|By Kevin Leininger, The News-Sentinel,
Fort Wayne, Ind.McClatchy-Tribune Business News
Mar. 20, 2007 - A gap of up to $6 million has developed between the money available for a new downtown hotel and what it would actually cost to build the proposed 250-room facility.
If additional funding cannot be secured, the hotel's design may have to be changed -- but not in a way that would significantly affect its features or appearance, said Greg Leatherman, the city's deputy director of community development. "If you didn't know (about the changes), you'd never notice," he said. "What it means is that, instead of marble floors, they'd be made of different materials.
"I'm still very confident we'll get an agreement."
If construction costs do need to be cut, he added, the hotel could be changed to a full-service Marriott Renaissance instead of the higher-end Marriott city officials announced last month. The hotel is a key component of the proposed Harrison Square downtown revitalization project, which would cost $125 million to $160 million and include a baseball stadium, condominiums, shops and restaurants.
It would also include a parking garage -- which is partially responsible for the "funding gap," Leatherman said.
When White Lodging Services of Merrillville and Michigan-based Acquest Realty Advisors Inc. submitted the lone hotel development proposal, they assumed the hotel would receive 100 percent of the revenue generated by the attached $10 million parking garage, which would be built and paid for by the city. But the percentage of parking revenue available to the hotel owner is still being negotiated, Leatherman said.
Also complicating matters is the state's earlier decision to cut the amount of Community Revitalization Enhancement District (CRED) tax credits for the project from the hoped-for $12 million to $6 million. That is a major reason why four firms that had expressed interest in the hotel project failed to submit a development proposal, Leatherman said.
"There's no single magic bullet, and if there was only one way to deal with this, I'd be worried," Leatherman said. But in addition to design changes, he said, the city also is working to free up more money for the project, mostly in the form of additional tax credits.
For example, the city has asked the state to make $3 million in CRED credits originally approved for redevelopment of the downtown Holiday Inn available for the Harrison Square hotel instead. Local businessman Bill Bean had proposed converting the Holiday Inn into condos, offices and shops, but withdrew from the project after a feasibility study determined renovation costs would be excessive.
Doug Smith, an associate with Acquest, said the Marriott brand requires certain standards for construction materials, square footage and other amenities. A Renaissance hotel would offer developers more flexibility, which could result in lower construction costs.
One possible change, he said, would be the elimination of meeting rooms, which would save money and eliminate competition with other nearby facilities, including the adjacent Grand Wayne Convention Center. In addition to two 1,000-square-foot meeting rooms, the original proposal included an 11-story tower, a 4,200-square-foot restaurant and bar, 1,200-square-foot coffee shop, an outdoor pool and year-round fitness center.
Leatherman said he has stayed at Renaissance hotels, and was impressed by their quality. If the hotel design departs significantly from the city's original specifications, he said developers who expressed an interest but did not submit a proposal could be given a chance to reapply.
But Smith said no design changes will be considered until developers and the city can hammer out the financing.
"I'm still very confident we can build the full-service product that belongs (downtown). We just have to roll up our sleeves," he said.
Copyright (c) 2007, The News-Sentinel, Fort Wayne, Ind.
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