Two companies are proposing contrasting hotel concepts and financing options to the city for the Palm Avenue hotel site.
The property sits directly behind the Palm Avenue parking garage, on North Palm Avenue at Cocoanut Avenue.
Sarasota-based Floridays Development Co., which has the exclusive rights to purchase a 5,418-square-foot Cocoanut Avenue parcel, currently home to an antiques store, is proposing a four-star, 200-room hotel the company plans to operate independently. Floridays President Angus Rogers, who has partnered with Sarasota-based Jonathan Parks Architect, promises the hotel would be among the top-10 tourist draws in Florida, ranking just below the Ritz-Carlton in class, while offering a $200 room rate that Rogers says “can’t and won’t be beat.”
The proposal includes 12,000 square feet of meeting space, a spa, a restaurant, display space for local artwork and up to 40,000 square feet of owner-occupied or rental residential units on the top two floors of the 10-story building.
Atlanta-based Jebco Ventures Inc., which also has a Sarasota office, is proposing a 175-room Embassy Suites chain hotel for the 40,000-acre site. It would work in partnership with the Gainesville, Ga.-based McKibbon Hotel Group. McKibbon has built hundreds of chain hotels around the country.
Both Floridays and Jebco Ventures have extensive experience in the luxury-hotel and residential-building industry. City staff will review their proposals and make a recommendation first to the Community Redevelopment Agency Advisory Board, then to the City Commission. The site is permitted for a 10-story hotel.
Founded in Sarasota in 1990, Floridays has a portfolio of resorts and hotels that includes the Grande Riviera and Sarasota Bay Club communities in Sarasota and the Floridays Orlando Resort in Orlando. It also has built a variety of residential and assisted-living communities in Naples, Viera, Coral Springs and Tamarac.
Jebco is a 30-year-old company that has constructed a wide range of projects, including high-rise residential structures, mixed-use development, freestanding retail development, neighborhood retail centers and luxury residences and apartment buildings. Jebco also has developed properties for national retailers such as Home Depot and Wal-Mart.
Jebco’s portfolio includes downtown Sarasota’s Vista Bay Point two-building, luxury condominium towers. The company bought the land on which Vista Bay Point sits and coordinated the development and sales of the 16 luxury residences, which were completed in 2005.
Two major differences exist between the Palm Avenue hotel proposals.
Floridays revealed in a Jan. 12 meeting with city staff that it has the exclusive option to buy a neighboring parcel where an antique store sits. It produced a letter from Coco Palm Gallery Art & Antiques owner Paul Passerat, which confirms the option agreement with Jonathan Parks.
Parks, who told city staff he once was interested in relocating his company’s office there, said he would move ahead with such plans if Jebco is selected to build an Embassy Suites hotel.
While Floridays may have the upper hand with its option on the other parcel, on the corner of Cocoanut Avenue and Palm Avenue, city staff seems a bit hesitant about its financing plan. Floridays has said it would need to make use of the city’s credit rating.
If chosen to construct the hotel, Floridays would partner with Cleveland-based Western Reserve to formulate a credit tenant lease (CTL).
The CTL would work like this: Floridays would agree to pay the city $3.8 million for the hotel site, construct the hotel, then lease the building to the city for 20 years. The city, in turn, would agree to a sublease with a Floridays-created entity that would operate the hotel.
The hotel operator would use its income to pay off its 20-year lease.
Senior Planner Steve Stancel and Finance Director Chris Lyons asked the Floridays team several questions about the financial risk the CTL would pose to the city.
“What percentage of hotel project costs would the city be on the hook for if anything happens?” Stancel asked.
Western Reserve Managing Director Vic Ferris explained that in the event of a default by the hotel operator, the city could replace the operator. The city also could negotiate a lump sum of lease payments, which could be put into a reserve account, acting as an insurance buffer in the event of a default.
After the debt was paid off, Floridays would own the hotel.
Ferris explained that a CTL is a bondable lease for public or private tenants that is sold exclusively to insurance companies offering lower interest rates than mortgage companies can provide.
The option would allow Floridays to build a better hotel, Ferris said, though he conceded the CTL would present both a development risk and an operating risk.
“The city, as the tenant, will make lease payments when the hotel opens, but must figure out what to do if the hotel can’t finish construction for whatever reason,” Ferris said. “And the city must make lease payments for 20 years whether the hotel operator has the money to give the city or not.”
Ferris said those worries can be alleviated by negotiating a sizable equity fund with Floridays; the city could use that fund to make payments if the hotel operator did not have sufficient income.
“Believe it or not, it’s not a complicated transaction,” Ferris said.
Ferris pointed out the CTL gives the city more control of the site, whereas a regular, bank-financed deal that failed would leave a half-built structure on the site, with no option for the city to remove the building, because the city no longer would own the land.
Rogers, a Sarasota resident, said his team has the necessary project financing in place. The CTL, he said, would allow him to build a hotel at a cost of approximately $200,000 per room (or a total of $40 million).
“What we want to deliver is a destination where you want to bring your friends,” Rogers said.
Floridays also plans to gain beach access for the hotel, through an agreement with the city to use the Lido Pool.
Meanwhile, Jim Bridges, Jebco’s CEO, was more reserved with the details of the Embassy Suites facility his company would like to build on the site, but noted he and his partners have more than 100 years of combined experience in the hotel industry.
The Embassy Suites hotel is expected to cost $17.25 million to construct.
If Jebco’s proposal is selected, Bridges said he is hopeful his company can acquire the antique store parcel.
However, he said, if Jebco could not acquire the site, his company “can work around it.”
Bridges, who declined to disclose a purchase offer for the hotel site, said he believes his proposal is more appealing for several reasons.
“We plan to finance this project through bank financing and equity and don’t intend to burden the city with a lease agreement,” Bridges said. “We are ready to move as fast as the city will allow us and could start construction as early as this year if we get the green light.”
General negotiation parameters, Stancel said, include a willingness to put a hotel on the site, the mandatory use of the adjacent parking garage and the purchase of the land from the city.
Tale of Two Proposals
Floridays Hotel Proposal
• Independently operated
• 200 rooms
• $40 million project
• Financed through:
a credit tenant lease agreement
Jebco Hotel Proposal
• Embassy Suites
• 175 rooms
• $17.25 million project
• Financed through: