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« Jobbed | Main | Research project »

Jan 15, 2010


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Why do we taxpayers have to keep funding these oversized ego projects?

Tony Wilkins

Related post: Robbie Perkins Awaits Catanoso’s Proposed Hotel Report. Ah oh.

Ed, why do you say "devastating"?


No private money.

Ed Cone

Why do I say "devastating?"

Because the article is thorough and the math seems conclusive.

I hear the city has a document that purports to justify the project, but the financials therein are not being released to the public.

I would like to know how a hotel that must capture approximately 100% of the existing downtown hotel market, and do so against a competitor with enormous capacity and great pricing power, plans to do it.

Wouldn't you?

Tony Wilkins

Of course. Just wasn't sure which way your "devastating" arrow was pointing. The report pissed right in Robbie's Post Toasties.
Looked for you yesterday between the Tokyo Tower, Sashimi Combo Bento Box, and spicy CA roll.


Can anybody answer, beyond speculation, whether or not the bonds are underwritten by taxpayers? Are they "government" bonds only to the extent that interest is tax deductible but without any guarantee by the public or, if the issuer defaults, will the government indeed guarantee them?


Not only 100% of the market share but at
an 80% higher price


Justin writes what most of us have known since day 1.


I'm not so worried about the performance of the facility bonds as the econ dev bonds. The Build America Bonds, which are similar, if not inclusive of the ARRA RZ econ dev bonds, offer a 20% loan forgiveness after seven years. That's definitely tax-payer subsidized.



And hopefully, the defining logic that causes the whole idea to be sent to the circular file.

Not that something like logic ever figures into decisions like this when there's "business as usual" to be accomplished.


Why can't anyone stay at the Proximity, it was good enough for Obama!

Mike J Baron

We are up to our eyeballs in an socio-economic crumble and the city is wasting its time on diversions like the Aquatics Center and the hotel to nowhere.

Jim Caserta

" 70% occupancy at $200 per night to cover bond payments" Are those really the numbers - just to cover bond payments? Not covering bond payments is operating at a loss. If that is the case hotel proponents need to produce a list of hotels that are hitting that criteria, and then the cities & areas those hotels are in need to be compared to downtown GSO.

IMO, the project, in concept, is nice - unique downtown hotel, but breaking the numbers down, for the proposal as it is doesn't make financial sense. If you scale back the proposal, less rooms, lower cost, the numbers might make a lot more sense. However, I imagine for something like a hotel, as you design for less rooms, keeping all else semi-constant, cost-per-room can go up.

Proponents of the project also need to examine the general world-wide hotel market. Lots of hotels have gone bankrupt and been foreclosed. Nice, new, hotels in high travel cities. Greensboro has the advantage that it has not overbuilt nearly as much as other areas, but still needing 70% @ $200 doesn't seem like a recipe for success.

Ed Cone

One hotelier quoted in the column says he studied the downtown market a couple of years ago for a $16 million, 80-room, "value-priced" Residence Inn. They were going to build their own parking deck. Numbers didn't work.

JC, the 70% (actually, 68%) occupancy @ $200/night is quoted in the column as being from a feasibility study.

I would love to see a distinctive hotel in downtown GSO. I'm just having a hard time understanding how one works for anyone not involved in brokering the bonds or the real estate, or in getting free money to prop up an existing investment.


first of all $200 per night is at the high end in terms of what the expected rate is. No one said that its set in stone. In fact the hotel group even stated that the rate would likely be lower than $200 per night. That addresses one concern.

"The answer, as you’ll see, is clear: if downtown could support such an amenity, Greensboro would have it already. "

The comment Justin made is the most stupid thing I've ever heard. If you believe the logic in that comment, downtown will never get a luxury hotel...EVER. There is always a first time for everything. What if the owner of Greensboro's first downtown night club had said downtown couldnt support night clubs because there aren't there already. What a stupid comment.

Since we are dealing with private bonds there will be NO risk to taxpayers in the project and you naysayers can shout all you want to that it will. It wont change the facts


Also Justin seems to be skitsofrentic in regards to this project. When he was on the good morning shows he seemed enthusiastic about the project...what the hell? I dont know if id take his advise


Google helps greatly with spelling.


News & Record's Allen Johnson interviews Randall Kaplan and Bridget Chrisholm Friday. See the interview here:


Ed Cone

If you change one variable in an equation while keeping the result constant, you have to change the other variables to make the math work out.

So if $200/night at 68% occupancy equals the interest payment on $30 million in bonds, and you lower the nightly rate, you must increase the occupancy rate to pay the interest.

That would seem to push the occupancy rate from unrealistic to even more unrealistic.

That's why Justin's comment is not stupid: it's not a blanket statement claiming that nothing that hasn't happened can ever happen, it's an analysis based on the math.

If there are numbers that say otherwise, let's see 'em.

