Extended Stay? Not so much

By Dick Hughes  

APRIL 11, 2011 2:09 p.m. (0)

Extended Stay got state, county and city assistance to move to Spartanburg and eight years later is getting taxpayer help from North Carolina to pack up and move its headquarters to Charlotte.

Disappointed Spartanburg officials say Extended Stay and HVM, the company that runs the motels and employs virtually all of its workers, gave them no chance to keep the headquarters and, further, publicly gave reasons for moving based on thin reeds.

The move is a setback, too, for Spartanburg’s favorite son and benefactor, George Dean Johnson Jr., who was a founder of Extended Stay and brought the motel chain from Fort Lauderdale, Fla., to his hometown in 2002 to set in motion revitalization of a crumbling downtown.

The announcement by HVM that it was taking headquarters to North Carolina came suddenly last Thursday as a news release from North Carolina Gov. Bev Perdue.

In that announcement, Gary DeLapp, president and chief executive officer of HVM, said Extended Stay “will be better served from corporate headquarters in a major national market and transportation hub.”

HVM manages Extended Stay’s 685 hotels in North America and employs about 9,000 employees at these sites and an estimated 165 in the Spartanburg corporate office.

Company executives said personnel flying to the multiple destinations needed better airline access than the Greenville-Spartanburg International Airport provided.  Southwest Airline’s entry into the market was not good enough.

“They say they want to be close to the Charlotte airport so they don’t have to change flights,” said County Councilman David Britt, who was part of a team hastily assembled to convince HVM to stay.

“That’s not an excuse for moving a corporate headquarters because you want to save 65 minutes of driving.”

Besides, he said, “the truth is you can live in Charlotte and have a 50 to 60 minute drive to the airport.  I have friends and associates who live in Charlotte, and it can take them longer to get to the airport than it takes me from Spartanburg.”

It was clear, Britt said, that “they made their mind up” and nothing was going to change it.  “There are other factors at play, and that is their business.”

North Carolina awarded HMM a grant equal to 75 percent of the state personal income tax withholding of employees for each of 17 years “in which the company meets annual performance targets” for creating new jobs.

If targets are met, HVM stands to realize $4.7 million in benefits, according to the North Carolina Economic Investment Committee.

In turn, HVM promised to create 170 jobs within three years and invest $3.6 million in its new corporate facility. According to news reports in Charlotte, the company plans to lease 63,000 square feet in a corporate park in south Charlotte.

HVM and North Carolina officials said the new jobs annually will pay $83,500 on average, not including benefits, considerably higher than the average of $51,584 in Charlotte’s Mecklenberg County.   According to the Bureau of Labor Statistics, the average in Spartanburg County is $38,300.

According to the local officials, no financial counteroffer was made.

But when it moved from Florida to Spartanburg, Extended Stay – HVM was not in the picture until 2004 -- received considerable government assistance to relocate and to build a four-story, 112,000-square foot building as the linchpin of revitalization of Morgan Square as an office park.

The state anted up $600,000 in 2001 and approved $1,500 in tax credits for each job Extended Stay created. The city gave the company $760,000 in cash and built a 550-space parking garage next to the office building at a cost of $5.5 million.

Spartanburg owns the garage and the land; Extended Stay owns the office building.  The land is leased to Extended Stay for 20 years with an option to buy.  According to county tax records, the 1.9 acres is assessed at $864,200 and the improvements at $12.9 million.

DeLapp has declined to comment further on the move, referring questions to Jennifer Kearney, marketing director, who issued a statement saying the move “will impact approximately 50 employees” and that “some support staff will remain in Spartanburg.”

She did not respond to follow-up questions.  City officials have not been any more successful in getting information from HVM, which did not give the city advance notice of the decision to move.

“We’re trying to understand, more specifically, how many of their workforce will remain in Spartanburg,” said Ed Memmott, city manager.  “Our emphasis obviously will be on the future. Extended Stay owns that building, and there are some tenants in that building now.  We want to know what their plans are for that facility long term.”

Extended Stay America has been through three ownership changes and one bankruptcy since it was founded in 1995 with an initial investment of $56 million by Johnson and Wayne Huizenga, his business partner, former associate at Waste Management and partner in Blockbuster Video.

Headquarters was in Fort Lauderdale, where Huizenga was based, and their first long-term motel was opened in Spartanburg in August 1995.  They took the company public later that year, and it became the fastest growing lodging chain in the country.

In 2004, a year after Johnson moved Extended Stay to Spartanburg, Blackstone Group, a private equity powerhouse, bought Extended Stay for $3.1 billion, took it private and merged it with a smaller competitor, Homestead Village, which it previously purchased for $740 million and where DeLapp had been CEO.

Blackstone turned management of what now was a chain of 607 units over to HVM with DeLapp as CEO and laid off 82 employees at the Spartanburg office, a third of the workforce.

Then, in a 2007 deal, Blackstone sold Extended Stay to New Jersey developer David Lichtenstein and his Lightstone Group for $8 billion, nearly 98 percent of which was in layers upon layers of complicated debt.  The lodging market and business travel collapsed with the recession and Extended Stay went into bankruptcy in 2009.

A year later, Centerbridge Partners led a group of hedge fund operators that includes as minority partners Paulson & Co. and the Blackstone Group, its former owner, to take Extended Stay out of bankruptcy for $3.9 billion.

A spokesperson for Centerbridge in New York did not respond to a request to make a Centerbridge official available for questions about Centerbridge’s role in the planned move to Charlotte and to discuss its plans for the Morgan Square building.