Developer Surprised Hotel Deal Died

Posted: June 19, 2014

A proposed $40 million hotel and conference center would have been built on JMU-owned property bound by Martin Luther King, Jr. Way and South Main, Grace and Mason streets. The proposal died after the city and JMU Foundation couldn’t reach a deal. (Photo by Nikki Fox / DN-R)

HARRISONBURG — Harrisonburg Downtown Renaissance offered the sales pitch and developer Paul Gladd thought he had it knocked out of the park.

About two years ago, Gladd said HDR Executive Director Eddie Bumbaugh and the revitalization group’s board president, Andy Perrine, gauged his interest of bringing a hotel and conference center to the city. A 1987 James Madison University graduate, Gladd said he was intrigued.

Through his Maryland firm, dpM Partners, Gladd followed with an unsolicited proposal to Harrisonburg City Council in September 2012, asking for $10 million toward the $40 million project, with details to be negotiated. The city’s commitment would fund the conference center’s construction.

A JMU-owned site on South Main Street was later identified as property Gladd would lease for the complex, and the university agreed to provide a parking deck to serve the complex, to be called Hotel Madison.

Heading into last week’s council meeting, the last, and biggest, piece — the financing details — appeared lined up, Gladd said. While he would pursue federal New Market Tax Credits for the hotel, the JMU Foundation agreed to build the conference center and would be reimbursed by the city, based on annual revenues the meeting space generated, he said.

A presentation scheduled for council was postponed for a week or two so the foundation’s attorney, Jay Litten, and City Attorney Chris Brown could work on “tweaks” to the draft memorandum of understanding, Gladd said.

Yet changes coming from the city were so “dramatic” that the foundation’s executive board needed to take additional action, he said. By Tuesday, the deal was off, as the board said it no longer was considering the hotel an active project.

“In my world, having lawyers negotiating the deal versus business people negotiating the deal with lawyers is problematic,” Gladd said Wednesday. “The foundation would inherit financial risk if revenues did not cover debt. It was a beautiful situation for the city. …  I’m just still a little bit confused about what happened on the last lap around the track.”

Brown said nothing unusual took place. As the city looked more into the details, there were issues that popped up, such as the length of council’s obligation to the foundation, he said.

“The devil’s in the details,” Brown said. “There were just some issues we weren’t able to get solved with other parties.”

On Tuesday, City Manager Kurt Hodgen said it was important that the city not “extend” itself too far financially, minimizing its risk in the project. He and Tom Schaeffer, the foundation’s president, didn’t divulge details on what separated the two sides to the point of ending talks.

“It got to the point where we went as far as we could go with this,” Hodgen said.

Gladd is hopeful that, given time, city officials will reconsider and see that “it was a pretty special deal.” Mayor Ted Byrd, an opponent of the project, said he still welcomes Gladd’s hotel, but not with the public financing tied to it and the conference center.

Gladd, however, said the private-public partnership is necessary for the project to work.

“It’s just such a shame if it doesn’t come to fruition,” he said.

Contact Preston Knight at 574-6272 or


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