Riverfront Triangle renderings

A rendering of the proposed 10-story hotel building, which includes three floors of condominiums on the top, and a 60,000-square-foot conference center to be built in downtown Missoula.

The Riverfront Triangle developer group now has 18 months to get a building permit for a new 10-story hotel and 60,000-square-foot conference center at the site in downtown Missoula.

The agreement approved by the Missoula City Council on Monday night stipulates that the city will use the additional property tax generated by the project to purchase the conference center, which will be the largest of its kind between Billings and Spokane, for approximately $16.5 million.

The city also will purchase most of a new, 405-space underground parking garage for a maximum of $8.3 million. The hotel will lease a portion of the spaces. The property is located just west of the Orange Street Bridge, bounded by the Clark Fork River to the south and West Front Street to the north.

The city will only rely on tax increment revenue, which is generated by the increase in property taxes created by new development at the site, to fund the purchases.

“Working with the city we have developed a plan that has no impact on the general fund or the general obligation taxes in Missoula, while providing a strong engine for economic growth,” said Jim McLeod, principal with Hotel Fox Partners, the Missoula-based company leading the project. “It’s another example in our community of how tax increment financing can benefit the whole community without creating new costs for local taxpayers.”

The hotel and conference center will be the first component of what the developers say will eventually be $150 million worth of high-density, mixed-use development on seven acres of downtown real estate, including three stories of condominiums on top of the hotel, affordable housing, medical offices, restaurants, retail, a public plaza and a park.

McLeod said the conference center will bring thousands of visitors to Missoula every month. City officials and the developers both agree that conference centers by themselves don’t make a lot of money, but the visitors they bring in do have a huge economic impact.

“Historically, conference centers are not profitable,” McLeod said. “But the economic impact it has on the city as a whole is very important. The market study we had done (shows) you can equate it to hosting a Missoula Marathon every month, as far as the impact it will have in Missoula. Everybody realizes those three days every July in Missoula, there is a lot happening with hotels, the restaurants are busy, and there is a shopping spike. It has a huge impact.”

Currently, the 1.8 acres where the hotel and conference center will be built is a vacant parking lot, and the city and McLeod’s team have been working on plans since 2011.

“It has taken tremendous creativity and attention to detail from all parties to get to this point,” McLeod said. “The strong spirit of partnership from city government and Missoula Redevelopment Agency professionals has made this project possible. We believe these agreements will provide a framework for a strong and durable partnership going forward.”

Once the city buys the conference center, Hotel Fox Partners will lease the city-owned portion for 25 years, with two automatic 10-year renewals at the developer’s option. The city will buy the furniture, fixtures and equipment, but the developers will be responsible for all major, non-routine repair and maintenance.

“As part of our commitment to this long-term partnership we are taking on all of the risk that would normally be a landlord’s responsibility,” McLeod said.

McLeod said that they hope to break ground within two years if not sooner, but they want to have a realistic time frame for the complicated process.

“It’s a unique situation,” he said. “Typically on a conference center of this size, the city would build it and take all the financial risk themselves. But the city did not want to impact the general fund, so by using Tax Increment Financing we came up with this method.

"We are taking on 100 percent of the financial risk and also all the maintenance liability. We believe in Montana as a whole and the future of Missoula, and we did not enter into this agreement blindly. We had numerous studies completed to help guide us.”

He said that the project wouldn’t have happened if it weren’t located within an Urban Renewal District, which allowed the city and developers to use TIF funding.

“The problem with TIF districts is a lot of people really don’t understand them,” he said. “It’s real simple. Today we have a parking lot there that’s generating very little revenue.''

McLeod said one option for the site would be to build perhaps a new Walgreens, surface-only parking and a couple of drive-through restaurants and "call it good."

“Or, you could take this piece and use that tax base to build public infrastructure and when you look back in 50 or 75 or 100 years, it’s going to be the western gateway to downtown,” he said. “Every two years they talk about (doing away with Tax Increment Financing) in the state Legislature. But people need to get in there and educate themselves and understand the impacts they have.

"This project would not have happened without TIF funding. There’s not a developer out there that would have funded this without a public/private partnership. By coming here and building public improvements and parking facilities, we can now build hotels, office buildings, retail and residential. And the increment of new taxes is helping finance those public improvements.”

McLeod is part of Farran Realty Partners, which built the Corso Apartments in Missoula and the new, nearly 500-bed ROAM student housing complex, with an underground parking garage, on Front Street downtown.

“We would not have been able to get that student housing project off the ground were it not for the city needing an additional level of parking, and now nearly 500 more individuals are going to be living downtown,” he said. “That’s going to have a huge impact on the urban core.”

City council member Gwen Jones said she has been closely tracking the agreements and the Riverfront Triangle plans for two years. She firmly believes the development will be good for the city as a whole.

“There’s going to be no tapping into the general fund,” she said. “This is the best example of using MRA (Missoula Redevelopment Agency) money as a leverage to truly create an investment. It’s really leveraging not just an improvement somewhere, but this is really facilitating a much bigger project than otherwise could have been reached.”

Jones said the city and the developers have paid for market research that showed what size conference center there is demand for in this region of the country, and she believes the size will draw visitors.

“It’s going to impact all of downtown and many other hotels and there will be a big shopping impact,” she said. “And even if the conference center is not profitable, the city is not bearing that risk.”

Jones said she thinks many Missoulians are ready for the currently forlorn vacant lot to be improved.

“When I was running for office, it was a common question candidates were asked,” she said. “'What is the plan for the Riverfront Triangle? Hasn’t it taken forever already?' I’m glad we’re seeing something concrete. It’s not just a plan, it’s way past that. We’re getting down to the nitty-gritty.”

The council also voted to unanimously approve a land disposition agreement. The land is currently owned by the city, but it will be sold to the developers for $2.3 million, it’s appraised value.

The developer will receive a credit of no more than 40 percent of the total purchase price for the land that will be occupied by the publicly owned conference center and parking. The developer will pay interest only on the purchase for the first five years, and then begin making interest and principal payments, with the final payment due within 15 years of the original sale date. The developers also may, in the future, receive an additional credit of up to $1.25 million in exchange for giving the city a portion of land it owns in the so-called “chicken block” north of West Front Street for a future additional parking structure.

The developers and the city will finalize another agreement for the conference center in the next two months. It will be a condominium-type agreement because Hotel Fox Partners will retain ownership of the land beneath the center.

Hotel Fox Partners is a Montana-based development team, McLeod said. Partners include Averill Family Hospitality, which owns and operates the Lodge at Whitefish Lake and the new Firebrand hotel in Whitefish, as well as Dieter Huckestein, the former chairman and CEO of Conrad Hotels and past chairman of the American Hotel and Lodging Association. The team also includes CTA Architects and Engineers, the state’s oldest and largest firm in that industry, and WGM Group, a Missoula-based civil engineering, land-use, surveying and planning company.

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