Hammons plays numbers right for another city deal

Hammons has agreed to build a full-service Embassy Suites hotel on 1.7 acres between Jordan Valley Car Park and the Springfield Exposition Center. He would buy the property and car park from the city for $7 million, according to a term sheet outlining the proposed deal.

The six- to nine-story hotel would have between 150 and 200 suites and a full-service restaurant that serves three meals a day, Scott Tarwater, vice president of development for John Q. Hammons Hotels & Resorts Inc., told Springfield City Council members at their Oct. 16 luncheon.

Council is expected to consider a resolution approving the term sheet at its Oct. 22 meeting. A formal redevelopment agreement will likely go before council in November.

Hammons, 88, outlasted three other developers competing for the exclusive right to build a hotel on property he previously walked away from after scrapping plans to build a multipurpose arena there. Instead, Hammons committed $25 million to the $67 million JQH Arena under construction on the Missouri State University campus.

A second dimension of the deal would allow accounting firm BKD LLP to build a corporate headquarters on Hammons-owned property at the southwest corner of John Q. Hammons Parkway and St. Louis Street.

“It’s been kind of a difficult process … but we’re all keeping our fingers crossed that we’re there,” said BKD Operations Partner Bill Kirkman.

BKD is privately negotiating with Kansas City development firm Opus Northwest LLC to build a 100,000- to 120,000-square-foot building on the eastern end of the University Plaza and Convention Center parking lot. Hammons owns and operates UP, which is just south of the Embassy Suites site. The lot would lose about 40 parking spaces to the office building, said Tarwater, who suggested the new hotel would not compete with, but complement, UP and Hammons’ nearby Holiday Inn Express.

Officials and elected leaders alike lauded the deal as the best possible outcome some 10 months after the city first requested development proposals for the former arena site.

“I think we have a deal that’s very favorable to the city,” said city consultant David Queen, an attorney with Gilmore & Bell PC in Kansas City.

Hard bargain

Hammons’ offer to buy the land and car park for $7 million was particularly attractive to the city for a couple of reasons, said Economic Development Director Mary Lilly Smith.

HCW Evergreen – the Branson-based development firm seen as Hammons’ primary competitor throughout the process – offered no more than $6.4 million for the land and adjacent deck. HCW Evergreen withdrew its proposal in mid-September after reviewing Hammons’ operating lease for the expo center.

“Mr. Hammons has numerous rights that significantly limit or perhaps make it impossible for any party other than Mr. Hammons to develop the … site,” Huffman wrote in a Sept. 14 letter to City Manager Bob Cumley.

Additionally, the city has been subsidizing the $12.7 million car park with general revenue since the 977-space facility was built four years ago. Officials have said the annual subsidy this year amounts to roughly $600,000.

Once the sale closes with Hammons, the city’s outstanding debt on the car park would be reduced to about $2 million from $8.8 million, Smith said.

In addition to his high bid, Hammons offered to pay cash for the land and begin construction as soon as possible. The term sheet states he must close on the property and start construction by Sept. 30.

The hotel would provide covered connections to the car park and expo center, and Hammons has agreed to build 15,000 square feet of additional meeting space between the hotel and expo center. The agreement also requires Hammons to install carpet tiles for acoustics and improve the food-service facilities in the expo center.

In return, the city has promised to extend Hammons’ expo center operating lease for 20 years with four five-year renewal options. The lease currently extends through 2038.

The city also has granted Hammons several tax breaks, including long-term property tax abatement for the hotel and car park.

Both would receive 100 percent property tax abatement for 10 years and 50 percent for another 15 years. Construction materials for the hotel also would be exempted from sales tax.

If Hammons doesn’t begin construction by Sept. 30, the city is authorized to terminate tax abatement, repurchase the land for $1 and amend its expo center operating agreement with Hammons to take control of a 90-foot easement on the center’s east side. The city also reserves the right to terminate property tax abatement if the hotel is not complete by Sept. 30, 2010.

“I think the performance guarantees are excellent,” Councilman Gary Deaver said.

Process defended

The deal with Hammons comes on the heels of accusations that city officials gave the hotel magnate an unfair advantage.

At council’s Oct. 8 meeting, Becky Spence of BC Development Co. – a Kansas City-based firm that submitted a hotel-office tower proposal to the city in May – said her partner, Rick Baier, was told by city employees in July that the Hammons hotel was a “done deal.” City officials have said BC was deemed “nonresponsive” after failing to respond to a request for additional information in July.

On Oct. 10, Baier told SBJ that several people in Springfield indicated to him that the city had come to an agreement with Hammons, but he would not reveal his sources.

On Oct. 12, the city issued a news release stating that Baier had since publicly stated that his conversations about a purported Hammons agreement came from individuals outside city government, and City Manager Cumley publicly demanded that Spence retract her comments and apologize to city employees.

As of Oct. 18, the city had not heard from Spence, said spokeswoman Louise Whall.

“The unfounded allegations made in a public meeting impugn the integrity of all city employees,” Cumley said in a news release. “To have someone make false statements in a public meeting is totally unacceptable and will not go without response.”

Both attorney Queen and Mayor Tom Carlson said the city treated the development firms fairly throughout the lengthy selection process.

“Fairness, equity and accountability have been the driving force here,” Queen said. “It was just flat-out good competition, and Hammons won it.”

Allegations that the process was “rigged or fixed” are unfounded, said Carlson, who noted that the well-funded, well-connected developers competing against Hammons knew what they were up against.

“Do you think they would have stuck with this if they thought the outcome was predetermined?” he asked.

“The process did have integrity, and the people who were betting their money stayed with it.”

SBJ.net Poll

Do you think John Q. Hammons had an unfair advantage in the competition to win development rights for the vacant plot in downtown Springfield? Why or why not?

Vote at sbj.net/poll.