The Danville, CA-based developer last spring won the right to develop the project by telling the Foss Waterway Development Authority Board of Directors that it would build for $70 million a 124-room hotel on one of the two parcels, a 200-unit condominium tower on the other, both with ground floor retail space. The proposal, for which the developer originally hoped to break ground on in late 2003 and complete by May 2005, won out over a $114-million proposal by Portland, OR-based Williams & Dame, which called for 372-condominium units in four buildings, a 54-room hotel and three residential buildings evenly split on the two properties and also containing ground floor retail space.
Now, however, Nearon project manager Mark Ossola tells GlobeSt.com that the only way to make the hotel project pencil out is to cut the size of the hotel to about 80 rooms and place 16 to 20 luxury condos on top of it such that, when sold for between $400 and $450 per sf, the condo units will offset the development cost of the hotel and lower the average daily rate necessary to make the hotel feasible. For the price, the condo units would have private entrances, high-end finishes and appliances as well as access to all hotel services.
"The original proposal just didn't make any sense given the cost of new hotel construction and the average daily rate for hotel rooms in Tacoma," says Ossola, explaining why the original hotel developer they were working with walked away from the project. The new plan, which is $10-million more expensive, calls for the project to break ground late this year and be complete in early 2006, and for the hotel-condo tower to be designed by Portland, OR-based Ankrom Moisan. Upon completion, the hotel portion of the building would be sold to Robert Thurston, owner of Seattle's Inn at the Market.
So, in retrospect, it appears that Williams & Dame's losing proposal--which had the smaller hotel and a residential component on both properties--was the one more based in reality. Indeed, the losing proposal's design also is proving more appropriate, as Nearon is now using the architecture firm Ankrom Moisan, which Williams & Dame had planned to use, for the hotel-condo portion of the project.
Ultimately, the changes mean that two of the three of the main reasons that development authority executive director Don Meyer gave for choosing Nearon over Williams & Dame--because it would have been a larger hotel without residential development on both parcels--are now gone. And the third reason--because Nearon was willing to pay for both properties upfront and develop more rapidly --is losing its luster, as the sale hasn't yet occurred and the project likely will be 12 months behind schedule by the time it breaks ground, an event now tentatively scheduled for this fall.
Despite all that, Meyer remains content with the development authorities choice of developers for the project. "If we are moving more toward what another presenter had, that's OK," he tells GlobeSt.com. "The fact of matter is Nearon was more aggressive."
Scott Surdyke, the man hired by Williams & Dame to win them the project, said last spring he was "very surprised and very disappointed" at the outcome. Now, with the changes that have occurred, he seems at the same time both annoyed and flattered. He thinks part of the reason why Nearon won out is that he wouldn't guarantee the development authority that a hotel would pencil out at all, only that their proposal would be the most likely to succeed. Now, with Nearon apparently about to give it a try, the theory will be tested, just not by Williams & Dame.
"It's interesting--and frustrating," says Surdyke.
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