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French Quarter Hospitality, LLP May Acquire the Shut Del Lago Resort in Conroe, Texas; 
Plans to Invest $100 million to Purchase and Renovate the 357 room
 Property Built in the Mid-80's

By Renee C. Lee, Houston ChronicleMcClatchy-Tribune Business News

Apr. 16, 2007--CONROE -- A proposal to revitalize an aging hotel and conference center on Lake Conroe into a premier tourist destination has received a key economic boost.

With approved 10-year tax abatement agreements from the city of Conroe and Montgomery County, French Quarter Hospitality, LLP, an Atlanta-based company, can afford to invest $100 million to purchase and renovate the Del Lago Golf Resort and Conference Center, which shut down in January.

The project, which includes adding an aquatic center, spa, ballroom and restaurants, is expected to attract more than 200,000 visitors every year and bring as many as 435 jobs to the area, according to the developer.

The only hurdle facing the project is a sales agreement. French Quarter and the current property owner, Del Lago Partners LP, are expected to reach a deal today.

If the property sale goes through, French Quarter would begin renovations this summer, with completion by March 2009. Developer Ronnie Ben-Zur, chief executive officer of French Quarter, and the Del Lago owner could not be reached for comment.

'A ripple effect' Conroe City Administrator Jerry McGuire said the project will energize the local economy.

"It's staggering to see the number of new people that will be coming here for vacation, conferences and the amount of money that will be spent," McGuire said. "It has a ripple effect on the entire county. I think it will have a tremendous impact on the entire region on a long-term basis."

The Conroe City Council on Thursday unanimously approved the tax abatement after it designated the resort property within city limits as a tax reinvestment zone. The zone is required by law to enable the city to enter a tax abatement agreement.

The Montgomery County Commissioners Court approved a similar tax break on March 26.

The agreements freeze the taxable value of the property's land and improvements at the base year value determined as of April 1. Any market value increase above the base year value will be abated 100 percent.

The base year value is $9.1 million under the city agreement and $12 million under the county agreement. Both amounts are based on real property, and not personal property. The county agreement excludes the hotel because the county does not abate taxes on hotels.

In addition to the tax break, Conroe city officials agreed to let French Quarter retain 5/7 of the city's 7 percent hotel occupancy tax once the project is complete. French Quarter will use the money to promote tourism and the hotel and convention center.

Hard to compete

The 357-room Del Lago resort opened in the mid-80s and became a premier convention spot because of its location. But over the past three years, it has struggled to fill rooms, said Danielle Scheiner, director of the Lake Conroe Area Convention & Visitors Bureau.

In 2002, Del Lago's annual occupancy rate was 41.8 percent, with revenues at $4.7 million. By 2006, the occupancy rate had dropped to about 25 percent, with revenues at $2.8 million, according to the convention and visitors bureau records.

Scheiner said the property had good potential but the current owners did not invest in updating the hotel. Most hotels are revamped at least every seven years, she said.

"From a product standpoint, it could not compete," Scheiner said.

The resort closed on Jan. 26 after "unsuccessful efforts to secure additional capital or a sale of the hotel operations," according to a statement from Del Lago at the time.

Del Lago's 18-hole golf course and 300-slip marina have remained open since the closure of the hotel.

Scheiner said she believes the new project is coming at an opportune time as both the city and county are growing, bringing more people and development to the area.

The hotel is the only full-service hotel in the Conroe area, making it a critical economic asset, said Montgomery County Judge Alan B. Sadler. County commissioners approved the tax abatement because it wanted to help Conroe land the project, which should give the area a huge boost, he said.

renee.lee@chron.com

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Copyright (c) 2007, Houston Chronicle

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