Downtown luxury hotel project subject to influence plays by contesting factions

by Jordan Green

Bridget Chisholm, a financial consultant with North Carolina roots and an MBA from the Wharton School of Business, had discussed an idea she had for a downtown Greensboro luxury hotel financed with federal recovery bonds with Ole Asheboro community leaders and a handful of reporters by mid-summer 2009.

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, Chisholm had already presented renderings of the planned hotel before the Greensboro Redevelopment Commission.

“No one would be talking about recovery zone facility bonds if it weren’t for Bridget Chisholm,” Greensboro at-large Councilman Robbie Perkins said. “She went to the trouble to read the legislation. She’s a very smart lady…. Everyone had an opportunity to look at these and said, ‘These are too hard.’ She kept at it. My hat’s off to [Chisholm’s group] for having that kind of perseverance.’” The Recovery Zone Facility Bonds allow developers to finance qualifying projects by selling bonds to buyers who are not required to pay federal taxes on their investment. The bonds are backed by private banks rather than local, state or federal governments. In essence, the tax exemption creates cheap capital, and the program is designed to stimulate economic development and put people back to work.

City staff had questions about the project early on: The hotel industry had taken a beating ever since the economy tanked. Room vacancies and business trips had been down. Projected room rates for the proposed downtown luxury hotel seemed unrealistic.

“I do think that the fact that this will be a brand-new hotel as well as its downtown location, high-end flag and heavy advertising, it would likely successfully cannibalize customers that would have otherwise stayed at one of the competitors,” wrote Greensboro Economic Development Manager John Shoffner in an e-mail to Assistant City Manager Andy Scott.

Scott turned to local hotel developer Dennis Quaintance for advice on the viability of Chisholm’s project. The day after Shoffner expressed concerns about the project, Quaintance told Scott: “If I were in the city’s shoes, I’d get a market study for this sort of hotel from one of the top consultancies.”

At the top of his list was Hotel Valuation Services International, a Colorado-based hotel consulting group. The firm would produce two reports for the city of Greensboro on the proposed hotel — one assuming that the hotel would be built at the intersection of South Elm and Lee streets in an area razed for redevelopment, and another in a prime downtown location across from the new International Civil Rights Center and Museum. The second report, referencing the current location under consideration and received by Scott on Jan. 18, concluded that “the developer’s projection of occupancy at the proposed hotel over the first five years is highly unlikely to be achieved” and “the revenue per available room… is well below the level necessary to cover debt services.”

The report also determined that the proposed hotel would likely compete directly with two Marriott hotels, and with the O. Henry and Proximity hotels. The latter two were developed by Quaintance and his partner, Mike Weaver.

“Dennis is very concerned that a project failure in Greensboro would have a negative impact on whatever plans he might have in the near and distant future and the hospitality business,” Scott said in an interview with YES! Weekly. “He’s been pretty upfront about that.”

Quaintance kept in close contact with Scott about the competing project, and during one week in January the two were talking on the phone every day. In mid-January, a sleepless Quaintance dashed off an impassioned e-mail outlining his objections to Scott. He and Weaver would soon go public with their reservations. The two filed an extensive public records request through a high-powered local law firm, and Weaver showed up at a Guilford County Industrial Facilities Pollution Control Authority hearing to urge caution on green-lighting the hotel project for consideration by authorities in Raleigh.

Quaintance and Weaver’s intervention put Chisholm and her associates on the defensive and stoked fears that the two rival hotel developers might leverage their standing in the community to derail the proposed hotel.

Chisholm’s group responded by attempting to protect a new proposal from public scrutiny,

in contrast to its lack of objections about the release of an earlier proposal when the hotel was planned for South Elm and Lee streets.

Lawyer Eric Pristell told City Attorney Terry Wood that the hotel group considered the proposal a trade secret and exempt from public disclosure. When Wood determined that the document could be released with tax ID numbers and much of the business plan redacted, Pristell responded, “If I were in your position, I would choose not to disclose the un-redacted version of my client’s proposal to the public. The fundamental reason is that if the public decides to sue and you lose, your damages will be significantly lower than if you released the document and my client sued. Our damages, if proven, would be substantial. Food for thought.”

Since New Year’s Eve, when city staff learned from Chisholm’s group that the hotel would be built near the center city rather than south of Lee Street, escalating charges of inappropriate political influence have surfaced on either side of the project.

Guilford County Commission Chairman Skip Alston, who is considered a leader of the black community by virtue of his status as a voting member of the Simkins PAC — which distributes its endorsements to black voters in favor of candidates considered friendly to the black community’s interests — emerged as the real estate broker in the hotel deal. He has not disclosed the fee he would receive should the deal close. Considering his personal financial stake in the project, Greensboro Mayor Bill Knight and Mayor Pro Tem Nancy Vaughan expressed strong disappointment after Alston conveyed to them that they could face political consequences if they were to revisit the city council’s vote to approve the hotel project, allowing it to be considered by the county industrial authority and, later, by the Local Government Commission in Raleigh.

Similarly, threats by Guilford County School Board member Deena Hayes to organize a rally in conjunction with the opening of the civil rights museum stirred public outcry, especially when it was revealed that she maintains a household with the owner of a construction company listed as one of the principals in the group assembled by Chisholm to build the hotel. Hayes is also a member of the Ole Asheboro Neighborhood Association, which holds a small stake in the hotel project.

