Tall Job: Hotel to Condo
Tall Job: Hotel to Condo
Will the $65 million renovation of a hotel-turned-condominium tower spur a renaissance in downtown Fort Myers?
At 24 stories, it's the tallest building in Lee County and one of the highest in Southwest Florida. It sits on Edwards Boulevard in downtown Fort Myers overlooking the Caloosahatchee River, footsteps from a marina. The building, now a Ramada Inn, is the only sizable hotel in the downtown district.
For some it is a landmark. For others it has stood out as a hindrance to downtown development for years.
If Gates McVey, a major Naples commercial development company, and Accord Real Estate Group, a North Andover, Mass.-based real estate development company specializing in hotels, have their way the site may soon jumpstart the downtown's renaissance.
The Gates McVey/Accord team plans to remodel the property, making it a condo-hotel where all units are individually owned and managed as a hotel in the owners' absence. The two businesses presented their proposal to the Fort Myers Downtown Redevelopment Agency (DRA) earlier this month.
The $65 million proposal calls for gutting 90% of the interior, converting the rooms into suites, 11 per floor, remodeling the exterior, adding upper floor balconies and a porte-cochere with an elevated walkway to the marina. Plus, another 76 condominiums would be built next to the property in two-story, four-story and six-story structures along Fowler and Bay streets.
The beauty of the concept, says Steven Robison, managing member of the Gates McVey Capital Group LLC, is that individual unit ownership will increase downtown's tax base and provide a financial foundation for operating the hotel. "As it stands," says Robison, "downtown can't support a 417-room, single-owner hotel. So that operation flounders as it deters other hotels from entering the downtown market."
Condo owners could live in the units all year or seasonally. Unoccupied units could be rented by the owners or placed in a rental pool operated by a management company. The partners are negotiating with two well-known hotel management firms.
Gates McVey is seeking incentives and tax rebates from Fort Myers and the downtown redevelopment agency. Without the incentives, the return on investments would be an estimated 8%, which isn't enough to justify the risk associated with the project, Robison says. With the incentives, however, projected return would be 20% or more, which makes the investment worthwhile. The developer wants real estate tax rebates, impact fee waivers, a utility line extension, landscaping of Edwards Drive, permit fees waivers and leases to a portion of the city-owned boat slips.
In 2002, the property's owners, the Thangsumphant family, were assessed taxes of $122,873 on a taxable value of $8,776,660. Converting the property to 310 condominiums would result in estimated sales of $75 million. According to the developer, the higher valuation could lead to $34.2 million in new tax receipts for the city in the first 25 years after the project is completed. The developer wants $15 million, or approximately 44 % of the total over 25 years, rebated to help fund the $65 million cost of the development. Scott Lodde, president of Accord Real Estate Group, projects the rebates would be completely paid out by the 19th year. That is based on higher rebate percentages in the early years that would give the city an additional six years at the end of the agreement during which it would collect 100% of the incremental tax for the remainder of the life of the property.
Gerald Laboda, chairman of the agency, is concerned that rebating incremental taxes would deprive the DRA of its operating revenue, which is generated by incremental tax growth.
Tammy Hall, a Fort Myers council member and chair of the Community Redevelopment Agency, which would have to approve the terms of any incentive package, offered a different sentiment. "The rebates the developer is asking for actually are found money," says Hall. "These are taxes that are not being collected now and will not be collected without the kind of property improvement that Gates McVey is proposing."
Hall contends the hotel, built in 1982, has been a major hindrance to generating investment interest in downtown Fort Myers. "Whenever we talk to a possible new hotel investor, for example, they ask what will be done about the Ramada Inn. When the answer is nothing, their interest dries up."
DRA member Tom Cronin Jr. says: "Something has to be done about the property, which brings down the ability of the downtown area to attract significant new investment. This is the best proposal we've seen." Cronin's firm, Flordeco, Inc., a major commercial real estate company in Lee County, owns a small island in the river, near the hotel, that is also under contract to Gates McVey and Accord.
The DRA voted to encourage the developer to continue with his plans. Gates McVey plans to complete the permitting and conclude the agreement with the city so it can close on the purchase contract in 45 days. This means sales and marketing would start early in 2004 and construction would start in early 2005.
In commenting on the condo-hotel concept, part of a national trend, Gates pointed out that the ownership of units within a hotel framework allows unrestricted rental opportunities not usually found in standard condominium associations.
Among the amenities - a lagoon-style pool, restaurants and bars, a fitness center and spa, conference and meeting facilities, a market area, Internet room, theater facility, terraces overlooking the river and boat slips that owners can lease. Owners also will have access to hotel services in maintaining their units.
Allen Fox, president of Flordeco, Inc., is excited about the project. "My wife and I have been looking for a downtown condo but can't find anything under $250,000. We'd love to live downtown. If they can bring these units in near that price, we'd be very interested."
Upgrading the downtown hotel property also will have a positive effect on downtown businesses in other ways. Additional residents will increase economic activity and the presence of a first-class hotel is expected to encourage conference and convention business that will fund additional investment in tourism facilities, restaurants and retail operations. Increased convention and conference business long has been the goal of Fort Myers leaders, with recent upgrades of the Harborside Conference Center to encourage it. A study conducted by Pricewaterhouse Coopers in 1998 pointed out "the interior condition of the existing hotel supply is impacting the downtown area's ability to lure hotel demand as well as the convention center's ability to lure out of town groups."
Commercial broker Frank D'Alesandro, who listed the Ramada Inn for sale, met Todd Gates, one of Gates McVey's owners, by chance one day while eating lunch at a downtown Fort Myers restaurant.
D'Alessandro, owner of D'Alessandro & Woodyard commercial brokers for the RE/MAX Realty Group, and Mayor Jim Humphrey were having lunch when Gates stopped at the table to say hello. D'Alessandro suggested a meeting between Gates and Accord to discuss a joint project with the property.
Gates McVey had considered the property for some time and had done due diligence but was unable to work out a promising plan, Robison says. Combining Gates McVey's local commercial development expertise with Accord's experience in hotel development apparently clicked, leading to the team that is expected to bring new vitality to commercial real estate in downtown Fort Myers. That is, of course, if the city, the CRA and DRA agree to the incentives sought by the developer.
Gates McVey Inc. was incorporated in 1995 when James McVey and Todd Gates formed the company as a general contracting firm. One of the firm's initial commercial projects was Park Central, a campus-style office condominium park in Naples.
Other previous projects include Cambridge Square, Edgemont Office Park, the Equestrian Professional Center, Parkway Professional Center and Stanford Square, all in Naples/Collier County. In Bonita Springs, the company has developed the Shores, the Center at the Springs II and Gates McVey corporate headquarters.
Other Lee County projects include the recently completed Lee Memorial Health Services Outpatient Services Building and Health Park Commons. Still under development is Central Park, an office park west of U.S. 41 and south of Cypress Lake Drive that has three buildings of a projected 20, each with 3,000 square feet of office space. James McVey, Todd Gates and Steve Robison are the current co-owners of Gates McVey Capital Group.
The Accord Real Estate Group, Inc. is a privately held company that specializes in hotel development, finance and asset management. Scott Lodde formed the company in 1993 after leaving the Liberty Real Estate Group, a subsidiary of Liberty Mutual Insurance. Lodde's previous projects include more than a dozen Residence Inns around the country, and the Sanibel Harbour Resort & Spa, Fairfield Inn and Hilton Garden Inn in Lee County.
- Wailliam Waites