Texas developer frustrated by latest Jackson convention hotel deal
by Ted Carter
Published: July 5,2013
An Austin, Texas, hotel development company says it feels slighted that the City of Jackson is not giving it an opportunity to make a proposal to build a convention center hotel.
The hotel opportunity instead is going to Tampa, Fla.’s Robinson Callen Development in a $60-million deal the Jackson Redevelopment Authority approved on June 18 that so far JRA executive director Willie Mott has insisted on keeping secret.
Details that have been released have come from a press conference outgoing Mayor Harvey Johnson held in the last week of his term. Under that deal, the city would “backstop” $9 million, provide most of the land for the approximately 300-room hotel and surface parking lot and presumably provide such incentives as property tax waivers, sales tax exemptions and a Tax Increment Financing, or TIF, district.
The city would make the $9 million available in incremental loans over five years. The loans would be made only if occupancy at the hotel fell below a specified level. That level is reported to be 70 percent, but without the JRA releasing the development deal the occupancy benchmark can’t be verified.
Austin’s Journeyman Austin made a proposal in November 2011 to build the convention hotel in response to a last-minute RFP the Jackson Redevelopment Authority Board of Trustees issued on the advice of Zachary Taylor III, the JRA attorney. The board had been set to award the project to Dallas developer Transcontinental Real Estate until Taylor cautioned that an RFP would be necessary but could be condensed to 15 days rather than the customary 30 days.
The Jackson City Council ultimately rejected both the TCI and Journeyman Austin proposals. The project remained on hold until Robinson Callen recently entered the picture with an unsolicited proposal.
Robert Gallup, vice president of Journeyman Austin, said he received assurances from city officials and the JRA that his company would get a chance to make a proposal once the city revived the project. He said he was “taken aback” by the hasty way the city and the JRA attached themselves to Robinson Callen’s plan and dropped its previous pledge of issuing a new RFP.
“It’s frustrating,” Gallup said. “We would love to respond.”
The hotel development company won’t make a formal challenge but is ready to respond quickly should the City Council decide to consider proposals other than that of Robinson Callen, he added. “We could probably respond to it in 14 days,” as the company did before in the rushed-up RFP period.
“We’re ready to go,” Gallup said.
City officials and JRA board members call the Callen Robinson proposal to build the hotel across Pascagoula Street from the Jackson Convention Complex “a dream come true” for the city. Gallup insisted, however, that Journeyman Austin could present an equally attractive proposal.
With the land the city is awarding Robinson Callen for the hotel and the 200-space surface parking lot as well as a Tax Increment Finance district, “Looking at that, I can see how they (Robinson Callen) got to $60 million,” Gallup said.
“With a TIF, we’re sure we can be very competitive,” he added.
Under a Tax Increment District, a set tax rate would be set based on current valuation of the property in a district that would take in several blocks in the vicinity of the hotel. As property values rise with new development occurring, the money collected above the set tax rate and former property values would go into a TIF fund. Money from that fund would, in turn, be put toward the hotel development.
Providing Robinson Callen land for surface parking and freeing it from an obligation to build a parking structure carries an estimated savings of from $3 million to $3.5 million, according to Gallup.
The City Council ought to think twice about accepting a deal that does not include garage parking, warned Jackson real estate investor Don Hewitt, principal of Advanced Technologies Building Solutions, a firm that partnered with Journeyman Austin in the 2011 hotel proposal.
“Who is going to come to a [convention] hotel with surface parking? What we proposed had structure parking and retail,” said Hewitt, who voiced anger at not getting a chance to make a proposal as the city promised.
“It’s a slap in the face,” he said.
Though Gallup has not seen the Robinson Callen development deal, he said he understands the city “must guarantee 70 percent” occupancy. Otherwise, it would be obligated to begin lending the Tampa developer portions of the $9 million backstop.
It is not known whether Robinson Callen’s market studies show 70 percent occupancy can be achieved. That’s a large percentage of rooms for a second-tier convention city such as Jackson to keep filled, say Gallup and hospitality professionals familiar with the Central Business District’s hotel market.
For a June 2011 convention hotel article, the MBJ reported Jackson’s hotels averaged an occupancy of 51.1 percent for the first four months of that year. The 51.1 percent was within a few tenths of a percent of occupancy levels for all of 2010 and 2009.
Robinson Callen vice president David Clement, the company’s Jackson representative, did not respond to either a phone call or email seeking details on the development company’s market expectations.
The Jackson Redevelopment Authority insists it has no legal obligation to issue a new RFP. It based its position on Robinson Callen’s intention to purchase some of the land for the hotel and the city’s repossession of the remaining land which was originally purchased with a federal Section 108 loan. Mississippi statutes state that if you buy the land with federal money you are not covered by state statutes that would require an RFP, the JRA says.
The Mississippi Business Journal has presented the JRA with an Open Records request for the development agreement approved by the JRA board. Even though the JRA board has reviewed the agreement in closed session and voted on it in an open session, the agency says the agreement may contain proprietary information and can’t be released until thoroughly reviewed.
The MBJ views the refusal to release a document approved in public session a violation of the Mississippi Open Records law.
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