The Public Building Authority’s development committee approached its decision on Lot 8’s future much like an investor: Should it bet on a “sure thing” with a lower return, or take a risk with the possibility of a higher payout?
On Thursday, committee members considered the two suitors for Millennium Park’s Lot 8. Both Eastman Credit Union and the Dowdy Group have submitted plans for the property, and ultimately, the committee voted 2-1 to recommend the “sure thing” — Eastman’s proposal to build a branch location — over the Dowdy Group’s proposal to construct a 100-room extended-stay hotel.
“We have a great interest in seeing this be the best project it can,” said PBA vice chair Jon Smith. “First of all, it’s the last piece of property we have, and second of all, we will live off the taxes generated by it.”
Smith, who voted against the non-binding recommendation, said his concern was the long-term revenues of the PBA. Committee members Stephen Dixon and Sam Preston voted in approval.
The PBA’s full board will take up the recommendation July 27, with both ECU and Dowdy Group representatives in attendance.
Smith outlined revenue estimates on both projects for committee members, who also considered the relative risks of both projects.
The $3 million ECU branch would generate $14,000 in annual property tax (with no sales or hotel/motel tax), create a maximum of 11 jobs, and be up and running within one year of closing. ECU has offered $750,000 for the property, $45,000 of which would go toward a commission.
The Dowdy Group, which has offered $600,000 for Lot 8, would construct a $9.5 million, 100-room extended-stay hotel. That project, according to Smith, would generate $60,000 in annual property tax, $28,000 in annual sales tax, and $130,000 in annual hotel/motel tax for the PBA, while creating about 14 full-time and 14 part-time jobs. The development group has asked for 12 months due diligence after closing, with another 14 to 18 months for the facility’s construction.
Despite the promise of higher revenues from the hotel, committee members said the risk of the project falling through and the waiting period before completion could tip the scales in Eastman’s direction.
Preston asked Brenda Clarke, representing the Dowdy Group, what the chances were of the hotel being built.
“In a stable economy, I’d say the chances are good,” said Clarke, president of The Clarke Commercial Real Estate Group. “Given this economy, I don’t think anyone’s chances are good.”
PBA committee members emphasized to Clarke they needed to see something more concrete as to how committed the Dowdy Group’s lender is to funding the project.
While the Dowdy Group does have a letter that indicates the lender’s desire to move forward, Clarke acknowledged much of the hotel project is in “limbo” and ECU’s project does appear more “solid.”
The Dowdy Group would need a contract on the property before it can move forward with the lender, and the PBA is hesitant to issue a contract without a more concrete guarantee the project would be completed.
“We feel the master plan for Millennium Park would include a hotel rather than another financial institution,” Clarke said. “It comes down to the bottom line and the overall development of Millennium Park and what you want to see there.”
Gary Sproles of TCI Group, representing ECU, said the PBA should have no qualms about Eastman’s commitment to the project. This offer represents the second time Eastman has attempted to acquire land in Millennium Park. Sproles said even with 30 days due diligence, the city permitting process, and construction, the branch would be open for business in nine to 10 months after closing.
Preston compared the choice with making a business decision.
“Its’s a slam dunk with ECU,” Preston said. “We’ve gotten burned on an extended-stay hotel before. It’s a sure thing versus a chance. In my business, you take the sure thing.”
Smith, who voted against the recommendation, said he did so to continue discussion on the issue of future revenues.
“My perspective is that I am concerned about future revenues to the PBA,” Smith said. “On the face, the Dowdy proposal will generate higher revenues than another financial institution. But you can’t look at it without taking into account the risk.”
The PBA’s full board will meet at noon July 27 at the Millennium Center to take up the recommendation.