Downtown hotel agreement collapses with developer set to miss deadline

By Cameron Montemayor

The long-awaited construction of a Downtown hotel in St. Joseph this year will not move forward after the hotel’s developer told the city it will miss its Aug. 31 deadline for construction.

City leaders received an official notice Tuesday afternoon from hotel developer HDDA, LLC, that attempts to secure the remaining $8 million for construction of a planned Courtyard by Marriott hotel were not successful due to continued challenges in the capital market.

“Our project is not unique as this has been a systemic issue in the lodging industry across the country for the last 18 months,” HDDA Director Aaron Gumpenberger said in a letter emailed to the city. “At present, our only option is to pause development efforts until lending conditions improve.”

St. Joseph Planning and Community Development Director Clint Thompson said the hotel agreement between the city and developer will be dissolved, meaning any future negotiations and planning will start back at square one, further prolonging development. The agreement had also been negotiated by the previous city council and not the current group.

“Although the project may not move forward in its current state, the city is still hopeful that the project will occur, even if it’s not with the current ownership,” Thompson said. “However, at this time we do not have a time frame as to when that may occur.”

Thompson said the hope is HDDA, the group that currently owns the property, will be the one to move forward with redevelopment of the property in the future. HDDA told the city it intends to continue seeking options for financing and will provide status updates periodically.

“The developer will eventually decide whether or not they have the ability to move the project forward. And if they decide at some time in the future that another entity may have a better opportunity. I’m sure they will transfer ownership to the next entity that can move that project to actually be able to develop the site,” Thompson said.

Ultimately, the city council would have to endorse and support any new project proposal and incentives for it.

HDDA has already invested over $1.5 million in demolition, architectural and engineering fees and other pre-construction costs. As part of the Marriott hotel deal, the city had agreed to commit $3.5 million in reimbursable funds from a combination of local sales tax and tourism tax revenue.

St. Joseph’s partnership in any economic development project is only after the project has been completed, so the city will not be required to reimburse any of the costs associated with HDDA’s investment to this point.

The failed agreement is a blow to the city after years of planning had it on the doorstep of breaking ground before being plagued by delays. Construction of a Downtown hotel is considered by many as critical for improving needed hotel space and strengthening Downtown business growth.

“Further delays for a hotel in our most walkable, visitor-friendly district in Buchanan County is disappointing, especially because the need remains the same,” said Christian Mengel, communications director for the St. Joseph Convention and Visitors Bureau. “We continue to have a shortage of hotel rooms as a destination, and we continue to have no hotels represented west of Belt Highway.”

Mengel said the development of two new hotels — a My Place and a Hilton hotel near the Shoppes at North Village — will provide a significant boost for hotel space, but the need for Downtown lodging is continually growing.

St. Joseph has one of the highest average daily rates for hotel use in the state, a sign of growing demand with limited availability. For comparison, Joplin, Missouri, has roughly 2,800 more hotel rooms than St. Joseph despite having 25,000 fewer people.

A hotel would also help attract and accommodate marquee Civic Arena events, boost tourism efforts and provide convenient lodging for the rapidly-evolving Rosecrans Memorial Airport.

“Downtown is an ingredient into the success of the overall community. An important aspect of our community, Downtown as a focus not only of the city council but increased emphasis to ensure that anything the city can do to help stimulate reinvestment in that area, we want to be a part of,” Thompson said.

Despite the agreement falling through and with no set timeline for when discussions could reengage, Thompson said going back to the drawing board will allow them to potentially pursue one or even multiple Downtown hotel projects, with conference and meeting space being a priority component.

“I think Downtown itself has the ability to probably attract more than just one hotel …” Thompson said. “I think the opportunity to probably double the existing rooms that existed previously from the prior hotel is still on the table. Conference spaces and the component of a restaurant, even potentially a rooftop restaurant, I think would attract people to Downtown as well.”