Will bad projects receive proper vetting? Will good projects get turned down?

The American Recovery and Reinvestment Act was signed into law by President Obama in February 2009. As early as June, the US Treasury Department had released local allocations of the recovery bonds, and in late October, Greensboro city staff was scrambling to assemble projects. In late November, the city announced a community meeting to educate potential applicants on opportunities. By then, Bridget Chisholm had already presented renderings of a planned hotel before the Greensboro Redevelopment Commission. More here.

Receiving a 35-percent break on interest on a project sounded like a win-win situation to Greensboro developer Lee Porter until he discovered the maze of regulations and bureaucracy he had to wade through to get his $1.9 million daycare facility project approved by private lenders and public boards like the Forsyth County Industrial Facilities & Pollution Control Financing Authority. More here.

Quaintance's downtown hotel envy

Dennis Quaintance, e-mail to Greensboro Assistant City Manager Andy Scott, Jan. 12:

“My jaw hit the floor a couple of different times when I learned that the financial mechanisms in play were different than you explained to us. I’m not really angry about this. My guess is that it was just an honest misunderstanding. It was just what you thought was so. Yet I am disappointed in that if we’d known earlier what we know now, we probably would have gotten busy and put together our own project (smaller initial phase), three variations of which have been in the work for years. My bet is that it was just an honest misunderstanding. We probably would have had enough time if we’d started earlier. I want to explain my feelings about that and make sure that we are ‘clean.’ If we’d started back in the early winter, we’d likely be ahead of this other project now but since we sat on our hands, they have lapped us and will possibly suck a lot of the various allocations away prior to our being able to belly up. Plus, even our long-term investment idea of making sense out of a smaller project that surely wouldn’t make money for years but would be justified with the eventual expansion potential and lower basis, wouldn’t work if new inventory is added to the market. (In fairness, if this other project had stayed on Lee Street, we probably would have stayed on the sidelines because entering then might have made us look like a party pooper from the Old Asheboro Neighborhood Association’s perspective. We are sincerely respectful of their point of view.)"

This makes it clear that Quaintance and fellow hotel developer Mike Weaver are envious of the proposed downtown hotel project, would have liked to have done it themselves, are concerned that Chisholm's group will corner a lot of the bond allocation, and could be contemplating submitting their own request for bond allocation if they can get the city council or the industrial authority to kill Chisholm's deal.

I'm organizing my notes, and plan to contact Quaintance to ask him for clarification.

UPDATE: Ed Cone writes: "The competitive aspect is pretty well understood." Richard Barron has cited the above-referenced e-mail in a Jan. 30 News & Record article. The e-mail is buried at the end of the article and heavily qualified by Quaintance's explanation that he was speaking hypothetically rather than outlining a concrete intention.

Local bond authority takes no action on hotel

Lawyer Eric Pristell (left) and businessman George House listen to remarks by developer Mike Weaver.

It felt a little like the blind leading the blind at the meeting of the local bonding authority with the unwieldy name of the Guilford County Industrial Facilities and Pollution Control Financing Authority in the Blue Room of the Old Guilford Courthouse today.

George Brumback, chairman of the authority, summed up the general feeling when he said, “I’m just telling you what we have done in the past. As the newspaper said, ‘This is a new critter.’”

Brumback said the authority has no written guidelines for vetting recovery zone facility bonds created by the federal government under the American Recovery and Reinvestment Act of 2009. Today was a first. Typically, the county-level financing authorities review industrial revenue bonds for manufacturing facilities and solid waste disposal facilities. The Obama administration’s aggressive effort to prime the national economy has thrust the four members of the local financing authority into a heady and controversial role few of them would probably have anticipated when they signed on.

Eric Pristell, a Durham lawyer representing the Urban Hotel Group, and George House, a local businessman who is a partner in the Elm Street Center LLC, had hoped the finance authority would approve an inducement resolution to bump a controversial downtown hotel project up to the state Local Government Commission for final review and approval.

“What we want in this tough economic environment is a chance to make this work,” Pristell said. “And an inducement resolution is a way to make this work.”

Brumback told Pristell that his board typically reviews a business plan and documentation of some kind of preliminary commitment from a lender before taking action.

Pristell and House presented little information that had not already been aired before Greensboro City Council and in various reports submitted to local governments. Pristell said that beyond a business proposal with projections, he was hesitant to offer any more documentation without first consulting his clients.

