Delayed hotel projects get second chance

Shannon McMullen-Coyne

As the industry returns to a more normal level defined by better conditions, hotel developers are moving forward with plans that had been sitting idle during the industry slump of the past four years.

For those unlucky developers who were on the edge of solidifying a new project when conditions went sour, the past three years have unraveled financial and industry changes that altered the original identities of their projects.

The Regent Winter Park in Orlando, which was announced in July 2002, is gaining momentum again. The project, which is rising above the grounds of the former Langford Hotel, will consist of 23 condominiums and a 140-room Regent.

The deal had been a long time in the making, according to Mark Ellert, president of IAG Florida, who had been working on the project since its inception with Langford Development LLC.

At the end of 2001, Jim Heistand of Orlando-based Capital Partners, co-developer of the project with John Anderson, was scheduled to close on the former Langford Hotel, but the project fell apart after 9/11. After negotiating several extensions on buying the property, the deal was signed in June 2003.

While Langford Development had to shell out several large nonrefundable deposits to the seller of the Langford Hotel while waiting to make the deal work, Ellert said the time that passed gave the team a chance to "manage their destiny" by restructuring the development to better suit the market with additional residences.

"What occurred was a huge emergence in luxury condos in Orlando, which forced us to take a look at the project makeup," he said. "We originally were going to move forward with a hotel and 23 residences, but after noticing the surge in luxury residences, we decided to convert the hotel to a condo hotel, adding additional residences."

The move made the project less risky, allowing Langford Development to gain financing.

"We also had time to make some changes in the adjoining of the hotel and condominium buildings, and increased the number of units in the hotel from 150 to 197, which was more economical because it meant more condos," Ellert said.

The condominium project is under way and the Regent Winter Park Hotel & Spa is slated to begin construction this spring.

Kemper Development Co. also recently announced progress on its hotel project in Bellevue, Wash., after the project had been put on hold.

The local development and management company now is making strides erecting The Westin Bellevue at Lincoln Square, a 337-room luxury hotel, with construction having re-commenced in January 2004 after KDC affiliates acquired the site from the previous developer.

The mixed-use project will comprise 148 luxury condominiums above the hotel tower, a retail component, a parking garage and a 27-story office tower. Completion of the project has been slated for this fall, according to Kemper Freeman Jr., chairman and c.e.o. of KDC.

Phase one of the property development includes the hotel tower, 148 condominiums, retail and parking. The office tower is expected to follow in a second phase of development. KDC also is developing two projects fronting Lincoln Square--Bellevue Square, a shopping center with 200 stores and restaurants, and Bellevue Place, a mixed-use facility featuring office, retail and a 382-room Hyatt Regency hotel.

Development Management Corp., a real-estate development and investment company based in Boston, recently got the green light to move forward with the development of the Regent Boston Hotel and Residences at Battery Wharf in Boston after the project was left simmering for nearly four years. First announced in March 2001, the project was negatively impacted by industry uncertainty.

In October, however, DMC announced it secured $230 million of financing for the project through Chicago-based Corus Bank and New York-based Fortress Credit Corp.

"We had all of our ducks in a row, and when 9/11 happened, one of our major investors said they needed 90 days to think about their position," said Francois Nivaud, principal, New England Management Services, which is acting as project consultant. "That investor pulled out."

While the project lay idle, the development team used the time to refine different aspects of the hotel and residences, Nivaud said.

For example, the residential condominium layout was completely revised to maximize living space. In addition, the size of the hotel was changed from 180 to 150 guestrooms, because a smaller hotel would be less taxing to fill and manage along with the residences, Nivaud said.

Harold Theran, v.p. of DMC, said he expects the facility to open in early 2007. The development will feature The Regent Boston at Battery Wharf, a 150-room, five-star hotel with 40 suites, The Residences at Battery Wharf, 104 luxury residences, an 18,000-square foot European-style spa, a 300-linear-foot marina, a parking garage and retail. Thirty-two of the 104 residences have been sold.

Smaller second chances

Some smaller projects that were put on hold also are coming back.

Real-estate investment trust FelCor Lodging Trust said it is in the planning stages for several projects, formerly considered for potential development, that are anticipated to now offer a strong return on investment.

The company is eyeing the development of two parcels of excess land that are adjacent to existing hotels--one on the West Coast and one on the East Coast, according to Michael DeNicola, executive v.p. and chief information officer of FelCor. One of these parcels is located next to the Napa Valley Embassy Suites in California, where it is anticipated that additional rooms, meeting space or condos on the vacant land will bring a solid return.

"Until now, we had to focus our cash resources on the upkeep of our existing portfolio," he said. "The timing wasn't right to develop these pieces of real-estate."

There has been a surge in retail and clubs near downtown Napa Valley, which makes it prime development time, DeNicola said.

In addition, FelCor is looking at the feasibility of building condominiums at its Cocoa Beach Holiday Inn in Cocoa Beach, Fla.

hmm@advanstar.com

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