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Norfolk, Virginia and Gold Key PHR Hotels and Resorts to Take Another Shot
at a $126 Million Hotel-Conference Center Downtown

Yet Dramatic Cuts in Defense Spending Feared as a Result of Sequester
Could Cause the Heavily Subsidized Project to Fail

By Jillian Nolin, The Virginian-PilotMcClatchy-Tribune Regional News

March 02, 2013--NORFOLK -- The city will take another shot at a $126 million hotel-conference center downtown, this time working with Virginia Beach-based Gold Key PHR Hotels and Resorts. But the heavily subsidized project will have to survive the sequester first.

The deal, formally announced Friday after months of negotiations, is similar to what has been proposed in the past. Gold Key would pay the majority of the construction costs for the hotel, while the city would pay for a 50,000-square-foot, high-tech conference center and a 600-space parking garage. Gone is the residential component of a former plan.

The ambition is still there, though. Bruce Thompson, CEO of Gold Key, said he intends to build "the leading hotel in the commonwealth of Virginia." The 23-story hotel would have 300 rooms, three restaurants and a rooftop garden and bar.

"We'll build you a property that you'll look up at one day in the very, very near future, hopefully within the next few years, and you'll say that is a defining moment for downtown Norfolk," Thompson said. He's known for two Virginia Beach public-private projects: a mixed-use project called 31 Ocean and the Hilton Virginia Beach Oceanfront, which opened in 2005.

The project would create 500 construction jobs and 250 full-time jobs, and about $2 million in new annual tax revenue, Mayor Paul Fraim said.

Public money would cover more than half the project. The hotel is expected to cost $64 million, while the city's share includes: $42.5 million for the conference center, $19.5 million for the parking garage, a $750,000 performance grant to recruit a high-end restaurant and a $7.5 million grant to offset the construction costs for the hotel. The money would come from the city's public amenities fund.

That's in addition to the $16 million the city has already spent to clear the site.

City officials signed a letter of intent with Gold Key on Thursday. The city denied The Virginian-Pilot's request for a copy of the document, citing a "confidentiality clause," city spokeswoman Lori Crouch said.

If defense spending is cut as dramatically as some fear, it would "kill the deal," Thompson said after Friday's announcement. Fraim said he didn't expect the deep cuts to happen, but if they did, "all bets are off."

This marks the city's third attempt in a decade to build a hotel-conference center at the site through a public-private partnership. The City Council approved an agreement in 2005 and then amended it, most recently in 2009. Fraim said Friday that there will be a public hearing and possibly "council action" later.

There is $19.7 million set aside for the project in the public amenities fund, which is tied to the meals and lodging tax. The City Council created the fund in 2002 for the purpose of building either a conference center or a basketball arena to attract more visitors to the city.

The fund is expected to take in about $5.5 million this year. The annual revenue would go to pay the debt on the project.

The project appears to have universal support on the council, but Councilman Tommy Smigiel said he is bothered that the council didn't discuss the letter of intent at its Tuesday meeting, leaving some council members to hear details for the first time at the news conference.

"It is troubling because it's kind of like putting the cart before the horse," he said. "I want to be supportive, but at the same time, I do have questions."

Thompson said he will likely use Las Vegas-based Cleo Design to design the project. Gold Key has up to 90 days to finalize the agreement, but Thompson said he hopes to have it wrapped up in a month.

Thompson said it will then take about six months to finish the design. The groundbreaking could happen by the end of the year, he said. Currently, the site contains The Plot, a park that opened last year.

Councilman Andy Protogyrou described the partnership between the city of Norfolk and a Virginia Beach developer as a "game changer" for the region.

"Thompson wants to do well, we want him to do well, and part of doing well is going to be linking Norfolk to Virginia Beach by light rail and joint developments in the future," Protogyrou said.

Jillian Nolin, 757-446-2326,


(c)2013 The Virginian-Pilot (Norfolk, Va.)

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