West Sacramento’s
taxpayers are on their way to owning a “higher end” multi-story hotel on their
riverfront. City officials are working on a deal in partnership with a federal
stimulus program, a South Korean investor and a local hotel developer to bring
the project to fruition. The project could put a 300-room hotel of around 16
stories on the River One site between the Tower Bridge and the “ziggurat”
building.
“The idea of developing a
hotel in a downtown location is one where subsidies are normally required,”
said Paul Blumberg, the city’s project manager for the hotel. “Particularly if
you have conference and meeting room space. Public entities almost always have
to make those projects work.”
Blumberg described the
project to the News-Ledger:
The city and its
redevelopment agency have together created a “West Sacramento Financing
Authority,” which will take on the project.
An acre of city-owned land
near the riverfront will go into the project, as well as another 4.6 acres the
Authority is buying from the Raley’s Corporation for about $9.6 million.
The Authority will then
issue bonds to raise money for the hotel, backed by “Build America Bonds” from
a 2009 federal stimulus bill.
“These are taxable bonds that
are issued just like any tax-exempt municipal bonds,” he said. “It provides a
federal subsidy in the amount of 35 percent of the interest rate on the debt
service.”
With that 35 percent
subsidy to the interest payments, the Authority will be able to offer bonds
with an return attractive to investors, he said. And a foreign investor without
U.S. tax obligations will find them even more attractive, because they won’t be
taxed on their returns.
The current negotiations
include an investor that wants to buy all the bonds issued for the project –
and provide a $12 million loan for pre-construction work such as design work.
That investor is Consus Asset Management, a real estate investment trust from
South Korea.
“Consus has offered to
purchase all of the revenue bonds to be issued by the West Sacramento Finance
Authority, up to $100 million, to build the hotel,” said Blumberg.
At the center of the
project is Parkcrest Development Corp., a Sacramento-area developer of
commercial, retail and hospitality space. Parkcrest’s projects include Le
Rivage Hotel along Sacramento’s southern riverfront. The hotel was completed on
a troublesome piece of real estate. It was in the news this month for being in
default on its original $25 million loan. Parkcrest also developed the Lake
Natoma Inn.
The city has not pledged
any general fund cash for the project, said Blumberg. But the future hotel’s
room taxes – the “transient occupancy taxes” listed at 12 percent of a room
rental in West Sacramento – will be set aside in case they are needed to rescue
the financing. If they aren’t needed, they’ll eventually be freed to the city.
When complete, the hotel
will be owned by a city agency.
“The agency will actually
own the land, and once the hotel is finished, it will own the hotel,” said
Blumberg. “The intent is to resell it at some time in the future. The authority
can sell it to a private entity.”
The future hotel’s actual
brand isn’t finalized.
“We hope to announce the
identity of the hotel operator next month,” he said. “It will no doubt be one
of the premier hotel operators in the country. The number of rooms being
targeted is about 300 rooms, in a high-rise configuration. The development
agreement calls for up to 18 stories.”
“A major part of this
hotel is the components that go with it – ballroom space, a conference center,
meeting rooms as well as a major destination restaurant overlooking the river.
It will be full-service, with a day spa and health club. It will have a major
‘business’ focus. But because of its location, it will also be able to attract
some leisure visits during the weekends.”
Hotel design is “to be
determined.” The public is welcome to give its thoughts on the project at
either of two September 21 workshops at city hall. The workshops are scheduled
for 4 p.m. and 6 p.m.
