|By Jordan Carleo-Evangelist, Times Union,
Albany, N.Y.McClatchy-Tribune Regional News
July 29, 2011--ALBANY -- The Crowne Plaza hotel, a downtown anchor for three decades, is in danger of losing its franchise unless it receives at least $10 million in upgrades, according to the Dallas private equity firm that bought it last year.
To avoid that, Albany Hotel, Inc. is asking the city's Industrial Development Agency to grant the aging State Street hotel a tax break that would save it at least $14.3 million in taxes between now and 2042, with the hotel pledging in return to invest at least $10 million back into the building.
At stake is not just the fate of the Crowne Plaza but perhaps the image of State Street itself, one of the city's most visible and star-crossed downtown thoroughfares.
The roadway itself is undergoing a multi-million overhaul that includes new sidewalks, curbs and planted medians but is flanked by at least two seemingly stalled publicly backed redevelopment projects and another struggling hotel.
One of those projects, a bid to turn the old DeWitt Clinton Hotel at State and Eagle streets into an Embassy Suites, appears to have languished despite a commitment of $4 million in state aid, while luxury boutique hotel 74 State fell into foreclosure last year.
The Crowne Plaza deal would be structured as a payment in lieu of taxes that would pave the way for the hotel to renew its expiring franchise, or flag, with the Crowne Plaza or another top-tier hotel brand and also end its somewhat complex relationship with the state.
The land on which the 384-room hotel sits at the corner of State and Lodge streets, a block below the Capitol, is actually owned by Empire State Development, the state's economic development arm.
The Crowne Plaza has a long-term lease with the state, under which it pays an annual rent to the city of about $364,000, equivalent to the taxes on about half of the hotel's $27 million assessed value, according its attorney, Robert Wakeman.
Those payments are scheduled to spike to 100 percent of the building's assessed value in 2022 -- a development that the ownership group, for whom acquisition of the Crowne Plaza was just a small part of much larger deal, calls "economically unsustainable."
The owners claim the hotel's profitability is declining as it under-performs its nearby competitors -- including the much newer Hampton Inn on Chapel Street and the Wolf Road Marriott and Desmond near the airport in Colonie.
Failing to secure a new high-end franchise -- which the ownership casts as a near impossibility without the costly renovations -- would force the hotel to go independent, which would be "difficult to sustain" and potentially accelerate its decline, Wakeman wrote.
City Planning Commissioner Michael Yevoli likened that scenario to "a slow bleed" that could end with an undesirable use of the building.
Albany Hotel Inc. is owned by a subsidiary of Lone Star Real Estate Fund, a Texas-based private equity fund that last April bought Lodgian Inc. -- one of the nation's largest independent hotel owners -- for around $270 million. The Crowne Plaza was among Lodgian's holdings.
Albany Hotel Inc. could exercise an option to buy the Crowne Plaza land from the state for $1 million, but doing so, according to Wakeman, would cause the tax payments to immediately spike to 100 percent of the property's assessed value.
The PILOT agreement would allow the hotel to buy the property, make the needed improvements and compete for a new franchise while stabilizing the increase in annual payments for 30 years, representatives of the owners told the IDA last week.
Under the current proposal, the hotel would pay $346,000 this year, a sum that would increase three percent annually for the first decade and then five percent annually thereafter.
The owners are also asking to be exempt from nearly $1.1 million in sales and mortgage recording taxes related to the project. In exchange for the tax exemptions, the hotel would pay an additional $1.5 million between 2012 and 2026 as a community development fee, which the IDA could use to back other projects.
The estimated $14.3 million value of the property tax break does not include the community benefit payment but assumes the building's assessment would be reduced by more than a quarter to $20 million by the time full taxes were due to be paid on it.
The hotel's owners told the IDA they have two expert opinions to support their contention that the building is over-assessed. But city Treasurer Kathy Sheehan, a member of the IDA board, questioned that logic.
"What we're saying is they're going to invest $10 million in this building and it's still going to be worth $7 million less than our assessor says it is now," Sheehan said last week.
She also asked to see a more specific break-down of the projected economic benefits to the city.
"Certainly having a flagship hotel in the downtown of a capital city is something that is expected," Sheehan said Thursday. "It does absolutely benefit the city to have that here compared to having people staying in outlying areas, but we need to be able to quantify that for the taxpayers."
Yevoli said the hotel owners have since provided some of those figures. He has also said the agreement could be contingent on the hotel maintaining a certain level of hotel affiliation.
"I think for that type of project to remain competitive," Yevoli told the IDA last week, "we're going to have to be looking at numbers like this."
Reach Jordan Carleo-Evangelist at 454-5445, firstname.lastname@example.org or on Twitter @JCEvangelist_TU
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Copyright (c) 2011, Times Union, Albany, N.Y.
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