HCW gets 11th-hour $71M convention hotel deal

Branson Landing developer HCW LLC could have lost a $71 million convention hotel project in Evansville, Ind., had private investors in southwestern Indiana not stepped forward in the 11th hour.

On Sept. 30, the Evansville City Council unanimously approved a resolution allowing Branson-based HCW to develop a convention hotel, parking garage and apartment complex in downtown Evansville. Just days earlier, the whole project was in jeopardy.
Before the final vote, Evansville council members voiced significant concerns about the project’s level of public investment  up to $38 million in subsidies – and asked HCW officials to share company income statements. HCW declined to provide its intimate financials but began working with the city to restructure development plans.

“The leadership of the council came to me and said, ‘Listen, you do not have support for this. It is going to be voted down 6-3. We encourage you to pull the project,’” Evansville Mayor Lloyd Winnecke told Springfield Business Journal last week. “I said, ‘We are not going to pull the project. We have got to figure out a way to make this work.’”

To make it work, he said a $5 million retail and storage facility was scrapped, HCW voluntarily dropped $1 million from the city’s proposed investment and private investors were asked to come forward.

“The bottom line is the business community committed to raise $11.5 million toward the project,” Winnecke said, noting Old National Bank in Evansville played a key role in securing investments.

The deal was struck on Sept. 22, just 24 hours ahead of the scheduled vote. Following a five-hour meeting on Sept. 23 that included roughly 40 public speakers, the Evansville council approved the city’s issuance of a $20 million project bond at a special meeting Sept. 30.

HCW CEO Rick Huffman said he was worried about the fate of the project but had assurances from Winnecke that a deal could be worked out.

“I was a little concerned. But knowing what was going on in the background, we felt pretty confident the mayor would be able to get this project done as it is so desperately needed for their city,” Huffman said.

Huffman said the development agreement between HCW and the city’s economic development commission already had been signed in the summer. What was in jeopardy was the public funding, which only the city’s council had the authority to approve.

“The city has plenty of capacity. It was just that they wanted to reduce the subsidy,” Huffman said. “It is one of the few projects I’ve seen in the country where private enterprise stepped in and took the place of the public sector.”

Springfield Economic Development Director Mary Lilly Smith said she is not aware of Springfield City Council asking to review a developer’s financials before approving public financing.

“I can understand why a developer would not be willing to share financial statements with City Council because at that point they would become public record and the whole world could see all of your business,” Smith said, noting only projects where the city could be at risk of losing money would require a financial review.

She said the city has been known to utilize Kansas City-based Gilmore & Bell PC as a third-party legal counsel to shield developers’ financials from widespread public scrutiny.

“I certainly agreed with the desire of HCW to not release its personal financial statements and tax returns,” Winnecke said, noting a 15-member community search committee already had access to certain financial information about the Branson company. “We had done some preliminary research on HCW’s financial wherewithal. There were no red flags. We had a letter of recommendation from one of HCW’s banks. There had been more than sufficient due diligence on the part of the city.”

Through a process that began in January 2012, five companies were vetted and six public hearings were held before HCW was selected.

“We really connected on a personal and professional level,” Winnecke said of the community review group’s choice. “They were really wowed by its vision.”

Winnecke said HCW’s proposal was the fourth attempt for a convention hotel project in the city of 120,000 since the 2009 closure of a 450-room property downtown. With the financial package shored up, HCW plans to break ground in December on a 253-room Doubletree by Hilton that will serve Vanderburgh County’s convention center and a sports arena home to minor league hockey and Evansville University men’s basketball.

With a mid-2015 estimated completion date, HCW also is developing a 336-space parking garage and a 78-unit apartment complex.

A failure of the development could have impacted Springfield firms, as well, Huffman said. Butler, Rosenbury & Partners Inc. is the architect of record, and Killian Construction Co. is the general contractor.

HCW, a nationwide developer that led the $420 million Branson Landing outdoor lifestyle center project along Lake Taneycomo in 2006, had been in the running to build a proposed convention hotel next to the Springfield Expo Center in 2007 before John Q. Hammons Hotels was selected. While that project has not gotten off the ground, a Chicago-based consultant last year called for a public-private partnership to develop a $90 million retail, restaurant and entertainment complex adjacent to the proposed convention hotel site downtown. The same consultant, Hunden Strategic Partners, also worked with Evansville officials last year to determine the need for its convention hotel project.