting pushed back. So the slaughter, as he put it, could take place tomorrow at a luncheon with city commissioners.
"We're going to just keep going," said Buchanan, if the meeting turns into what he thinks it will. "We are just trying to take the politics out of this and we're looking for an independent review of the numbers."
The city, however, sees the meeting differently. Deputy City Manager Eric Delong said no figures would be misrepresented and no one plans to slaughter anyone. He said city staff would simply present the results of the negotiations they have held with the developers since last October.
"(City Manager) Kurt (Kimball) will then present the numbers that have been generated through our negotiations. We'll talk about the status of those negotiations and we'll just be providing an update," said Delong.
Buchanan said the numbers would be the focal point of the meeting. He also said that city staffers would misrepresent the figures to make the deal seem worse than it actually is.
According to Blue Bridge, the developer has offered the city $11.37 million in cash for the plaza and would invest $2 million more for improvements to it, and another $5.9 million for repairs to the parking ramp.
Gallium Group LLC, the company Blue Bridge formed with Hines Interests LP of Houston for the project, would then serve as the financing agent for the new City Hall.
Gallium would borrow the funds for the building at the city's tax-exempt rate and then loan those dollars to the city at a going commercial rate. The city would own the building and make mortgage payments to the developer for 30 years.
Gallium would use the difference between the two lending rates as equity to close the financial gap between the value of the hotel and the cost to build it.
"That creates our ability to subsidize the hotel," said Buchanan.
The center of tomorrow's dispute may be the method each has used to project current dollars into the future for the 30-year mortgage. The developer has figured the net present value at 9.5 percent, while the city has set it at 5.6 percent.
The developer figures it would cost the city $3.25 million for its new building. But at the meeting on Tuesday, the city may say the number is $6.45 million.
The city said it would move if Gallium could come up with a deal that wouldn't add to its operating costs. Buchanan said he wasn't ready to discuss numbers yet, but felt he had no choice after his last meeting with city staff.
Still, he feels that if the city can get a modern 100,000-square-foot building with about 300 parking spaces for that price, he has done his part. He noted that few convention-center hotels have been built over the last decade without some type of public subsidy, if not outright public ownership.
The deal is very complex and involves getting a brownfield authority for the plaza. But the numbers may not tell the whole story.
When asked if he felt the latest round of events that occurred over the past two weeks were orchestrated, Buchanan said he did.
When asked who he thought was doing the orchestrating, he named Mayor John Logie and Universal Forest Products Chairman Peter Secchia.
When asked why he felt they were behind the move to block his hotel, Buchanan said it was because they blamed him and Ed Kettle for the police department not relocating to the Steketee's building on Monroe Center a few years back. Secchia owned Steketee's then and wanted to sell it to the city.
Buchanan and Kettle, an advisor to Blue Bridge, told the Business Journal last week that they expect Logie to do most of the slaughtering. Kettle said Logie would "tee this deal up for someone else to steal" and that the mayor was sending a clear message to developers that major downtown projects are reserved for a select few.
"This thing isn't about what," said Kettle, "it's about who."
Delong disagreed, saying no one at the city was conspiring against the developer.
"We have a story to tell," he said, "and we're going to tell it."