A city board has approved the sale of the Chattanoogan hotel for $27 million - $5 million lower than was earlier approved with another firm.
The Chattanooga Downtown Redevelopment Corporation on Tuesday morning approved entering into negotiations for the sale of the hotel which was built and is currently owned by the city. The decision to sell the hotel was made last October and a buyer - Schulte Hospitality Group of Lexington, Ky.
- was announced. However, negotiations were not successful so the city went back to the most aggressive potential buyers. Ascent-Hospitality based in Buford, Ga., has been chosen to be the new hotel owner.
Terms with the potential buyer include the sale price of $27 million with $1 million put up as earnest money. The company will have a 45 day period for due diligence and the option of an additional 45 days. It the option is taken, another $500,000 in earnest money will be required. City closing costs will be $830,000. Closing will take place 30 days following that. The city will retain ownership of the parking garage that is associated with the hotel, and will lease 160 spaces for a 20-year term with an extension option to the hotel. Closing will be in mid July but with a 45-day extension, could be in mid or late August.
Benchmark, the company now managing and marketing the hotel, was given a contract extension of a year that will begin June 1. The extension was needed for extra time to accommodate the sale.
The city now has $31.9 million of outstanding debt related to the Chattanoogan Hotel. With the sale at $27 million, the city will be left with $4.9 million outstanding. The income generated by the hotel does not cover the debt service. If it is sold, Chattanooga will have a net savings of $23.1 million, leaving the $4.9 million in debt. This savings would be partially due to the fact that the facility will be put on the city’s tax rolls. Another consideration is that Ascent is planning to make $10 million in renovations.
It was stated that debt is separate for the hotel and the garage, and that income will be coming in by retaining ownership of the parking deck. There is $6 million outstanding debt for the garage.
The Redevelopment Corporation also discussed ways to facilitate the construction of the Moxy Hotel and a mixed-use building that is being renovated at the corner of Market and King streets by developer and owner Hiren Desai. Repairs are needed to fix a water problem in the basement of the building that will hold restaurants, offices, and apartments. City engineers have determined that the problem is caused by the slope of both a parking lot owned by the hotel and an adjacent lot owned by the city. Access to the property is also needed to complete demolition to the adjacent property, and the only way to get it is by using the city’s parking lot.
City employees use this lot and, for liability reasons, the city wants to eliminate all parking there for the five-week duration of the construction. Alternate parking has been obtained from CARTA for 40 spaces at $42 each per month. A Republic lot on Cowart Street has been found for the other 38 spaces that will be needed. The spaces on Cowart will cost around $8,000 for the two months they will be rented. Mr. Desai has agreed to cover all costs related to relocated parking. He was given the option to provide parking elsewhere during the second month if a better location is available.
The city wants to own and manage the parking lot that is contributing to the water problem in the building next door, and would prefer to make a permanent fix that would totally re-do the lot. To do this, the city is required to put the project out for bid which would take a minimum of 76 days before it is awarded. Construction is taking place now and time is of the essence so the CDRC is considering options to speed up the process.
It was decided that going forward, the city will come up with a price for a temporary fix to the lot using city employees to do the work. That figure will be determined by Wednesday. A RFP will also be done for a permanent fix which is expected to be around $400,000. This will take at least 76 days. If the temporary fix is viable, the problem with urgency will be resolved and water proofing the basement can be completed, at which time the CDRC could move forward with the RFP as usual. The meeting was recessed and no action was taken at the meeting on that issue. The CDRC will reconvene to vote on the issue on Thursday at 11 a.m. when more information is known.
If this plan does not work, other options that can be considered are to declare it an emergency in order to get a shorter bid window. Or, ownership of the lot may be able to be transferred to the Industrial Development Board which could expedite the process because an RFP would not be required.
Another item on the agenda Monday was the management of events at the waterfront which is owned by the city. Events are currently being organized by Friends of the Festival. A board member requested for these management services to be put out to bid with an RFP. This proposal was approved by the CDRC.