Hotel Figures Check Out

Council Still To Decide On Conference Center Project

Posted: March 29, 2014

HARRISONBURG — A city-hired firm’s projections for a public-private downtown hotel and conference center show that tax revenues will cover expenses on the development, but it’s still left to City Council to decide whether to proceed.

Harrisonburg Economic Development Director Brian Shull received a report recently from Cleveland-based Hotel & Leisure Advisors that analyzes two sets of figures: one from Maryland developer Paul Gladd, and those of PKF Consulting Inc. in Chicago, which Gladd hired.

The developer proposes a $40 million public-private hotel and conference center on James Madison University-owned property on the east side of South Main Street, between Martin Luther King, Jr. Way and Grace Street. Gladd would lease the property from JMU, his alma mater, for an undisclosed amount over a minimum 50-year basis to operate the complex.

He has asked the city to fund $10 million, which is the estimated cost to build the 21,000-square-foot conference center. The hotel would have 205 rooms and include a restaurant.

The city hired H&LA for $5,000 to conduct a “desktop” review of Gladd’s numbers and PKF’s figures, using the firm’s proprietary information rather than visiting Harrisonburg, Shull said. Its report provided mixed results: PKF’s projections for first-year room revenues of $7.9 million were too high and Gladd’s figures [$3.8 million] for food and beverage services “too aggressive,” Shull said.

But using conservative projections — Gladd’s $5.8 million from rooms and PKF’s $3.2 million from food — the consultant determined that revenues would cover the city’s debt service on the project, he said.

Out of the various taxes the city can collect, in the first fiscal year, which would begin July 1, 2016, Harrisonburg would receive $887,000 from the complex, Shull said. By the third fiscal year, the figure tops $1 million.

City staff is now negotiating “all aspects” of the project with Gladd and JMU before approaching City Council for a vote, Shull said. He has no timeline for when council will be asked to make a decision.

Gladd did not return a call for comment Thursday.

GMU Project Unrelated

A number of officials within Harrisonburg’s hospitality industry, however, are against the project. They say the city should not be partners in a facility that brings competition to existing businesses.

Crestline Hotels & Resorts Inc., a hotel management company in Fairfax that operates more than 40 hotels, would run the complex, which will be called Hotel Madison. It manages George Mason University’s Mason Inn Conference Center and Hotel, a 148-room facility that will close this summer because of financial problems.

Crestline entered into its partnership with George Mason in 2012, two years after the $50 million conference center and hotel opened. The complex has lost $11 million over four years because of “bad timing” — it was designed and financed before the market crashed in 2008 — and not poor management, GMU spokesman Mike Sandler said.

“As far as we’re concerned, [Crestline] did a great job for us,” he said.

GMU plans to renovate Mason Inn into dorm rooms and a campus dining facility.

Contact Preston Knight at 574-6272 or pknight@dnronline.com



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