Tony Wilkins

Tim, Kaplan states to AJ with the N&R that rooms will be between $150 and $220. That's in yesterday's awkward interview along with Chisolm in which AJ never mentioned the Memphis project.
Now I have a "stupid", as you might say, question. But it's one I don't have an answer for:
If the money allocated to Gso and GC is not used for the hotel project, then what alternative is that money available for? Anybody know?
I wish you would identify yourself Tim but that's your call. At least tell us the color of your tights so I can supply you with matching pom poms. Meant in a nice way.


WOW its amazing! We wouldnt be having this conversation if some hotel builder came in and applied for permits to build some hotel off of I-40. In fact it wouldnt have even made the local news. Why is downtown always a lightning rod for the naysayers?


Like I said a few weeks ago, the market in Greensboro makes this a zero sum analysis in terms of occupancy. This report not only confirms that but also illustrates what a money loser this project would be.

I still believe that the private investors involved plan to quickly bailout after they have made their money and leave the wreckage to someone else, probably the taxpayer. Run up the stock and then just run. We've seen this before. That's why it is better that they put only their own money on the line.

Ed Cone

Tim, calling people naysayers is no substitute for addressing the math problem discussed in my previous comment.

As it happens, I'm a longtime proponent of downtown, as is Justin.

A project anywhere in the city that required a bond issue and a city-built parking deck would be subject to scrutiny.


This whole effort has been handled clumsily, and not just by Urban Hotel Group.

Ed Cone

"...Run up the stock..."

What stock?

That's not the game.

The game is this: the would-be hoteliers own a money-losing meeting and party space downtown.

They pledge that property as equity, and get to use OPM to build a hotel and parking deck that could help their existing business.

Chisholm gets a fat fee for brokering the bonds.

Alston gets a fat fee for brokering the deal.

What do the rest of us get? A great hotel downtown has a ton of appeal -- IF it's financially viable.


I can name a number of projects where the so call numbers didnt work, Southside being one of them because the belief was that you couldnt have $300,000 to half a million townhomes in a questionable area that had a history for all sorts of crime. I think anybody can produce their own set of numbers to support or not support a project. The only public money involved is the parking deck, but the city was going to build the deck anyway. By having the hotel lease spaces, it would certainly help to city to pay for this deck.


Im not too worried about this project not getting enough support from city-council. It seems that several have already made up thier mind. Provided that this project moves forward, I cant wait til its built and we will see a lot of people eating crow.


Derek, I mean Tim, do you live in Southside?

Ed Cone

I'm puzzled by the idea that discussing this and trying to understand the numbers is "naysaying."


"Since we are dealing with private bonds there will be NO risk to taxpayers in the project..." -- Tim

I have been trying to ascertain whether or not that is true through some source other than pseudonymous blog commenters. Can you tell me how you came to know that taxpayers are not on the hook for these bonds, possibly pointing us to an authoritative source?


As a matter of fact I am a resident of Southside. I've lived in Greensboro for 31 years so I know what the area use to look like. Its like night and day. What if the developer of Southside had strictly gone ny the numbers? My guess is that Southside would still be a brownfield with boarded up homes today. It took an outsider to make us realize that Southside could work. Local developers wouldnt even consider doing something like southside unless it was an affordable housing project.

In any case lets look at the worst case scenario. If the project went belly up and there wasnt enough income to pay the debt, the losers would be the developers putting up money and the owners of the Elm Street Center not the taxpayers. If the project went belly up, the lenders would take over and run it themselves or sell it outright to a buyer. I think the hotel will be successful, I think the concern from people like Dennis Quaintance is that this hotel will further divide the pie and would hurt the vacanacy rates of their hotels. Dennis even stated in an old article that he feared such a hotel could affect his hotels. The economy has taken a toll on a lot of things including travel. Economist are already seeing a slow turn arouns in the economy. It will be a few years before this hotel comes online. Its going to take time to demolish a current parking structure and to build something that could be as tall as 15-stories. Two or three years down the road, there should be improvement in the economy and we'll be seeing people doing more traveling. The key is to be ahead of the curve. From the interview it appears that this hotel will have above average ammenities which includes retail and restaurants. Not to mention the uniqueness of being able to walk right outside the hotel to go to bars, clubs museums, restaurants and theater. Its a pretty unique experience from all the other hotels in the city.

Jim Caserta

From Jan 1, "The hotel still faces a political hurdle later this month, when City Council members will consider whether to approve a complicated financing plan for the project."(emphasis added) If the project didn't have a 'complicated financing plan' few would question it. If Barron Hilton wanted to put a hotel downtown with all private money, as long as it fit zoning & style wise, where would the argument come from? TW has a point, that if the bond money is not allocated to the hotel, it could go to something else that might be better use of the funds - a simple opportunity cost. Any project can be either a bad idea or a good one, simply by adjusting the cost. I would also pay attention to any feasibility study and how they project demand for hotel rooms to move from 2009 to 2010 and beyond. Assuming hotel demand will bounce back to peak would be dangerous.


Ladies and gentlemen, I present Derek Cain, son of Isaac Douglas Cain and UNCG Class of 2002. Welcome to the conversation.

Ed Cone

"If the project went belly up, the lenders would take over and run it themselves or sell it outright to a buyer."

The lenders would be the bondholders. How would they run it? And any buyer would be faced with the same math.

