Questions have been raised publicly regarding the lack of development on a proposed joint hotel and apartment complex, which has $920,000 in taxpayer money so far invested into the project.
The project included the development of a Home2 Suites hotel, Riverfront Brio Apartment Homes, and a parking structure. The hotel was expected to offer 120 rooms, while there would be roughly 200 apartments and at least 400 parking spaces.
A ceremonial groundbreaking was held between the City of Owensboro and developer Gulfstream Commercial Services in June 2019.
The hotel was expected to open in late 2021. So far, the project has not moved past the demolition phase.
Recently, concerns were raised during a City Commission meeting by Commissioner and mayoral candidate Larry Conder regarding the feasibility of the project and the money attached to it.
Upon Conder’s request for a status update on the project, City Manager Nate Pagan reached out to the developer for information regarding the project.
“It was kind of dependent on market conditions … the travel market is somewhat in question right now, so there was no announcement or specific date as to when they’d break ground,” Pagan said. “I think it’s more market-driven right now.”
With a groundbreaking date based on market conditions, Conder expressed concern that development could start “years from now.”
“The agreement was signed April 18, 2019, for our third hotel to [start development] and the marketplace housing to be developed — which we need,” Conder said. “Now, the third hotel — maybe that’s questionable considering how conventions and events are not probably going to be scheduled for at least the next two years. So I would suspect a third hotel being built is very problematic.”
Conder said the taxpayer money given to the developer as part of the agreement required construction to take place within 90 days, prompting the questions: Is it going to happen or not? And if so, will it be done within a timely and reasonable fashion?
Gulfstream’s Chief Operating Officer and legal counsel Ed Ray discussed the complexity of issues behind the construction delays. He said COVID-19-related market changes caused the developers to reevaluate the project’s design and feasibility, prompting them to move slowly and methodically before actually breaking ground.
“First and foremost, we have an agreement with the City. We are in compliance with that agreement,” Ray said. “We were given a certified timeline to make and build that project. That being said, the world has changed since making that agreement. No sector has been hit harder than the hospitality and tourism industry.”
Pagan said the contract between the City and Gulfstream allowed five years for the project to be completed, but that construction had to begin within the first 90 days.
Whether construction had taken place thus far was questioned because the land had previously been developed, but Pagan said the work that had been done so far — the demolition of a muffler shop, two brick buildings and a subsequent clearing of the site — didn’t technically constitute a violation of the contract.
The City approved a total of $4.6 million in public monies to be invested into the project. Pagan said Gulfstream received the first increment of $920,000 up front, but the other four would not be dispersed until the project reached 25%, 50%, 75% and 100% completion — per the contract.
“Because the hotel is in the downtown TIF (Tax Increment Financing) district, there’s a different state tourism tax program other hotels would get revenue from. This one couldn’t because it’s in the TIF, so we tried to replicate that [program],” Pagan said. “They would have to reimburse the City for the $920,000 if nothing gets built within five years. Even before then, if it’s decided nothing will be done. There’s no way they can keep the taxpayer money without anything coming to fruition.”
Before moving forward with construction, Ray said several aspects of the project needed to be reassessed — most notably, the hotel. Ray called the timing of COVID-19 hitting the industry a “unique” chance for developers to create something that might better serve Owensboro, especially since people have started looking at hotels and convention centers differently due to the pandemic.
Ray said COVID-19 had caused that part of the residential portion of the project to be put on hold, too.
“It’s tough right now to write a check, get financing or convince investors it’s time to build something,” he said. “When the governor is saying you don’t have to pay rent right now, it’s a hurdle.”
Ray acknowledged Conder’s concerns on receiving the first increment of money yet the project not moving forward over the last several months.
“The investors’ money went into the demolition, the design, the purchase of the property — there’s a cost to that investment,” he said.
Ray said it’s a complicated situation, but discussions are ongoing regarding the project.
“There’s such a bigger picture here that we hope people will consider,” he said. “We are very enthusiastic about continuing the downtown [project]. We talk every week about this project and other projects, and about what needs to come first.”
