Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 10, 1991 TAG: 9102110265
SECTION: EDITORIAL PAGE: B-2 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
The developers' expression of interest is heartening given the current condition of real estate markets, which is abysmal. Nationwide, real estate values have been dropping; the hotel market is glutted.
What's worse, with banks reeling nowadays, credit is severely constricted. Even if you have a sound project and a ready developer, financing may be unavailable. Banks are trying to recover loans on hotel projects all over the country. For a project like the Hotel Roanoke, financing is probably impossible to find without large amounts of equity invested up front and some sort of guarantees against losses.
Perhaps the easiest course would be to wait out the harsh times. Unfortunately, such a luxury isn't available to Roanoke officials or to Virginia Tech, the hotel's current owner. The property isn't vacant land. At some point, Tech would exercise its option to give the crumbling hotel back to its original owner, Norfolk Southern, and the railroad probably would raze it.
From this reality, two conclusions should be drawn.
The first is that the top-notch advisory group formed to choose a developer can't simply pick the most attractive plan. The seven who have submitted proposals - including the Charlotte, N.C., firm that is developing Roanoke's Dominion Tower - all seem capable, experienced companies. But because none is likely to have financing in hand, the advisers aren't choosing just a renovation design. They're picking a partner that Tech and the city can work with to develop a complete package, including financing. (Having other candidates around should enhance bargaining leverage.)
The advisers also must concentrate, more than normally might be necessary, on the developers' financial strength. Two years ago, if Donald Trump had offered to do the project, would anyone have raised questions?
The second conclusion to draw from today's harsh investment environment is that, whichever developer is chosen, some unusually creative financing may be needed. The mix could include bank loans, government bond issues and private contributions. It almost surely will require public as well as private investment.
The city and Tech already have agreed to commit $4 million each in tax-free revenue bonds to the construction of a conference center next to the hotel. This has proved a key attraction for developers, but may not be enough.
Which is why Roanoke City Council members performed a crucial service in December when they expressed willingness to consider hotel-financing packages involving taxpayer money. The members were right to avoid specific assurances before negotiations with a developer begin. But their openness to the idea of a public-investment role probably helped draw some of the developers to the table.
Reviving the Hotel Roanoke is the city's No. 1 economic-development priority this year, and correctly so. The effort will be lengthy, complicated, difficult, possibly costly; the outcome is yet uncertain. None of this makes seven developers' interest in the project, in these times, any less encouraging.
by CNB