Financing Hacienda Hotel project is tougher than expected

NEW PORT RICHEY — Plenty of developers are having a hard time getting project financing amid the most severe credit crunch in nearly a decade.

Among them: The people who want to restore and expand the city-owned Hacienda Hotel and build a parking garage, a project with a total price tag of nearly $26-million.

Developer Kirby Glaze said Tuesday that he and his partners have not exhausted all options for private financing. But the search is much harder than developers planned for when they first approached the city about the project.

"We're not going to sell the city on a pipe dream," Glaze said. "Obviously, you've got to have a lending partner."

Since buying the now-vacant 1920s hotel, the city has been trying to get someone to redevelop it. Glaze's Georgia-based Community Development Partners came forward with a proposal back in 2006.

The group is continuing to negotiate with city officials over the $12.7-million hotel project — which includes the restoration as well as a 40-room addition to the east — and a proposed $13-million parking garage off Bank Street that would have 28 condominium units built on top. To make room for the expansion, the city would have to vacate a portion of Bank Street.

Both sides say the negotiations are going well, despite what Glaze called a "change in the game" following the voter-approved property tax reform: The city doesn't have much to offer, money-wise.

Initially, the developers were looking at requesting two $750,000 grants from the city, according to one proposal. City administrators nixed that idea.

"Where would we get it from?" finance director Rick Snyder wrote in an April 9 e-mail to City Manager Tom O'Neill. "I don't think this will surprise the developer to learn that we currently have no up-front money."

The developers also asked the city to pay for the costs of the garage's public parking spaces — estimated at $3.2-million — through an annual lease of roughly $282,720 a year, according to the preliminary proposal.

What will become of that part of the proposal remains unclear. Glaze and city officials say they are still working on the terms of such a deal.

Developers would build the garage only if the city pitches in on public parking spaces, Glaze said. City Manager Tom O'Neill said Tuesday the city is committed to having a parking garage as part of the project.

Glaze also wants a delay in making lease payments on the hotel so that the project has a chance to get up and running.

That's because hotels typically need five to seven years to start making money, he said. Projects that fail are ones with too much debt during the first five years.

The next goal for developers: Coming back to the city with solid financing in hand.

Glaze said developers are working on getting an independent market analysis they hope will convince a bank or other lender to loan them money for the project. Because banks have become so reluctant to make loans, he said, the Hacienda developers are looking at non-traditional sources, including private equity firms.

O'Neill said he's hoping to get a proposal before City Council members as soon as June, though it isn't clear if that will happen.

"The obvious goal," he said, "is we want to get it done."

Jodie Tillman can be reached at jtillman@sptimes.com or (727) 869-6247.

Financing Hacienda Hotel project is tougher than expected 05/20/08 [Last modified: Thursday, May 22, 2008 2:34pm]

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