City, county leaders: hotel deal still in the works
Developer interested, investors needed
By DEANNE WINTERTON
Some city and county leaders thought ground might have been broken for a hotel on Commercial Street by now, but they are still extending attractive incentives, and developers are still on board. But the search is still on for investors.
“I continue forward with this project with the same interest, excitement and enthusiasm to see it completed, as I had from day one of our conversations,” said Tim J. Shefchik, VP of development for BriMark Builders, LLC. “I believe that Cobblestone Hotels is a great fit for Morgan, and I believe Morgan is ready and capable to support an upper mid-scale hotel like Cobblestone.”
BriMark is a developer/general contractor that specializes in developing and building hotels, primarily Cobblestone Hotels, the fastest growing hotel brand in the industry, Shefchik said. “Cobblestone is also the most unique in its approach to national hotel franchising, making it the most ‘owner/investor friendly’ brand within the industry,” he said. “I have been working very closely with both the city and the county for quite some time now to organize a good project that can be brought out to potential investors to become the franchisee for the Morgan Cobblestone Hotel.”
And BriMark is a developer/builder, not a hotel investor or owner, Shefchik said in an email.
At the same time, Morgan City and Morgan County can only offer incentives. Just like BriMark, they are not hotel investors or owners. Even the landowner, Scott Parkinson, is on board.
What everyone needs to make this hotel project come to fruition is investors, owners, franchisees. And those are market-driven.
“We don’t control the capital and the markets,” Morgan County Economic Development Director Steve Lyon said. “We are still in negotiations. Some of these can take years.”
“Those who have been involved in the process of developing and bringing projects together in any size market, let alone smaller markets like Morgan, understand that these projects don’t come together overnight, and can sometimes take time,” Shefchik said. “The city, county (of Morgan), and myself continue to work closely together to bring this project together.”
Ty Bailey, Morgan City manager, said this is a good time and opportunity for a local investor to jump on board. “A local investor adds a local flavor to the project,” Bailey said. “There are a lot of other benefits that our local economy gets from getting local investors. It is a better flavor if we have a local investor. It is a good opportunity for someone to benefit locally, and not just purely from an investment standpoint.”
“It has been Cobblestone’s practice to scale the hotel on a local investor model,” Lyon said.
In the past eight years, the county has put funds toward multiple hotel studies.
A 2009 feasibility study had numbers that indicated a low profitability, even though those numbers may have been based on an economic downturn at the time.
A feasibility study from two years ago identified a Morgan City hotel as “not ideal for a private investor.” In 2015, Barker Real Estate Services based in Salt Lake City studied the feasibility of a 3.64 acre, 70-unit hotel on Commercial Street. The county paid Barker $10,000 in grant money for the study.
The Barker report referenced a 2014 Como Springs Feasibility Report prepared by MGB+A, saying without a revitalized Como Springs water park, a hotel in Morgan City would be hard pressed to get a positive return in the first two years.
The MGB+A report was later peer-reviewed by the county’s then economic development consultant Better City as well as Hotel and Leisure Advisors of Cleveland, Ohio, because the original was “overly aggressive in terms of what the market might be able to accomplish.” The county paid Hotel and Leisure Advisors $1,500 to verify the initial Como Springs report.
Three years ago, Marriott and Renascent Hospitality stepped away from a possible deal in Morgan.
The most recent study was in mid-2016, when Marlin Eldred was hired as the county’s economic development consultant and began flexing his network muscles. Benton and Associates conducted the study for $10,750, a cost that was split among the city, the county’s Business Expansion and Retention (BEAR) funds, and land owner Scott Parkinson.
A year ago, Eldred said PEG Development may be interested in a Hilton Tru in Morgan.
In February this year, talk was that a 54-room hotel with a pool and conference room would cost $5.7 million, and that investors were seeking $1 million in tax incentives to be paid over 10 years. Tax incentives can be extended to developers through a Regional Development Authority, or RDA, on Commercial Street. Three entities—Morgan City, Morgan County and Morgan School District—earlier this year considered extending the city’s current RDA. The RDA was first established in 1993 and is set to expire in less than two years.
In March, city and county leaders announced that Cobblestone Inn & Suites was interested in the incentives the city, county and school board were discussing.
While the city and county voted to extend the RDA another 10 years, the school board was hesitant to extend the RDA, citing that past tax incentives have cost them more than half a million dollars in tax revenue. On April 11, the school board voted to extend the RDA only to the end of 2017.
BriMark developers are aware similar project concepts have come and gone in Morgan. “I can’t answer to those, other than they were not proposed to be Cobblestone Hotels, and I was not working on them,” Shefchik said. “We at BriMark take a much different approach to the development of these projects, and I know that we (including the City, County, and myself) are all committed to seeing it come together sooner than later. We are ready, and excited, to begin construction just as quickly as we can have the commitments from a franchisee.”
And city and county officials are doing their best to help the stars align for what could be the first hotel in the county.
“The city is still offering an incentive package. We put the RDA and incentive package together to make this possibility a reality. We have opened that door because a hotel would be good for this community, an addition to this community,” Bailey said. “Now, it is getting the dots to line up.”
The incentives include waiving an impact fee worth a couple hundred thousand dollars, an enterprise zone tax credit up front, and incremental tax credits spanning 10 years, “on a post-performance” basis, leaders said.
Bailey said the city continues to offer incentives because, “it is difficult to be the first hotel in the county. But it is also a good opportunity to be the first one” in a county with a major interstate running through it, as well as a myriad of recreation alternatives such as skiing, river rafting and two state parks.
“Our job is: we are ready to receive whoever wants to step up,” Bailey said. “It is long, frustrating, and a lot of hurry and wait.”
City and county leaders said they would continue offering an incentive package to the county’s first hotel, but “if we are talking a second hotel, I don’t think we would have an incentive package put together,” Bailey said.
But Cobblestone is still sniffing around Morgan, even though many say the county is just too small of a market for a big hotel chain.
Cobblestone specializes in smaller rural markets that the bigger chains often overlook. Their tag line is “Big city quality, small town values,” according to their website at www.staycobblestone.com. The chain’s first property opened in 2008 and now it has 123 hotels open, under construction or in development across 17 states including Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Minnesota, Nebraska, North Dakota, Ohio, Pennsylvania, Tennessee, Texas, Wisconsin and Wyoming.
Last week, Cobblestone broke ground on a location in Victor, Idaho, on the southern end of the burgeoning Teton Valley. That location is set to have 56 rooms, an onsite lunge, indoor pool, guest laundry and fitness room.
Cobblestone broke ground on a 53-room hotel in Soda Springs, Idaho, in November of 2016. That location is planned to include a conference room, fitness room, laundry facility, convenience store, alcohol bar, hot breakfast, and in-room microwaves, refrigerators and 40-inch flat screen TVs.
Nine other locations under construction include Paxton, Ill.; Stevens Point, Wis.; Vinton, La.; Gering, Neb.; Greenville, Pa.; Guernsey, Wyo.; Lamoni, Iowa; Menomonie, Wis.; and Orrville, Ohio.
Based in Neenah, Wis., Cobblestone Hotels, LLC claims to be an upper-midscale hotel brand with signature amenities such as high-speed Internet, complimentary hot breakfast, convenience store, fitness center, and business center.