DECEMBER 12, 2010 1:15 p.m. (0)
The property is under contract with Bridgewater Capital Solutions of Atlanta, the current owner of the hotel building. The city owns the 4.7 acres the hotel occupies.
Changes to the city-owned lease with Bridgewater cleared City Council at first reading Monday and a final reading is on track for approval at next week’s meeting. The changes to the lease would enable SMR Hospitality LLC, the new potential owner, to finalize the sale.
SMR is made up of Spartanburg’s Gibbs International, Southern Hospitality and the Atlanta investment firm Peachtree International.
Gibbs International is owned by Spartanburg businessman and philanthropist Jimmy Gibbs, one of the richest men in the city.
Cajka was acting as a spokesman for SMR at Monday’s council meeting. Southern Hospitality has developed and managed franchise hotels in Greenville, Asheville, Charleston, Cleveland and Nashville. The Spartanburg Marriott would be run as a franchise operation with Marriott under the new owners, he said.
“We’re in the hospitality business and Spartanburg is a natural extension of that,” Cajka said. “There is tremendous potential in this downtown and for the hotel. With the Chapman Center and The George right next door this is a prime location.”
Until future development bears fruit on the city owned property adjacent to the hotel, Cajka said he sees the Marriott as a destination in and of itself. SMR plans to develop its business based on conventions, visitors to local colleges and universities, and tourism.
The hotel’s occupancy rates are on average with the region as a whole, Cajka said.
Memmott said the city plans to start marketing the property it owns around the hotel as soon as the new owners take over.
The actual sales price will not be revealed until after closing. Bridgeport obtained the Marriott tower after bankruptcy proceedings in 2007 for $19.6 million, the amount owed on the hotel.
“It’s not surprising that Bridgewater wants to sell the property,” said Ed Memmott, city manager. “They are a bank and I’m sure they’ve held onto it for longer than they would have liked.”
Problems with the Marriott at Renaissance Park project destroyed Spartanburg developer Arthur Cleveland and cost him his home and ownership of the historic Montgomery Building downtown in 2007. Those properties were sold at a foreclosure auction prior to the bankruptcy proceeding over his debts on the hotel.
The complex public/private development was touted as a cornerstone of Spartanburg’s downtown strategy in its initial phases. The city helped arrange financing to build the hotel through Tax Increment Funding (TIF) bonds and obtained a $4 million loan from the U.S. Department of Housing and Urban Development.
The TIF bonds and HUD loan are the only debt on the project for which the city is responsible and that money is being paid back through Bridgewater’s ground lease on the property for $200,000 a year. The city rents the hotel’s convention center to Bridgewater for $1 a year.
Those arrangements would continue under the new lease agreement, Memmott said.
The change would also keep the city on track to develop surrounding city owned properties while ensuring stable ownership for the hotel.
Cajka said SMR has agreed to invest at least $1 million in the property during the first two years after purchase.
Facilities to house a high-end restaurant is likely to be part of those investment plans, Cajka said.
“Spartanburg seems to be starved for that kind of thing,” he said.
Under the terms of the new lease the city agrees not to sell any of the property they own behind the hotel and The George to any competing hotel chains for at least five years.
SMR agrees to pay the city $200,000 a year plus the $1 rental on the convention center until the lease expires in 2053. They also have an option to purchase the property after the city’s obligations on the project are repaid in 2025.The agreed upon sales price for the property is $1.5 million, should SMR chose to exercise its purchase option.
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