July 27–Albert Abdouche promises his $13.2 million plan will help the long-vacant Americus Center recapture the grandeur that once made it Allentown’s most elegant hotel.
The members of the Allentown Neighborhood Improvement Zone Development Authority want that too, except they don’t think Abdouche can pull it off. So, they’ve denied Abdouche access to the generous tax incentives that have spurred $1 billion worth of building by other developers.
If Abdouche wants the money, he’ll have to jump through hoops not required of developers that have earned their trust, ANIZDA board members said.
But can ANIZDA block Abdouche from using the Neighborhood Improvement Zone to reopen the historic building as 13 floors of hotel rooms, apartments, shops and office space? The answer may determine how much power ANIZDA can wield over developers when reviewing projects over the next three decades.
“If they’re evaluating projects based on the chances of success, they absolutely have the authority to deny a project they believe will fail,” said state Sen. Pat Browne, R-Lehigh, who wrote the NIZ law and also holds a law degree. “We’re talking about public money, and it is ANIZDA’s responsibility to determine if a project is a public benefit.”
Gary Asteak, a 40-year Easton attorney who specializes in municipal and real estate law, agrees with Browne that the presence of public money should dictate ANIZDA’s actions. But, he said, the authority may be overstepping its bounds in denying Abdouche’s project.
“If his project meets the objective criteria of the law, then he should not be denied,” said Asteak, who does not represent Abdouche. “If they are using public funds, they cannot discriminate.”
In the 127-acre NIZ, most tax revenues generated by new projects can be harnessed by property owners to pay off construction loans. Allentown’s one-of-a-kind zone is perhaps the most lucrative tax incentive ever offered by Pennsylvania. It has spurred almost runaway development that includes several office buildings, restaurants, retail shops, a hotel and an upscale apartment complex — all under construction.
Abdouche’s 13-story Americus Center is in that zone, a block from the new PPL Center hockey arena that is at the heart of the city’s redevelopment. Abdouche wants the tax incentives to fund a $13.2 million plan that calls for 85 hotel rooms, 48 apartments, 10,000 square feet of office space, two banquet halls, a sports bar and six first-floor shops that would front Sixth and Hamilton streets.
He launched his project in 2009, more than two years before it was announced that a special taxing district, as outlined in the NIZ law, would cover portions of downtown. Initially, the zone did not include the Americus, but the hotel was added when the NIZ was expanded in 2012. Without the zone’s incentives, Abdouche said, he will have a hard time finishing the project or it will take much longer.
Abdouche questions why he’s spent months trying to get ANIZDA approval while the authority has enthusiastically welcomed other developers’ projects. J.B. Reilly, CEO of City Center Investment Corp., easily the zone’s biggest developer with more than $400 million in projects and counting, routinely gets large projects through ANIZDA in a single meeting, with board members often thanking him for his vision.
There’s a reason for that, said ANIZDA member Alan Jennings. Reilly has a proven track record of successful projects not only in Allentown but across Pennsylvania, and he’s working with local banks and well-known contractors. When he arrives, it’s with an impressive portfolio of documents and usually a big project price tag. His Marriott Renaissance Hotel, one block from the Americus, is costing $65 million to build.
Abdouche, 53, of Whitehall Township, is primarily a residential real estate investor who, since emigrating from Syria nearly four decades ago, has owned more than 80 properties, most of them homes. He’s credited with transforming the former Ice Palace hockey rink in east Allentown into an elegant banquet hall called The Palace Center. But he has never taken on a project as large as the Americus and is working with smaller banks and out-of-area contractors whom ANIZDA members aren’t familiar with.
Perhaps most troubling to Jennings and other ANIZDA members is how much Abdouche plans to spend. Abdouche says $16 million is enough to renovate the Americus, including the $3 million he has already spent. Some authority members are convinced it will cost much more.
Opened in 1927, the building named for explorer Amerigo Vespucci was once one of the city’s most prominent hotels, featuring colorful murals by artist George Harding, arched window openings, ornate ballrooms, polished French marble and penthouse balconies. It was added to the National Register of Historic Places in 1984.
“Look at the beauty, the workmanship,” Abdouche said last week as he looked from the mezzanine through the crystal chandelier hanging above the grand ballroom. “They don’t make buildings like this anymore.”
But the Americus has fallen into such disrepair that it has been closed since 2003. When Abdouche and a partner bought it for $676,000 in 2009, they hoped to renovate it and reopen it as a hotel, but it has only recently gotten new life with the arrival of the NIZ. The way Abdouche sees it, he was willing to take a chance on the abandoned building back then, so he deserves a little freedom to renovate it his way. He’s now the sole owner, after buying out his partner’s share.
“He’s never done a project this large, has no experience in hotels and he wants to do the project with an amount of money no one thinks is enough,” Jennings said. “If this landmark hotel can be brought back to its grand style, it would be a fitting sign of a new era in Allentown. It’s not just another building project. It deserves every bit of scrutiny we’re giving it.”
