Hotel Avery: More than half of $16M needed before developer can break ground
March 29, 2012
TRUCKEE, Calif. and#8212; The economy was pumping in 2006 when JMA Ventures announced its intention to build Hotel Avery, a three-story boutique hotel and restaurant at the corner of Bridge and South River streets.
In the same year, Lake Tahoe Development Company filed for bankruptcy part way through construction of the Chateau at Heavenly Village project in South Lake Tahoe, leaving a big hole in the heart of the South Shore community and#8212; literally.
Colloquially known as and#8220;The Hole,and#8221; the 11-acre pad of concrete and rebar near Statelineand#8217;s casinos serves as a physical reminder to planning agencies throughout the Truckee/Tahoe area: ensure construction financing is secure before breaking ground.
The Hotel Avery project will cost $16 million, said David Tirman of JMA Ventures, a price tag that includes hard costs such as materials and construction expenditures, and soft costs, such as architecture fees, permits and furniture.
Of this amount, the town of Truckee requires the San Francisco-based developer to submit proof of financing and#8212; in the amount of $9.75 million and#8212; before construction will be permitted to begin.
and#8220;We canand#8217;t report we have it yet today,and#8221; Tirman said this week. and#8220;The financing market has maybe shown slight signs of thawing, if you want to call it that, but it still has its challenges.and#8221;
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The art and science of construction financing is a balancing act of deciding who can provide large amounts of money up front, who can loan over time and who can afford to throw a few proverbial nickels and dimes into the pot.
Up until this monthand#8217;s design amendment requests, the Hotel Avery business concept was based on a private-owner condominium model, Tirman said.
With this previous model, a portion of the construction funds was to be provided by small, private investors who purchased rooms in the hotel as condominiums. These investors would allow their condominiums to be entered into the hoteland#8217;s rental inventory once the hotel was operational and receive a portion of the nightly room rate in return.
But loans for small investors of this type have dried-up, Tirman said, so the idea was nixed in favor of a standard hotel model in which rooms are owned by the hotel proprietor.
This change increases the amount of construction financing JMA will need to secure on its own; Tirman could not give a specific dollar amount or percentage increase.
Before the economic downturn, Tirman said banks were willing to lend approximately 70 percent of the amount needed for a construction. Now, banks are only willing to lend about 60, sometimes 50 percent and#8212; if theyand#8217;ll lend at all.
At one point, in March 2010, JMA became eligible for a $5 million, low-interest stimulus loan provided by the American Recovery and Reinvestment Act.
and#8220;It basically gave banks a tax incentive to make loans to construction projects,and#8221; Tirman said. and#8220;But the banks werenand#8217;t that interested. They said and#8216;well thatand#8217;s all fine, but we want this and this and this.and#8217;and#8221;
Though JMA was eligible for this loan, the company never received funds, he said, and the opportunity expired when JMA missed the construction deadlines set forth in the program.
The most recent financial development came in January, when Truckee Town Council, in an effort to allocate Redevelopment Agency funds before the agencies were officially disbanded by a gubernatorial dictate, voted to provide a grant of $1 million and a loan of $500,000 for Hotel Avery.
The money is earmarked to rebuild sidewalks, re-route infrastructure and install other public parks and use facilities. Hotel Avery design plans also call for river overlooks and#8212; but not river access and vessel launch points and#8212; for use by guests and the general public.
JMA Ventures will repay the $500,000 loan over time by collecting a two percent fee added to the nightly room rate at Hotel Avery, Tirman said, and the town will recoup grant money at an estimated rate of $170,000 a year through property taxes imposed on the hotel.
Tirman said JMA Ventures is continuing to look for financing options, and he believes the project is nearing shovel-readiness.
In a previous story, Tirman said he expects construction on the 47,299-square-foot property, when it does begin, to last about a year-and-a-half.