April 6, 2010 - -GREENSBORO -- A proposed luxury hotel has yet to prove its financial feasibility, a necessary step if its developers still want to be considered for a special form of financing.

The $52 million luxury hotel, proposed for South Elm Street across from the International Civil Rights Center & Museum, needs approval soon from the county bond authority before it can become eligible for a form of assistance created to stimulate the economy.

Last week, the authority canceled its meeting because it still didn't have enough information to review and forward to the Local Government Commission in Raleigh, the final step in the process.

The hotel's development group, which includes several local prominent business people and the Ole Asheboro Neighborhood Association, wants $27 million in special financing to build the 200-room hotel.

The project can't move forward without providing more details on financing, something the project's backers were hesitant to do at a tense authority meeting in January.

Mary Nash Rusher, bond counsel for the authority, said the Urban Hotel Group hasn't communicated with the authority since then. No one from the group could be reached for comment Monday.

"They still need an inducement resolution from the authority before they can move forward to the LGC," Rusher said.

They need that, and more importantly, they need a financial feasibility letter from someone who is going to provide the project's letter of credit."

A letter of credit is an assurance from a lender saying it will repay the bonds if the project fails or doesn't make enough money to repay investors. The authority hasn't asked to see that letter, but Rusher said the Local Government Commission will.

"So far, they haven't produced that to anyone," Rusher said.

The bonds are part of the American Recovery and Reinvestment Act passed last year by Congress. Qualifying projects are supposed to stimulate construction, jobs and growth.

The bonds are not government money or government loans. Instead, they are essentially IOUs issued by local government bond authorities. Institutional investors -- mostly banks and mutual funds -- buy the bonds because the interest they yield is tax-exempt.

Critics of the hotel have said its scope is too ambitious given the slow economy and demand within the city hotel market.

Local hoteliers Dennis Quaintance and Mike Weaver, owners of the O. Henry and Proximity hotels, filed a lawsuit against the city and county seeking to invalidate their approvals of the bond financing. Their suit claims the approval processes were flawed.

County Attorney Mark Payne has asked a judge to dismiss the suit.

Rusher said if the hotel wants to be considered at the Local Government Commission's May meeting, it will need to get on the group's agenda by April 15. But she said that's not a firm deadline.

"If they don't get on the agenda, the funding will revert back to the state," Rusher said. "But they can reapply for it. There are a lot of deals that are in this position right now and a lot of allocation still out there."

Staff writer Richard M. Barron contributed to this report.

Contact Joe Killian at 373-7023 or [email protected]

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