Abdouche said his investors, International Financial Group of Wilmington Del., could close on the loan soon, once he gets ANIZDA approval. He has hired Gulph Creek Hotels of Wayne, Delaware County, to manage the hotel and JD Matthews LLC of Jenkintown, Montgomery County, a hotel specialist, will do the renovation. In addition, Abdouche said he’s gotten three renovation estimates — including one by JD Matthews — all of which are less than $13.5 million.
That’s in addition to the $3 million Abdouche says he has already put into the building to make facade, electrical, plumbing and interior repairs, as well as add sprinklers up to the fifth floor. With the spectacular bones of a 1920s structure, the Americus is much cheaper to renovate than building a new hotel, he said.
Abdouche told ANIZDA he’s willing to sign an agreement that if Gulph Creek can’t obtain a hotel rating of at least three diamonds from AAA, he’ll relinquish the tax money.
He said if ANIZDA agrees to allow him access to future NIZ tax revenues, he’ll be able to have several first-floor businesses and the ballroom open by the end of the year, and the hotel rooms would follow next year.
“Why me? Why are they treating me differently?” Abdouche said. “If I guarantee that I’ll give them a three-diamond facility, what’s the problem? What more do they want?”
What they want is for Abdouche to help pay for a new estimate by an independent company on how much renovations would cost. Much of ANIZDA’s skepticism of Abdouche rests with that $13 million renovation figure. ANIZDA Chairman Sy Traub says he’s heard it will cost $25 million, though he didn’t say where that estimate comes from.
Abdouche said he’s not interested in hiring someone to second-guess his own contractors.
John Ingram, president of Ingram Real Estate Group of Allentown, said he’s not nearly as skeptical of Abdouche’s estimate as ANIZDA. He was the appraiser for an undisclosed Chicago company that planned to turn the Americus into a Wyndham Hotel in 2009. That project fell apart, but not before the contractor estimated renovations would cost $15.6 million, said Ingram, a former Allentown Planning Commission member.
“That was before the $3 million that’s been spent by the current owner,” Ingram said. “I don’t have a horse in this race, but it seems to me that even with inflation, that estimate isn’t that far off what he’s talking about.”
None of those arguments answers the question of whether ANIZDA has the legal authority to keep Abdouche from the tax incentive. The NIZ law, which went into the state’s fiscal code in 2009 and has been updated twice since, is silent on that point.
It designates the borders of the zone, which taxes are eligible, who is eligible to use them and how the money is to be distributed. It also designates that a “contracting authority” be chosen to operate the zone. That contracting authority is ANIZDA, but the law does not spell out the authority’s precise duties.
That, Browne said, is partly by design. It would be impossible and impractical to list all of ANIZDA’s duties in the law, he said.
“That was done purposely to give them the flexibility to make things work — to allow them to evaluate each unique project based on its unique merits,” Browne said of the authority. “It’s not a matter of playing favorites, it’s a matter of looking out for the best interest of the taxpayer.”
“The best interest of the taxpayer is not leaving a law open for vague interpretations,” Asteak said. “A criterion is set and if the property owner meets it, then he’s eligible. That’s how it’s supposed to work.”
That debate leaves a gulf between ANIZDA and Abdouche. Abdouche is holding out hope that he’ll show up at the next meeting, Aug. 6, with enough evidence to give ANIZDA members the confidence to approve his request.
“I’m hoping we can come together, I really do,” Abdouche said.
If not?
“If not, then we fight,” he said. “What else can we do?”
If that happens, it may take a judge to decide.
“Until I get dragged into court and a judge tells me I’m overstepping my boundaries,” Jennings said, “I’m not changing my level of scrutiny.”
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AMERICUS IN TIME
1927: Built by businessman Albert D. Gomery in Spanish Moor design
1984: Placed on National Register of Historic Places.
1985: Purchased by Americus Center Inc., of which Mark Mendelson is majority shareholder, for $1.25 million.
1988: Joins Radisson chain.
1994: Loses Radisson affiliation and goes to sheriff’s sale with $5 million in liens; no one offers to buy it.
2003: Hotel closes but some business tenants remain.
2007: Last business tenants move out. New Jersey firm RSR Capital announces intent to buy but deal isn’t reached.
2008: Americus Center files for Chapter 11 bankruptcy protection.
2009: Chicago developers plan to reopen the hotel under the Wyndham Hotels and Resorts chain, but the plan doesn’t materialize. Albert Abdouche and John Haik purchase the building for $676,000 at a sheriff’s sale.
2012: Included in the city’s expanded Neighborhood Improvement Zone.
2014: Allentown Neighborhood Improvement Zone Development Authority puts conditions on giving tax revenues to Abdouche, now the hotel’s sole owner.
