City Rejects Hotel Deal
The City of Urbana has concluded that a proposal by developer Crimson Rock Capital to renovate the Urbana Landmark Hotel is not feasible.
Mayor Diane Marlin said the major issues were the large amount of money the city would have to borrow to finance the project, the low level of equity participation by the developer and overall taxpayer risk.
“A vibrant hotel would make a great addition to our downtown, but unfortunately after many months of discussion, we were unable to reach an agreement with this developer on the current proposal,” Marlin said.
The primary hurdle for the proposed $24.5 million project was the developer’s request for $9.5 million in city funds, which would have required the issuance of taxpayer-backed bonds. Total cost to the public would have approached $15 million over a 20-year period. Renovation costs were estimated to be $19.5 million, with the remainder going for the purchase of the now-closed hotel.
At the city’s request, SB Friedman Development Advisors of Chicago conducted a financial analysis of the project proposal and found the developer’s share in the risk to be too low.
“The developer’s planned level of equity participation is substantially below industry standards and would not normally be considered sufficient in the eyes of other capital sources,” the report said.
The developer’s proposed equity share of the completed project was calculated to be less than 2 percent, or approximately $400,000.
“The numbers just don’t work,” said Marlin. “The current proposal would have put the city’s general fund at risk at a time when we’re trying to address a structural deficit and other financial challenges.”
Marlin said the city would welcome other proposals for the site and has already had recent inquiries.
“Everyone supports revitalizing this area but this particular proposal is not the best way to get there,” she said.
Crimson Rock Capital, doing business as Upsilon Lambda Heta, LLC, is based in Glen Rock, NJ. The firm was notified of the city’s decision last week.