From Chisholm, Alston and Hayes’ perspective, word of Quaintance’s behind-the-scenes communications

with Scott and a public statement by Mayor Knight provided ample reason for concern that the project might be subject to undue influence from the other direction.

On New Year’s Day, Knight was quoted in the News & Record as saying, “I do have concern about the impact on our hotel industry. We need to protect them.”

In late January, Hayes drafted a response that she sent to those questioning her contention that the scrutiny of the hotel project was racially motivated: “The political pressure is coming from ‘private hotel special interest’ not a broad citizen/constituency,” she said. “The mayor has mentioned the need to ‘protect preexisting hotels’ interest.’ No mention of protecting the interest and opportunities of the citizens in the recovery zone area.”

A Jan. 12 e-mail from Quaintance to Scott that was sent at 3:39 a.m. contains much to substantiate the concerns felt by Chisholm and her group.

“We probably would have gotten busy and put our own project (smaller initial phase), three variations of which have been in the works for years,” Quaintance wrote. “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.”

Quaintance clarified his intentions in a recent e-mail to YES! Weekly: “No, we will not apply for these bonds and would not have back in December. We do not have plans for a downtown hotel. We have studied the potential and we don’t see a gap in the trade area/market.”

Bruised by weeks of heated public discourse over the proposed hotel, Chisholm expressed skepticism towards Quaintance’s public denial.

“His actions are incongruent with that statement,” she said. “He may not have been interested in recovery bonds, but he’s already stated that he’s interested in building a hotel downtown.”

Quaintance expressed admiration of Chisholm’s financial acumen.

“She’s sharp,” he said. “I think she must be a very sincere student of these programs. That’s absolutely to her credit. I have no fault with her and anyone involved with her. My fault is with our county and city government.

Quaintance acknowledged the proposed hotel will have a financial impact on his businesses if it gets built, but he said his public criticism of the process is motivated more by concern about the local hotel industry, the welfare downtown Greensboro and wanting to see Greensboro’s allocation of recovery bonds put to its most effective use. He professed puzzlement at the racial cast that has framed the public discussion of the hotel.

“The issue of race is surprising because I can’t get there,” Quaintance said. “I think it’s unfortunate. I don’t think it’s as big a deal as people are making it out to be. I just can’t imagine that people think that we are saying, ‘I know what: Let’s go mess with this process because I don’t want African Americans to prosper.’ The opposite is true. If you see ways we can be helpful to any community that doesn’t get a fair shake — that includes the disability community or the gay, lesbian, bisexual and transgender community — and they really are not getting a fair shake — put me in the game, brother.”

Whether the hotel and a handful of other local projects in the pipeline ultimately receive financing through the federal recovery zone facility bond program remains a matter of speculation and debate.

“The financing package is so good they don’t have any risk,” said Joe Varipapa, general manager at Comfort Suites Airport and president of the Guilford County Hotel/Motel Association. “I think it will be built, and I think it will be a mistake.”

Varipapa, who emphasized that the hotel/motel association is staying neutral on the matter and that he speaks only for himself, added, “I don’t think it’s the right time to build a hotel downtown. Last year was probably the roughest year we’ve ever had. I’ve been in the hotel business 35 years in Guilford and Alamance counties. The bottom line is we don’t need another hotel right now. The demand is not there. We’re overbuilt.”

Quaintance concurs. In another e-mail written to Scott last month, he said, “They might get it done. If it does get done, it will cause even more concern for me that we are creating yet another bubble, but… I’m not a czar.”

Scott said Quaintance argued that staff should have withdrawn support for the project when the proposed hotel changed location, while the assistant city manger disagreed, contending that such a decision would have overstepped staff’s bounds.

“My position has always been that any project that gets as far as the Local Government Commission will get full financial vetting,” Scott said. “His understanding is that an organization might be able to sell junk bonds…. My understanding about the Local Government Commission is that they’ve always been pretty straight. I probably feel that there are more safeguards in the process than he does.”

While many worry that the city council, county commission, industrial authority and Local Government Commission might fail to give proper vetting and allow ill-conceived and unsustainable projects to go up, Scott said he fears that exactly the opposite.

“I am not sure that many projects in North Carolina will be able to utilize this funding,” he said. “I hope I’m wrong. I think our financial networks are so tight and bank requirements are so strong that it’s going to be difficult to see a lot of projects go through. You can say, ‘That’s great: No bad projects can go through.’ You can also say, ‘That’s too bad: There’s projects that won’t go through that might have been very good.’” As long as bets are being taken, count Robbie Perkins in the bullish column. Noting a heated exchange at a recent industrial authority hearing between Weaver and George House, one of Chisholm’s partners, Perkins asked, “Why would Weaver and George House go toe to toe if George didn’t feel very certain about being able to get the money?

“You don’t get into that kind of conversation unless you’ve got a high level of confidence that it’s going to happen. The people involved know what they’re doing. They’re very bright and they’ve got a lot of business acumen. This group’s got everything going for it that the group that put the recovery bonds together are looking for.”

Mike Weaver, a Greensboro hotel developer, urges the Guilford County Industrial Facilities & Pollution Control Financing Authority to exercise caution in approving a downtown luxury hotel project represented by lawyer Eric Pristell (left) and Elm Street Center LLC partner George House during a recent meeting. (photo by Jordan Green)