Commission okays land sale despite concerns about hotel marketability
Asplit 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 lowinterest 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 developerswith the hotel property plucked out. Advocates for the hotel projectargued in response that the federal recovery bonds offer a small windowof opportunity that demands immediate action.
“WouldI be here is there wasn’t an American Recovery Act?” Chisholm asked.“Absolutely not. It’s very hard to make the numbers work with thecurrent structure, understanding where the market is today. But it doeswork and it is viable.”
Theseven-story luxury hotel with meeting space, a restaurant and bar, anda pool and fitness center is esti mated to cost $47 million, includinga parking garage.
Chisholm’sgroup is requesting a public investment of $8 million, primarily for aparking garage, but also including a retail shell to be leased to otherbusinesses, relocation of overhead power lines, stormwater retention,streetscaping, sidewalks and curb and gutter work.
Thecity has filed a notice of intent with the state for $4 million ineconomic development bonds to pay for the parking garage and associatedinfrastructure. Curry said he believes the county commission has filednotice for the equivalent amount to cover the rest of the publicinfrastructure costs.
“Webelieve that this deal will not turn into a pumpkin, but is in factviable,” said Eric Pristell, a Durham lawyer who has been hired ascounsel by Chisholm’s company. “We disagree with some of theconclusions of staff, and will work through those. But today thefundamental question is whether you will sell the land to thenonprofit, and I hope you will stay focused on that and not put on thehat of an underwriter from Wall Street.”
The Ole AsheboroNeighborhood Association, led by Barbara Akins (back), has retainedlawyer Henry Isaacson (right) (photo by Jordan Green).