BR hotel process explained
BERMUDA RUN – The town council and the public got a closer look at the in-depth process that goes into attracting a developer for a possible upscale or boutique hotel in last Tuesday night’s special meeting.
In its regular August meeting, the council voted to ask Development Finance Initiative to make a public presentation and seek any feedback from folks interested in the project and consider adopting a resolution supporting it in the Sept. 11 meeting.
As Town Manager Lee Rollins said, the goal for the meeting was to provide more detail into the town’s plan to put together an official request for proposal out to developers on a hotel.
The town entered into agreement in April to work with DFI after negotiating an option with the Hillsdale Group earlier this year on a three-acre tract next to WinMock barn for a possible hotel.
DFI, which is a subsidiary of the UNC School of Government and has already done 75 such projects, partners with local governments to attract private investment for projects by providing finance and development options.
“This will give you an opportunity to see where we are in the process of looking forward towards an economic development initiative to enhance and grow the town center area,” said Mayor Ken Rethmeier, “and in doing so, we want to capitalize on the outstanding assets we already have in the area.
“In the coming weeks, the town council will be looking at a resolution to go forward in an effort to work with DFI and issue an RFP (request for proposal) to developers who might have an interest in coming into this area. This does not mean it is a done deal. That does not mean money has been spent, other than our contractual relationship. What it does do is give us the best opportunity to have a foundation upon which we can make a good decision and make the right decision for the best interests for the entire town.”
Sarah Odio, project manager for DFI, went through a PowerPoint presentation to provide specifics on the work that has been done and what’s ahead.
Odio said that the objectives for the project include recruiting a hotel to accommodate visitors to the WinMock Event Center, the BB&T Sports Park and other area tourist destinations, anchoring the development of a town center that will serve tourists and residents, and minimizing public investment and maximizing private investment.
“Bermuda Run is a risky market, and the reason why it’s risky is because this kind of product is unproven at the moment,” Odio said. “But the demand is there, and we know that.”
According to DFI’s market analysis, the area generates demand for 800 room nights per weekend from BB&T Sports Park and WinMock alone (not including visitors to hospitals, wineries, golf courses and traffic generated by I-40). Within a 10-minute drive of Bermuda Run, only 353 rooms are available, all upper midscale and below, with 92 rooms (in Clemmons) in the pipeline – creating a gap in supply remaining of about 355 rooms.
The findings of the market analysis add that although local hotel vacancy rates and daily room rates are low, these are based on a lower quality product than what wedding, corporate and sports travelers may demand.
DFI recommends the best fit for this site being an independent boutique or upscale brand (Hyatt Place was used as an example). Development costs are estimated between $23 million to $25 million for a boutique hotel (with more expensive finishes and upfitting of a restaurant and spa facilities) and $19.5 million to $21 million for an upscale brand.
For this project, DFI modeled the following public participation options to gauge feasibility:
• Loan to developer in the amount equal to the cost of land for a hotel (seller financing), meaning the town would be paid back with interest.
• Town builds surface parking for the hotel and any potential adjacent commercial activity.
The total estimated public investment for this model DFI put together for Bermuda Run would be between $1.5 million to $2 million.
“This investment is contingent, and not a commitment, that the council is going to make on receiving proposals from the private development sector that meet the public interest,” Odio said. “If the council is not happy with the proposals received, no commitment has been made.”
The estimated return of total investment would be made in 12 to 14 years, said Odio, adding that is a conservative estimate. This doesn’t account for estimated occupancy tax revenues to the Tourism Development Authority of $120,000.
The next steps, according to Odio, will be getting approval from the council for final development plans on Sept. 11, and DFI would then draft a request for proposal.
“We would estimate that could go out at some point in October and be available to developers to respond in that time frame,” Odio said.