The St. Louis Post-DisPatch this week reported that HRI Properties was not able to meet their obligation on debt service for the Renaissance Grand Hotel in downtown St. Louis. See my previous blogs. All concerned Peoria taxpayers should be following this event as it may be a foreshadow of the planned $108 million complex involving the Pere Marquette and surrounding businesses. Wednesday's JSEB Editorial, "Hold city's leaders accountable on hotel deal" quotes Mayor Ardis as saying "this project pays for itself". Read this editorial carefully.
On Tuesday the JS quoted Chris Setti, an assistant to Interim City Manager Hollings, "With projections ccme some risks".
If the risks are so few why is the "private cash" only $4 million on a $102 million, also projected, project?
The JSEB further states "the mayor and nine other council members voted to in favor of backing this $102 million hotel with nearly $40 million from taxpayers should be held accountable for what they say and do". From what little I have learned from the city council, which is nothing more than I read in the JS, this "transparent" (Read The Peoria Chronicle blogs of today) project appears to put the city (taxpayer) in a large crap shoot with taxpayers dollars.
As reported from St. Louis today, "The developer of Renaissance Grand Hotel in St. Louis, Missouri, HRI Properties, has presented its foreclosure forbearance proposal to bondholders, their lawyers and trustees. HRI made the proposal to bondholders as part of an effort to find a restructuring program that can help improve the lodging market's conditions and the hotel's value.
The Renaissance Grand, which started operations in 2003, has incurred a total debt of $98 million and its revenue often failed to cover the hotel's interest payments. Because of this, Kimberley-Clark, which owns 85 percent share in the property, was forced to contribute about $14 million to reinforce operating expenses.
HRI and Kimberly-Clark representatives said that both companies have decided that they would not provide funds to offset the hotel's $1.4 million revenue shortfall to meet its interest payment of $3.5 million due on December 15.
Kimberley-Clark is negotiating the transfer of its ownership share in the Renaissance Grant to HRI. In the process, the company has turned over all restructuring efforts for the property to HRI.
Included in the foreclosure forbearance plan presented to bondholders is a proposal to give HRI and Marriot Corp., Renaissance Grand's manager, until the 31st of December 2009 to boost the hotel's performance to avoid filing foreclosure proceedings.
In its presentation, HRI outlined the Renaissance Grand's operations and its projection that the hotel's profit for 2009 would total $1.4 million, a decrease from $5 million total earnings in 2007 and $3.8 million total in 2008.
HRI also included in the presentation its projection that the hotel's occupancy would be reduced to 60 percent in 2009, a decrease from 64.8 percent total occupancy in 2007 and 63.2 percent total in 2008.
If bondholders approved the foreclosure forbearance option, HRI is willing to serve as the bondholders' asset manager at no cost until the 31st of December 2009".
4 comments:
Here's reality.... No private development, in the U.S. today, occurs without tax incentives. That's a fact! You, apparently, believe that Peoria IL should be different. Ever since the late PJS columnist, Rick Baker, revealed a " little known secret " .... that Peoria owned nearly all the " public AND private development " (ex: Civic Center, Twin Towers, River Station restaurant, Continental Regency... now Holiday Inn City Centre, Etc.) in Downtown Peoria at that time.... a legion of Peorians have become distrustful of ALL Peoria developers AND city-assisted projects. So, how is THIS latest project financing any different?
What other cities are financially assisting urban development in the U.S. ? Here are more examples.... Lexington KY is using TIF financing to construct a 35-story (downtown) mixed-used tower/retail complex. Omaha NE is using a TIF to help construct a 32-story condo tower, currently on hold due to the economy, in it's downtown. Chicago has over a half-billion dollars worth of TIF projects completed, proposed, and under construction within it's downtown and New York City has issued billions of dollars of tax credits over several decades for the continuous redevelopment of Manhattan. So, Peoria IL should be different? Get Real!
Development is STILL a business not altruism! Will the private developers make money out of this deal? I hope so! Because, despite what skeptics are implying, the developers are risking twice the private financing versus the public portion! Do the math.... it's nearly 2 to 1. The agreement critics, including the Journal Star, lack confidence in Peoria's legal staff. The same staff whose job it is to make sure the City of Peoria is protected, within the development agreement, for it's stake in the project. But, the critics presume to know more than they about a project over a year in the making. They're the ONLY ones threatening Peoria's welfare, not the hotel's developer!
Reality is making millions of people rich today and twice as many sick. The JS says the private equity in the hotel is $4.5 million; historical credits, $4 million. Historical tax credits came from somewhere. City backed bonds come to $39.37 million based on the hotel's "projected" success. If not succesful, the city (taxpayer) picks up payments on the bonds. Are the city guaranteed bonds insured for the balance due including interest? If so who is paying for the insurance and approxsimately how much?
The 2 to 1 developer risk over the taxspayers risk? (the ordinary taxpayer is not asking for this risk) The figures in the JS do not bear out the 2 to 1 ratio.
Maybe this "reality" is a partial explanation that the city struggles with their budget and will struggle far more if this recession really hits the area. Or just if the projections don't hold up as they sure didn't in downtown St. Louis.
The country, indeed, the world is in what appears to be in a severe recession. It appears the way Peoria, this country and the world does business is the problem.
To many want to be subsidized from welfare up. This country through the Federal Reserve System is operating on phony money.
It appears, all developers have figured out legal ways to use tax payers to enrich themselves for the "intellectual" betterment of the rest of us. And circuses where we can sit on our widening butts and watch.
Perhaps more people should read more about what our competitors in the world are doing. Maybe more past histories, such as the rise and fall of nations, and less Spiderman comic books.
" Oooookay! And, just what does MOST of that have to with the new (downtown) hotel? "
PEORIA: I'll venture a guess to answer your question --- Merle's comments to you mean that Peoria taxpayers are likely to get financially fleeced again....
Ah yes, another opportunity which we cannot afford to miss like the ball stadium, the Riverplex, the Gateway building, One Technology, restaurants on stilts, parking decks ..... and now we get and have to look forward to the library expansion, CSO project and the museum to nowhere ....
Merle is correct, it is the way that welfare has invaded the mindset of many --- from welfare for the poor all along the way to developer welfare --- something wrong with the something for nothing mindset. Instead of a lifeline it has become a life style.
I do not buy lottery tickets --- if I did, I might as well spend my money on the lottery the odds are probaly equal or better than Peoria's past success rates for build it they will come projects which never met projections.
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