Citizen Staff Writer
A presentation on a proposed 525-room, 25-story Sheraton hotel at the Tucson Convention Center at Tuesday’s City Council study session left members pleased about the estimated $167 million project.
The council is expected to approve a master development agreement May 12 with Garfield Traub Development for an estimated $239 million package that will include the hotel, a TCC expansion and an 1,160-space parking garage.
“The most important thing is making a decision and getting on with stuff,” Tucson Mayor Bob Walkup said.
Construction of a new main TCC entrance on the east side is scheduled to start in September so the hotel can be built where the grand lobby is now. Hotel construction is penciled in for March 2010 with an opening in June 2012, said Steve Moffett, president of Garfield Traub’s Hospitality Division.
Council members’ questions revolved largely around financing and occupancy projected during a severe recession.
“The hotel would have to be significantly underperforming to not cover the bonds,” Moffett said.
Moffett said projected hotel revenue with 72 percent room occupancy would cover bond payments. But Garfield Traub is asking that the sales tax, hotel room tax and a 2 percent Sheraton surcharge stay with the hotel to build a 50 percent revenue cushion above the debt service to satisfy bond investors.
Rio Nuevo downtown redevelopment director Greg Shelko said local hotel occupancy currently is about 69 percent.
Sheraton has 19 convention center hotels in North America, said Hoyt Harper, senior executive vice president of the Sheraton brand for Starwood Hotels and Resorts.
The development agreement states the city can terminate it with 30 days notice if the project is “neither legally or economically feasible.” In that case, the city would pay all of Garfield Traub’s expenses due as of that date as well as the pro-rated share of the development fee as of that date. The projected development fee would be about $8.4 million, based on the prescribed 3.5 percent fee applied to the initial $239 million estimate for the full TCC project.
Rio Nuevo has paid Garfield Traub nothing so far, but will pay the developer $400,000 for the pre-development concept plan, Shelko said.
No mention was made of the uncertainties facing Rio Nuevo in the Legislature or that Shelko’s position will be eliminated June 30. Garfield Traub principal Tony Traub said he isn’t concerned about the Rio Nuevo turbulence.
“There is no doubt in my mind that this is going ahead,” Traub said.
Presentation to City Council on proposed hotel at TCC puts development pact step closer