My problem with the numbers as presented is that they are not even close to be being close to adding up.

As stated, we're talking about doubling the number of room nights sold in the downtown market, and doing so at a price point significantly higher than the competitor down the street.

If the city needs a new parking deck, and that location makes sense with or without a hotel, then putting the deck there is fine by me. If people want to buy high-risk bonds, that's their business.

How are the feds on the hook if the deal goes south? Aren't the bond-holders the ones assuming the risk?


again people think its public money because the government is issuing bonds. The fact is that the PRIVATE SECTOR!! purchased the bonds so the PRIVATE SECTOR will be liable, NOT CITY OR FEDERAL TAX PAYERS. That being the case, why should any of you who are concerned even care?


" The fact is that the PRIVATE SECTOR!! purchased the bonds so the PRIVATE SECTOR will be liable, NOT CITY OR FEDERAL TAX PAYERS." -- Tim

I have been trying to ascertain whether or not that is true through some source other than pseudonymous blog commenters. Can you tell me how you came to know that taxpayers are not on the hook for these bonds, possibly pointing us to an authoritative source?


apparently there are other studies that show different numbers. I think people who question the viability of this hotel should look at those numbers as well before judging this project. Comparing this hotel to the downtown Marriott is like comparing apples to oranges. There is a reason why the O'Henry/Proximty have lower vacancy rates than the downtown Marriott and if im not mistaken, guests pay more a night at those two hotels. The downtown Marriott is not a luxury hotel. Its located in a dead end of downtown in terms of street activity, not really pedestrian friendly areound that hotel and the main entrance doesnt even face the street. There are certain type of travelers who want to stay in a budget hotel and there are types of travlers who want to stay in a high end luxury hotel.

Ed Cone

"apparently there are other studies..."

Apparently. Now there's a rigorous standard.

"...people who question the viability of this hotel should look at those numbers as well..."

That's what we want to do, but the City is only releasing documents with the financials redacted.

Again, my problem with the numbers we have seen is that they don't fail at the margins, they are not even close to being in the comfort zone.

And taking business from the Marriott may not be so easy: It gets 20% of its business from government, which has a hotel per diem is $89, for example.


clearly there is something that "we" are missing and are not taking into account. If it were that obvious the hotel would fail, I just can't see Bridget and Kaplan even attmepting this. Both are intelligent business people. They aren't idiots and I cant see Kaplan risk losing the Elm Street Center over a project thats "not viable"


Tim, making an assertion and twice declining to explain how you know it to be true does not inspire confidence. One might even say it is an indication that you have no idea what you are talking about.

I would still like to get an authoritative and verifiable answer to who is on the hook for the bonds, but this document from the IRS says over and over again that it is states and municipalities who will be issuing the bonds. How Greensboro can issue a bond then throw up its hands if the project fails is beyond me. From what I can tell, we will be quite on the hook.


no...theres is no point in responding because no matter what I say you are going to hold your beliefs.

Ed Cone

Chisholm gets paid a handsome sum for facilitating the bond issue, then walks away.

Previously, she was all about that Lee Street project, which pretty much nobody else believed in.

Alston also gets paid, no matter what.

What are the owners of Elm Street Center risking? A property that's losing them money now.


Tim, good job. You've convinced me.

Brandon Burgess

Tim, you have the floor. You have some open and inquiring minds. You could gain supporters for this project if you answered Roch's simple question. I mean, it's a really, really simple question. Either you know, or you don't. If you do, clue the rest of us in.

Ed Cone

And if you don't know, that's OK, we're all trying to figure it out.

I've been told the city and county are not on the hook if the deal goes bad, and the bondholders take the hit, but I'd like a detailed and definitive explanation of the financing.

Tony Wilkins

Tim: "If it were that obvious the hotel would fail, I just can't see Bridget and Kaplan even attmepting this".
How did that Memphis project work out for her?
If you can't answer Roch's question, why not just say that?

Ed Cone

Also, one more time: It's my understanding that Chisholm gets paid up front, whether the project succeeds or fails.

Not along ago, she was trying to sell a project on S. Elm and Lee that nobody really believed in, so her participation does not necessarily bespeak a sound project.

David Hoggard

Your man of few answers smells like Tim Jones aka www.downtownstadium.org among other city-centered project that he has championed over the years

Circular in his reasoning, shuck&jiver extraordinaire, hardheaded and generally obstinate, I've wasted many an exchange trying to make sense of his positions over the years.

A lamp post would be more easily be persuaded to stick to reason and logic. Abandon any hope of satisfaction, all who would engage the man.


Tim, I doubt if my opinion is uncommon. It is that if the public is indeed not on the hook for the bonds, then let's get 'er done. But that's a big if that we need a little more than your ALL CAPS to convincingly answer.


Ed you say this

"What are the owners of Elm Street Center risking? A property that's losing them money now."

I have been asking for awhile who are all the owners of the elm street group , we know kaplan,semon,kern,house. There is still 8 others who are a part of this group can any transparency or maybe some reporting find out who are the rest and if they are not going to tell us who are all the investors please explain why.

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