Hotel developer asks for another extension
EVERETT - The developers behind a downtown hotel project came to the Everett City Council last week asking for yet another extension, and at least one council member is starting to say enough is enough.
This time, Touchstone Corp. said it has been delayed in securing $20 million in foreign investment money to finance the $27 million project.
The company wants to build a Courtyard by Marriott hotel behind the old City Hall at Wall Street and Colby Avenue. The city gave Touchstone an Oct. 31 deadline to start construction. Touchstone already has its building permits in place.
The council has to decide by Oct. 31 whether or not to grant Touchstone its 11th extension. The council has a third option to let Touchstone buy the half-acre parcel for $1.6 million, but still be required to build a hotel.
The city is involved because the hotel project is being built on surplus city land the city currently uses as a parking lot.
“For me, this is embarrassing,” Mayor Ray Stephanson said, noting city leaders promised the community a hotel by now. The project faced numerous financing delays.
The discussion will continue at this week’s council meeting.
Last week, Touchstone principal Jim O’Hanlon proposed a one-year construction extension and promised to give the city $25,000 every three months until work starts.
Touchstone also would seek traditional financing in tandem, O’Hanlon said.
Councilman Ron Gipson took the $25,000 offer as a slap in the face, saying Touchstone is throwing out “chump change” to placate Everett.
“Council has a fiduciary responsibility to the citizens of Everett,” Gipson said. “Should we just end the relationship and open bidding back up and see if we get a better deal?”
Stephanson and others responded that it would take longer to have another buyer build a hotel versus giving Touchstone the one-year extension.
“A one-year delay looks a lot better than” doing a new bid process for a hotel, Councilwoman Brenda Stonecipher said.
City leaders want an upscale hotel downtown in part to benefit Comcast Arena. Gipson noted, though, that a Hampton Inn is being built next to the year-round farmers market under construction at Wall Street and Grand Avenue.
If Touchstone is granted a deadline extension, the hotel would be completed in 2016. The Hampton Inn should be built by then.
Touchstone has constantly been plagued by financing issues during the Great Recession. Traditional lenders wouldn’t lend to Touchstone, and the project was rejected from a federal tax credit program aimed at redeveloping low-income areas two years ago.
Touchstone is now angling for millions in EB-5 foreign investment money, which is a cash-for-green cards investment program run by the federal government. Under EB-5, a foreign investor has to give $500,000 or more to a job-producing project in order to get a U.S. visa. The year-round farmers market got much of its financing this way and started construction this year.
Touchstone’s project was delayed when the government tightened project guidelines earlier this year, O’Hanlon said. They now have to first get the project approved before securing investors, which used to be the other way around.
Touchstone realized it couldn’t get the EB-5 money in time one to two months ago, O’Hanlon said.
“We do intend to see it through,” O’Hanlon told the council.
Everett-based Skotdal Real Estate, meanwhile, wrote to council members that their company could build a 95-unit, five-story apartment complex on the site within 24 months.
Skotdal Real Estate lost the public bid to the Touchstone hotel project in 2008. It didn’t meet the city’s requirement for an eight-story steel building.
At that time, Skotdal Real Estate said in its bid that it could have had its wood frame five-story apartment complex built by 2010.
Skotdal Real Estate wrote off the eight-story requirement as “arbitrary” in their letter and urged the council to drop the requirement.
Stonecipher said last week the city had a specific project in mind for a tall, steel-framed hotel. It is important to make the skyline taller, Stonecipher said.
Skotdal Real Estate notes in their letter that the city also required the winning bidder to be capable of independently financing and building its project, which Touchstone hasn’t been able to do.
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