A public forum Jackson City Councilman Tony Yarber staged Nov. 17 to hear details on a planned convention center hotel deal “right from the horse’s mouth” fell short of that expectation when the city’s proposed partner did a no-show.
Instead, the 50 or so people gathered at the Anderson United Methodist Church got some brief details on the financial arrangements and market viability for the proposed hotel partnership from consultants hired by the city. Financial adviser Porter Bingham of Atlanta and hotel development consultant Bob Swerdling of Denver punctuated their briefings with assurances the city needed the hotel and that demand for rooms would be sufficient to cover its $96 million development cost.
Yarber described himself as undecided but said he sees significant value in building a convention headquarters hotel, especially the potential it presents to help the 3-year-old Convention Complex live up to its promise. He said it further represents an opportunity to revive the area around the Convention Complex fronting Pascagoula Street. “I think it is a particularly good opportunity for the city of Jackson,” he said at the forum.
However, the Ward 6 council member is not sold on Transcontinental Realty Investors (TCI) of Dallas as a partner. He has said previously he would like to see whether any other potential developers are interested. Councilmen Quentin Whitwell and Kenneth Stokes also want to look for a new partner.
TCI, brought in as a partner candidate during the mayoral administration of the late Frank Melton, had committed to taking part in the forum at Anderson United Methodist Church. A conflict arose and kept the company away, according to Yarber.
“They told me they would be here,“ he said, but added TCI later notified him “they had other deals out of town they had to work on.”
Yarber said people in his ward wanted to hear details on the company’s part in the development pact and to learn more about the real estate investment firm’s financial soundness. The councilman said he and the forum audience also wanted to find out more about TCI’s “history in deals like this.”
In addition, the audience hoped to hear TCI’s plans for minority participation in the construction and operation of the 16-floor, 304-room hotel, Yarber said in an interview after the forum.
The forum was to give citizens a chance to hear “from the proverbial horse’s mouth,” he said in opening remarks at the Nov. 17 gathering.
Bingham, CEO of Atlanta-based Malachi
Group, said the city’s role in the partnership with TCI is to back the Urban Renewal Bonds that TCI pledges to pay off. “All that the city is doing is loaning TCI its credit,” he said. “Based on the feasibility studies, debt can be serviced from revenues from the facility.”
In answering an audience question on whether the city could be left “holding the bag” if TCI defaults, Bingham conceded the characterization was accurate. “That‘s one of the concerns the council has,” he said.
Bingham insisted, though, that default is a concern “we can get beyond,” and added:
“We think there is a reasonable possibility that if all else fails the city is in a position to recover all of the money.”
Bingham said he is comfortable with TCI’s liquid net worth of about $177 million, noting the investment group has about $1 billion in assets and more than $800 million in liabilities.
Swerdling, president and founder of Denver-based Swerdling & Associates, said even if TCI somehow does not hold up its end of the deal, the city will have a hotel in which to draw conventions and assist in preventing further decay of the surrounding area.
“If they fail four to five years from now you are in the same positions as if you built it yourself,” said Swerdling, who advises a host of cities around the country on convention hotel development.
The city’s exit strategy in the TCI deal, Bingham noted, is to sell the hotel to TCI a dozen years after opening or to another buyer.
To get the deal started, the city is to pay TCI $14.3 million for 3.4 acres between Pascagoula and Pearl streets on which the headquarters hotel and auxiliary development is to take place. The city, in turn, is to lease the hotel property to TCI at rates sufficient to cover the debt.
The hotel market feasibility studies cited by Bingham and Swerdling were done by PDK Capital Advisors for TCI and Chicago hospitality industry consultant Charlie Joiner for the Jackson Redevelopment Authority. The authority contracted with Joiner several weeks ago as the TCI deal neared its final stages and concerns arose about relying solely on a market study commissioned by TCI