Due to difficulty securing financing and other circumstances, the Missoula developers proposing to build a 195-room hotel and conference center at the downtown Riverfront Triangle have asked the city to grant them a one-year extension on a deadline to submit design plans and obtain permits.
Hotel Fox Partners has told the Missoula Redevelopment Agency (MRA) that financing the $100 million project has “been more difficult than originally forecasted.”
Along with the hotel, the developers propose to build restaurants, bars, a 405-space parking garage, public green space and condominiums at the long-vacant site at the corner of Orange and Front next to the Clark Fork River.
In a memo to the MRA board, assistant MRA director Chris Behan said unforeseen changes have caused delays in the project.
“Two of the Hotel Fox Partners have extensive global relationships with investors, but have been challenged to secure necessary equity investors,” Behan wrote. “The causes include the ‘hot’ market of proven projects in major cities (New York, Miami, LA, Seattle) that are more easily understood and fit better into many institutional investment portfolios. For an investment of this size, Missoula is relatively unknown from an investor perspective and requires time to gain a level of comfort."
Additionally, Behan wrote, the deal is complex with "numerous layers of public and private capital participation.”
Behan also said that early in 2018, one of the equity investment partners with committed capital to the project “experienced significant personal and financial issues unrelated to the Hotel Fox and conference center project.”
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Hotel Fox Partners had to eliminate that investor’s financial participation in the project, which Behan said was a lengthy process. Additionally, the Hotel Fox Partners’ project manager Barry Fisher passed away this past winter.
But Behan said the developers are taking steps to address all three issues. They’ve engaged “a couple of large-scale financing brokerages” and are now presenting the project to investors several times each week. Behan said the developers “seem confident that the equity and debt funding will come through.” The developers have also hired another project manager.
Behan said the developers and their design team are working on alternative materials options for the exterior design.
“Design modification may be required because the amount of equity and total construction costs drive what is possible to design and build, so funds have been directed at demonstrating financial feasibility to attract investors,” he said.
The city and the developers, which are led by Farran Realty Partners of Missoula, have entered into complex financial agreements. Essentially, the city would use $16.5 million in Tax Increment Financing (TIF) revenue bonds based on the new property taxes generated by the project to purchase the 60,000-square-foot conference center after it's built.
The city would also use $8.3 million in TIF to purchase the parking garage. City leaders such as Mayor John Engen have endorsed the project as a way to attract out-of-town visitors and their spending. Jim McLeod of Farran told the MRA board in the past that a market study showed the conference center could attract the equivalent of the Missoula Marathon crowd every month.
The developers had been facing a May 22 deadline to submit design plans under a previous agreement with the city. Their deadline for obtaining permits for the design, along with submitting evidence of final equity and construction financing, is November 22, 2019. The developers are asking for a one-year extension to both deadlines, and Behan is recommending that the board grant the extension. The MRA board will convene a special meeting on Tuesday, May 7, to consider the issue.