“I think we’re all struggling with what our role is,” Brumback replied. “What we would like to see is a financial commitment from a lender, because that’s what we normally see.”

He added, “We’re all sort of seeking to make sure we’re not approving something that is financially unfeasible, and it goes to Raleigh and gets crucified and we have been blamed for approving something that was crucified.”

The financing authority ended up recessing to an unspecified date to gather more information about the hotel project before deciding whether to advance it for consideration in Raleigh. Pristell will likely confer with County Attorney Mark Payne and Mary Nash K. Rusher, the county’s bond counsel, to determine what type of documents will be critical to the financing authority’s decision.

From a lay reporter’s perspective, it’s difficult to tell whether the hotel group was remarkably unprepared or if the process is so new that the terrain is completely unfamiliar to everyone.

After the meeting, Rusher told me: “Usually, by the time someone comes to this point they are able to provide information as to how [the project] can be financed. It’s definitely true that this process has been completely rushed.”

The meeting was sparsely attended. Mike Weaver, a local developer behind the O. Henry and Proximity hotels, spoke passionately and at length against the proposed hotel project. Brumback humored him for several minutes, but then threatened to set a time limit.

“I might like to refresh your memory on competition,” said the snowy-haired Weaver, dressed in a purple cardigan, addressing House. “I think it was Friday that we were talking. You told me that you would put the Downtown Marriott out of business.”

House averred, blushing visibly.

“I think we would compete very favorably with the Downtown Marriott,” he said.

Later, Weaver launched into a cautionary tale about what might happen if either the proposed new hotel or the Downtown Marriott were to go out of business.

“What happens if this thing doesn’t make it?” Weaver said. “Does anybody lose? Does the community lose? You’re elders. What happens when a hotel fails?”

He continued that the hotel that has become the Marriott has already failed before. It was forced to reduce its rates, and then sold to the current ownership group. An additional succession of failures could lead to either of the hotels being transformed into student housing, elderly housing or transient housing. In the worst-case scenario, either of the hotels could end up being torn down altogether, he said.

House had clearly anticipated Weaver’s remarks. He and Pristell seemed annoyed by Weaver's vocal opposition.

House told the financing authority that investors “would only get our money out if the thing is successful. I guess I could be a fool and be throwing my money away, but I think it’s going to be successful. The marketplace is going to be the judge. We’ve had disputes with our potential competitors, but they don’t know our numbers. I ask you to let it go forward, and let it survive or die before the [Local Government Commission] on its own merits.”

House also said he had been “asleep at the switch” when the American Recovery and Reinvestment Act passed. It’s clear that the stimulus program under the new administration in Washington has created opportunities for urban entrepreneurs that are plugged in and paying attention to the twists and turns of national policy.

House expressed admiration for Bridget Chisholm, the finance consultant who conceived of the hotel idea.

“To her credit, when this bill passed, she read it,” he said. “To my discredit, I, like 99.9 percent of the rest of Greensboro, didn’t read it and didn’t know about it.”

I anticipate that Joe Killian, who attended the meeting, already has a story posted at the News & Record website. Scott Yost was the other reporter present, and I don’t know whether he will have a story in tomorrow’s Rhino.

I’ll be reading through a thick accordion file of documents provided by the county in response to Weaver’s public records request, and a companion trove likely available from the city tomorrow. I plan to contextualize and cross-reference revelations from the meeting today with information from documents and personal interviews for a story in our print edition on Feb. 4. Feel free to shoot me questions on this comment thread, or by e-mailing me at jordan@yesweekly.com if you would like me to pursue any specific angles of inquiry.

UPDATE: More from Killian.

UPDATE 2: Piedmont Publius discusses the bond authority hearing. He says that Mike Weaver and Dennis Quaintance showed up to keep an eye on things. Not quite: It was just Weaver, not Quaintance.

What the movement is about, part 2

My take on this racially tinged spat over a threatened march on the civil rights museum because of two rival hoteliers scrutiny of federal bond financing for a new hotel is that it's a quarrel among local lords of commerce in Greensboro. There is a narrow kind of black empowerment at stake in that some members of the consortium promoting the new downtown luxury hotel are black. (See Hayes and cohort Bridget Chisholm's thoughts on black community empowerment here.) But for the mass of black workers, or working-class people of any race, it's a wash. They win if a new upscale hotel succeeds without putting the other hotels out of business because opportunities for employment expand.

