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City of Tucson Not Swayed to Offer Financial Assistance as HSL Properties,
Owner of the Deteriorating Hotel Arizona, Closes the Doors

By Carli Brosseau, The Arizona Daily Star, TucsonMcClatchy-Tribune Regional News

April 24, 2012--The downtown Hotel Arizona closed Monday, even as owner Humberto S. Lopez continues to seek city financial help to remodel the deteriorating property.

Lopez has threatened before to close the hotel to gain leverage in his negotiations with the city, but the mayor and two council members said his latest decision won't force their hand.

"His closing the hotel will not affect the way we look at this," said Mayor Jonathan Rothschild. "We've got to follow the state statute. We're going to be very strict about making sure that taxpayers get out at least as much as private developers receive."

The hotel's closure does not make the city any more likely to accept a deal with Lopez, and the City Council has done nothing to advance his latest proposal, Rothschild said.

Lopez and his company HSL Properties have owned the hotel at 181 W. Broadway since 1984. They are negotiating with the city "options that will enable it to reopen as a fully renovated, nationally franchised hotel that will service the Convention Center and downtown Tucson," they said in a news release Monday.

A sign posted on the hotel's door said it was already closed for renovations. Other area hotels will absorb reservations and catering events, and affiliated properties will offer some of the hotel's employees new jobs, the HSL news release said. It said others will get help finding new employment. No financial or vacancy-rate information was made available.

An HSL representative said the company would not comment beyond the news release. Neither Lopez nor HSL's executive vice president, Omar Mireles, returned repeated calls for comment.

Middle of Rio Nuevo

Lopez has long sought financial assistance from city taxpayers for the hotel, which is in the heart of the downtown and Rio Nuevo area the city has been striving to revitalize. It is along the modern streetcar route and next to the Tucson Convention Center.

Under Lopez's most recent proposal, HSL Properties would keep sales, hotel and bed taxes generated at the hotel over 20 years in exchange for renovating the property, which by all accounts needs an upgrade. In early 2011, Lopez reported 70 of the hotel's 308 rooms were uninhabitable.

"It's a prime piece of property," said Rick Grinnell, a member of the Rio Nuevo board tasked with using state sales tax receipts to help fund downtown development. "The economics just don't play out the way everyone would like to see them play out."

"There's nothing we can do," he said. "It's a business decision."

However, Hotel Arizona's closure comes just weeks after the city and the Rio Nuevo board in a joint closed session heard a presentation from another developer, Allan Norville, about possible convention center hotel plans.

Third-party analysis

Rothschild said his staff recently put together a list of 21 things the city government can do for business. "We are limited to that list," he said.

Among the benefits potentially available to Lopez are the abated property taxes associated with the city's recently approved central business district. "If Bert wants to come forward and wants to do that, we will talk to anyone who comes forward," Rothschild said.

The mayor emphasized that a successful proposal in the central business district would have to be vetted by an independent third party to ensure that the city is benefiting from the project as least as much as the developer.

The improvement would also have to result in a 100 percent increase in the property value. The property-tax abatements, if the city agreed to a deal, would extend for eight years and begin a year from now.

The city would have to take ownership of the property and then lease it back to the owner, who would make improvements on it.

Uhlich wary

Councilwoman Karin Uhlich said she's wary of Lopez's potential use of the tax abatement because she fears he is trying to use the city as a tax shelter.

Uhlich, like other members of the City Council, bridled at any notion that Lopez would close down the hotel in an effort to increase his leverage in negotiations with the city.

"I would certainly caution them or anyone else to make decisions thinking they are going to manipulate the city," she said.

In December 2010, the hotel's management said it would close unless it saw plans for an improvement to the Tucson Convention Center as well as the hotel.

The same year, Lopez led a recall effort against then-Mayor Bob Walkup, Councilwoman Regina Romero and Uhlich. He eventually dropped the campaign, saying he was satisfied that the council was beginning to adopt a more business-friendly stance.

As Lopez has been negotiating with the city over Hotel Arizona, HSL Properties has been snapping up real estate in other parts of Tucson. The company has acquired La Placita Village adjacent to Hotel Arizona, the Clarion Hotel near Tucson International Airport and Embassy Suites Tucson Williams Center in midtown, among other properties.

Lopez earlier told the Arizona Daily Star that he would put money into downtown properties only if there's an effective public-private partnership in place.

But when it comes to properties outside downtown, he has fewer financial concerns. "There's an opportunity to make a profit," he said then.

Some members of the council chafe at that strategy.

"If it's greater risk (to invest downtown), the city should not put the taxpayers at that risk," Councilman Steve Kozachik said Monday.

Uhlich said Lopez's investments in properties outside downtown make her question whether Lopez is the kind of partner the city wants.

"Part of redevelopment is choosing the right partners," Uhlich said. "I've seen him in public, and I've urged him to invest in the properties already in his holdings and in his properties downtown. It's a business model I think deserves intense scrutiny."

Uhlich and other council members emphasize that despite their trepidation, they are willing to hear proposals from Lopez and other developers but they definitely want them made in public.

"Let's just do a straight-up deal," Kozachik said.

Contact reporter Carli Brosseau at cbrosseau@azstarnet.com or at 573-4197.

___

(c)2012 The Arizona Daily Star (Tucson, Ariz.)

Visit The Arizona Daily Star (Tucson, Ariz.) at www.azstarnet.com

Distributed by MCT Information Services



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