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Hampshire Hotels & Resorts Planning $50 million Conversion of
Union Trust Building into 180-room Hotel, New Haven, Connecticut

By Mary E. O'Leary, New Haven Register, Conn.McClatchy-Tribune Regional News

Dec. 9, 2009--NEW HAVEN -- Inside and out, the early 20th-century Georgian-Colonial building has been touched up with an emphasis on historical accuracy combined with 21st-century sustainability.

Now, the new owners of 205 Church St. -- the iconic Union Trust Building -- are ready to present plans to the city for conversion of the former office building to a hotel.

Kevin Lillis, vice president of real estate development for Hampshire Hotels & Resorts in New York City, said Tuesday the company likely will seek approval for a 180-room facility.

That final number of rooms could drop, however, depending on which flagship hotel moves in and how much conference space makes sense. They are negotiating with a number of four-star hotel groups.

Lillis said they are also working with the city and New Haven Parking Authority on off-site parking options for the hotel, which would provide valet service.

William Kilpatrick, executive director of the authority, said an updated consultant's report is due soon on the feasibility of building an estimated 600-car garage on State and Wall streets that could serve the hotel and about 200 vehicles that will be bumped from the Temple Street Garage in 2012 when Gateway Community College opens.

The hotel plan is expected to come before the City Plan Commission in January, but when construction might start depends on who partners with Hampshire, the future demand for rooms generated by Yale University and Yale-New Haven Hospital, and on the economy.

Lillis said the $7 million spruceup, which included repointing the facade, a restored cupola, as well as the marble railing around the decking on the 11th floor, is completed.

Inside, all the upper floor tenants are gone, but historic elements, such as the original elevator cabs with classic dials indicating each floor and brass mail chutes, among other items, have been restored. Wachovia Bank has a long-term lease for the ground floor.

"We wanted to bring it back to its 1927 glory," Lillis said. The renovation has left the 11-story building with "no environmental issues. It's clean and ready to go."

Purchase of the Cross & Cross brick building, whose cupola was designed to mimic the churches on the other side of the Green, plus the renovation, has cost Hampshire $25 million so far.

Lillis said they are debt-free on the building, but are looking for a partner on the $50 million conversion cost to a hotel.

"A lot of pieces are in play between now and January," Lillis said.

Kelly Murphy, economic development director for the city, said generally the commercial lending market is "really tough" with few projects getting approval from banks.

Lillis said the slow market is allowing Hampshire "to take our time and do it right. It's not rush, rush."

Generally, they are evaluating hotel room demand that Yale University's programs and its planned residential colleges will generate, as well the Smilow Cancer Hospital, which will be fully open by April.

Years ago, the city had hoped to build a "mid-block" garage on space next to 205 Church St., but couldn't get all the owners on board. Lillis said it is up in the air how they will use that space, but very long term it could possibly be used for a residential component or additional hotel space.

An important factor on the residential market is how easily the 500 apartments at 360 State Street in the Becker and Becker project fill up.

In 2006, the high cost of construction and weak demand could not justify construction of the garage on Wall and State streets, Kilpatrick said of the right mix needed to justify revenue bonds.

Ginny Kozlowski, president of the Greater New Haven Convention and Visitors Bureau, said area hotels are "holding up better than other areas" during the recession.

In a year-to-date comparison of rooms through October, Kozlowski said occupancy dropped 0.3 percent in the area. When the 6 percent increase in inventory for the same period is factored in, however, occupancy dropped 5.9 percent, but this compares to a 9.5 percent drop across the nation.

"In these challenging times, with the corporate market cutting back, New Haven is doing fairly well," Kozlowski said.

On the plus side, she said Yale clearly helps keep the market stable, while its continuing growth, plus the presence of Smilow, and Covidien's decision to move 300 workers to Long Wharf Drive is all good news.

As for the presence of another hotel, Kozlowski said, "There is nothing on that side of town."

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To see more of New Haven Register, or to subscribe to the newspaper, go to http://www.nhregister.com.

Copyright (c) 2009, New Haven Register, Conn.

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