But the new luxury hotel, if it's built, will draw from the same pool of workers as the Proximity and the O. Henry, Dennis Quaintance and Mike Weaver's entities. If the Proximity or the O. Henry go under because their markets are cannibalized by the new downtown luxury hotel, former employees of the Proximity and O. Henry will be the most qualified to staff the new venture.

Cone provides some background for this morning's News & Record story on the unfolding saga.

UPDATE: More at Roch 101 here and here, and at Hogg's Blog.

UPDATE 2: A related strand from Piedmont Publius.

Hayes: Hotel group will turn down offer for land at South Elm and Lee

Deena Hayes says in a mass e-mail that the Ole Asheboro Neighborhood Association has decided to turn down the Greensboro Redevelopment Commission's offer to sell property at the intersection of South Elm streets for $1.1 million as a site for a luxury hotel.

Hayes writes in an e-mail yesterday at 12:26 p.m. to supporters of the neighborhood association's efforts:

Thank you so much for your ongoing support of the effort to bring-wealth building opportunities to the Ole Asheboro Street Neighborhood Association. After talking with our real estate representative, Skip Alston, we all felt that the price that the redevelopment commission attached to the land was inflated and did not fit our plan. Mr. Alston aligned us with a partner a few blocks away and we should be solidifying the partnership in the next 36 hours. The new site is in the heart of downtown and still meets the criteria for the Stimulus Economic and Facility Bond resources that Bridget Chisholm secured for this project. It is in a redevelopment area, the neighborhood association is still a partner and African Americans, Urban Hotel Group/OASNA will have majority ownership.

UPDATE: Looks like I missed the official announcement.

Commission OK’s land sale despite concerns about hotel marketability

The Ole Asheboro Neighborhood Association has hired lawyer Henry Isaacson (right) to represent it in a land deal with developer Bridget Chisholm (left). Also pictured are neighborhood association president Barbara Akins (second from left), Guilford County School Board member Deena Hayes and lawyer Eric Pristell (obscured).

A split Greensboro Redevelopment Commission voted 3-2 along racial lines to sell 2.8 acres near the intersection of Elm and Lee streets to the Ole Asheboro Neighborhood Association for $1.1 million, marking the start of a process to develop a luxury hotel through a partnership with a Memphis developer.

The project as conceived by developer Bridget Chisholm has captured the imagination of many in southeast Greensboro with its promise of revitalization for a long economically depressed African-American neighborhood and community empowerment, but city staff members and some commissioners cautioned that the hotel might not be as marketable as promised.

The site lies at a busy intersection on Lee Street about midway between the exits where it collects traffic from Interstate 40 and at the southern frontier of the city’s cultural and commercial heart on Elm Street. When it opens in February, the International Civil Rights Center & Museum will join a clutch of nightclubs, the respected regional theater Triad Stage and a lively restaurant scene on Elm Street. The last several blocks before Elm Street reaches Lee Street have developed into a thriving arts and antiques and district. Adding to the potential of the hotel site, a segment of the new downtown greenway is in the final planning stages.

“It not only creates jobs, but it creates a dream,” said Barbara Akins, president of the Ole Asheboro Neighborhood Association. “We’re talking about a community where folks are always coming in to us and telling us what they have for us. When this conversation came up, it was almost as if we were bringing the idea to the table.”

Under an “anticipated ownership structure” for the proposed Ole Asheboro Hotel submitted to the city by Chisholm, the nonprofit Ole Asheboro Neighborhood Association would have a 15 percent stake in the project. Chisholm’s company, Urban Hotel Group, would hold a 25 percent stake, with the remaining 60 percent held by other private investors.

Akins said she moved to Ole Asheboro 17 years ago with the notion that downtown revitalization would improve the value of her property. What she had expected to take five years could be finally realized if the city supports the hotel project, she said.

Several prominent members of the local black political establishment expressed support for the project. Among them was commission chair Nettie Coad, who lost her bid for the District 2 city council seat earlier this year. Coad is a longtime resident of Ole Asheboro and the namesake of an apartment complex on Martin Luther King Jr. Drive.

“I sit here admiring your stamina and the work that you’ve done, just wishing that I could have been out there helping you,” she told members of the neighborhood association. NC Rep. Alma Adams, a former city council member, also spoke in favor of the sale.

When Commissioner Bob Mays questioned Akins on whether the neighborhood association had exercised due diligence in ensuring that it would receive revenue from the project, Deena Hayes spoke on her behalf. Hayes is a member of the Guilford County School Board.

