Blanche Hotel Developer Equity Skyrockets 850%: What is The Real Investment?
Posted April 21, 2015, 10:25 pm | Updated April 22, 2015 10:55 am*
LAKE CITY, FL – At Monday night's City Council meeting, the Blanche Hotel was again front and center. City Manager Wendell Johnson told the City Council, "This is not a $17 million taxpayer project. This is a $17 million construction project, which will be funded at about 50-50 from available government funds. They're (Integrity Development Partners "IDP" – the developer) gonna' come to the table with $1.7 million of their own equity."
In September 2014, developer equity was "approximately $200,000." The seven month increase is 850%. No one is explaining the numbers behind the increase.
City Manager Johnson Addressed the Council
Tentative, but upbeat, City Manager Johnson kicked off the discussion with the City Council, "This has been an initiative that is unprecedented in Lake City... For the last several months I have been working with Integrity Development Partners... This is an issue that is very complex because it involves a number of federal and other funding sources. All that is explained in the letter. There is an issue of a couple of million dollars of local support. The other request for local support involves a guarantee against occupancy."
Communications with Assist. County Manager, Ben Scott, and County Economic Dev. Dir Glenn Hunter revealed that City Manager Johnson did not forward the final revision of the LOI to the County before the City Council meeting.
City Manager Johnson gave his take on the project, "This is not a $17 million taxpayer project. This is a $17 million construction project, which will be funded at about 50-50 from available government funds. They’re (IDP) gonna’ come to the table with $1,700,000 of their own equity."
Mr. Johnson said that the City's maximum exposure, until a complete formal agreement is executed between all the parties, is $35,000.
Mr. Johnson introduced IDP's president, Rhett Holmes. Mr. Johnson told the Council, "Rhett Holmes is here tonight. If you have any questions, he can explain."
IDP's President, Brett Holmes
IDP president, Rhett Holmes
IDP's Holmes explained the updated Letter of Intent (LOI). He said the project cost had gone from $14 million to $17 million. "We think it is a conservative number. Hopefully it will come down."
He explained the LOI was "transparent," telling the Council, "We want to put everything out there. This is not a simple process... When we look at these deals, getting somebody to invest four or five million into your community that doesn't live there, for tax preferences, is a pretty nice way for getting redevelopment to occur..."
Mr. Holmes continued, "I'm excited about it. We want the City and the community brought into the project. I'm happy to answer any questions you may have."
The April 21, 2015 edition of the LCR:
• The LCR wrote: The letter of intent from IDP was revised again Monday to reduce available office space from 41,325 to 38,835 [sq ft].
» Fact: since Feb. 11, 2015, in various incarnations of the IDP-Johnson LOI, the non-residential lease space has been 67,722, which at 60% would be 38,833. The LOI on which the LCR was relying miscalculated the office space, which was never 41,325. In the LCR's defense, none of the LOI's have been given revision numbers, but they should have done the math and checked further.
• The LCR wrote: City Manager Johnson said the following regarding the Blanche Project: "We will stay the course and make it work."
» Fact: Mr. Johnson said: As your City Manager I would like to ask you to stay the course and try to make it work.
The $17,000,000 Question
Councilman George Ward asked the only question. It was about fluctuating rental rates. which are expected to be $11 sq. ft. Mr. Holmes answered, "The market would dictate the final rental rates."
Mr. Holmes remarked about IDP's expenses, "The cost we'll be spending now until we get a definitive development agreement will be much more than $35,000 to make this project move forward."
City Manager Johnson's Legacy
Mr. Johnson explained, "This is not my legacy. This is what the citizens of this community wanted... This company is on to something that will work. In almost 6 years this is only the second time we've had anybody knocking on the door about the Blanche."
City Manager Johnson then asked the City Council to "stay the course."
Councilman Ward said, "If we don't do something soon, it's [the Blanche] going to be too far gone and then we're going to have another parking lot, and I don't want to see us wind up with another parking lot downtown."
Mayor Witt added, "I think the biggest mistake we could make is drop the ball at this point."
Councilman Ward, "To wind up with something in shambles is just unacceptable."
Without any further discussion the City Council unanimously voted to move forward with the IDP-Blanche Project.
His business completed, IDP's Holmes left the Council Chambers.
Transparency? IDP's Holmes wasn't talking.
Your reporter met Mr. Holmes by the elevator.
The Observer asked, "Could you guys explain the developer equity that keeps going up?"
Mr. Holmes was quick to answer, "No."
The Observer responded, "No?"
Mr. Holmes came right back, "I don’t think I need to explain anything at this point. Everything is just budgets right now."
The Observer followed up, "How's that developed – that number?"
Mr. Holmes wouldn't budge, "It’s very complicated (nervous laugh). It takes a lot of math to back into it."
The Observer, "Well, if that’s your answer that’s cool with me."
Mr. Holmes replied, "It is. At some point things will materialize and that’s where we define more clearly."
The Observer, "Good luck."
Mr. Holmes, "Thanks."
And with that, IDP's Holmes headed down to the first floor.
* Updates: the final version of the April 20, 2015, Blanche IDP-Johnson LOI; Eye on the Lake City Reporter