“We’re looking at this as a long-term value, and we think it will generate something,” Hayes said. “We’re not looking at this huge number the first or second year. This is going to be an opportunity for this community association to have its teeth in something that is very meaningful in regards to creating revenue.”

Mays cautioned, “You do know this is a business; it’s a speculative business. There could be a situation where you wouldn’t see any revenue or distributed profit.”

Hayes also addressed a question about whether the project would create good paying jobs for residents.

“The commitment on behalf of these two groups is that they value what we value,” she said. “And that is raising — whether the city does or the state does — to decent-wage jobs.”

Interim Housing and Community Development Director Dan Curry told commissioners that a market study commissioned by the city drew a different conclusion than one financed by Chisholm’s group.

“The hotel is predicting, as Ms. Chisholm said, initial occupancy rates around the upper 60s — 68, 69, 70 percent occupancy rates, and roughly $200 a night,” he said. “That is in excess of what the current marketplace is for hotel rooms in the Greensboro market.”

John Shoffner, the city’s economic development program manager, said in a memo completed hours before the vote that “it appears that the average daily rate at which a prudent hotel operator could successfully market upscale hotel rooms ranges between $116 and $152 a night.”

The Shoffner memo concludes that “there is material risk that the new downtown hotel project would have difficulty meeting its debt service obligation with the current proposed capital structure” and recommends that the developers “initiate a full feasibility study at their expense to better determine the appropriate price point and demand at which a new downtown hotel could be a viable going concern for the long term.”

The city’s study based its occupancy and rate figures on nine existing Greensboro hotels, including the Marriott Greensboro Downtown, the O. Henry Hotel, the Proximity, the Doubletree Greensboro and the Hyatt Place Greensboro. Chisholm called the comparison “apples to oranges.”

“Let’s make the comparisons correct; then you can address head-on the material risk of doing a hotel,” she said. “I think if you look at the trends of four-star, luxury hotels in southeastern markets, the occupancy rates have been holding at 70-plus percent; the average daily rates have been holding at $200 per night. When you actually call and check the nightly point rates, four key hotels in this area that would be similar to our product — the Grandover, the Proximity, the O. Henry — they’re not charging $100 a night or $150 a night. They’re asking for $200-$250 a night.”

The land sale will have to be ratified by the Greensboro City Council at its Jan. 5 meeting. If a majority of the council does not approve of the decision, it could vote to remand the matter back to the redevelopment commission, Curry said.

Earlier this month, the city council voted to include the Ole Asheboro Hotel, along with two smaller projects, in a notice of intent filed with the state for recovery zone facility bonds. The developer is seeking $17 million in low-interest financing under the American Recovery and Reinvestment Act. The council will have to take an additional vote to authorize the bonds, which would incur no liability on the city.

Mays and fellow commissioner Jerry Liemenstoll had argued that selling part of the tract assembled by the redevelopment commission to the hotel development group would short-circuit the master developer process, which includes issuing a Request For Proposals. They worry that the remaining parcels will be less attractive to potential developers with the hotel property plucked out. Advocates for the hotel project argued in response that the federal recovery bonds offer a small window of opportunity that demands immediate action.

“Would I be here if there wasn’t an American Recovery Act?” Chisholm asked. “Absolutely not. It’s very hard to make the numbers work with the current structure, understanding where the market is today. But it does work and it is viable.”

The seven-story luxury hotel with meeting space, a restaurant and bar, and a pool and fitness center is estimated to cost $47 million, including a parking garage. Chisholm’s group is requesting a public investment of $8 million, primarily for a parking garage, but also including a retail shell to be leased to other businesses, relocation of overhead power lines, stormwater retention, streetscaping, sidewalks and curb and gutter work.

The city has filed a notice of intent with the state for $4 million in economic development bonds to pay for the parking garage and associated infrastructure. Curry said he believes the county commission has filed notice for the equivalent amount to cover the rest of the public infrastructure costs.

“We believe that this deal will not turn into a pumpkin, but is in fact viable,” said Eric Pristell, a Durham lawyer who has been hired as counsel by Chisholm’s company. “We disagree with some of the conclusions of staff, and will work through those. But today the fundamental question is whether you will sell the land to the nonprofit, and I hope you will stay focused on that and not put on the hat of an underwriter from Wall Street.”