Hotel backers seek financing
A bar and entertainment center featuring bowling and arcade games would be the main moneymakers at a proposed downtown Springfield hotel, according to a prospectus being circulated by a Chicago real-estate company that is seeking investors.
The project described in the prospectus differs from the project described in documents provided to the city prior to aldermen last month granting a $7.65 million subsidy in the form of tax increment financing funds. Under the TIF ordinance, the city would pay $450,000 for land when private construction financing is secured, then pay the balance over as many as eight years. The city also would turn over land where a crumbling parking garage now sits for the $56.2 million project on the 300 block of Washington Street.
According to documents submitted to the city by DK Collection SPI, the developer, the building dubbed TownePlace Suites in the prospectus would include 95 hotel rooms and 17 apartments. However, the project would have either 28 or 30 apartments along with 95 hotel rooms, according to the prospectus circulated by Diliberto Real Estate Services, a Chicago firm that auctions and markets both residential and commercial property across the country.
Neither Diliberto officials nor representatives of DK Collection SPI could be reached for comment.
Hotel rooms would generate $880,770 in net revenue in 2021, according to the prospectus, and 28 apartments would add another $499,200 for a total of nearly $1.4 million during the first year of operation. By contrast, a rooftop bar and entertainment center that would include a bowling alley would generate nearly $1.8 million in revenue, according to the prospectus. Including money from parking, commercial space and retail space, the project would generate more than $3.9 million in net revenue in 2021, according to the prospectus, and revenue would swell to more than $4.6 million in 2024, with the bar and entertainment center accounting for nearly $2.1 million.
The numbers are based on a 70 percent occupancy rate for the hotel rooms in 2021 and a 73 percent occupancy rate in 2024. Both figures are considerably higher than the occupancy rate for Springfield hotels, which has been 55 percent between 2016 and 2018 and has never exceeded 60 percent dating back to 1992, according to Scott Dahl, director of the city’s Convention and Visitors Bureau.
Occupancy rates depend on supply and demand as well as the tier level of a given property, Dahl said. “Just because a city’s running at 55 percent doesn’t mean we don’t have places at 70 or 75 percent occupancy,” he said. The city has set a goal of getting to a 60 percent occupancy rate, Dahl said, which would mean 87,000 more rooms rented each year. The city is pursuing conventions, he said, and has started marketing in Iowa, which hasn’t been done in recent years.
Average daily rates and revenue per available room, a matrix that takes into account both occupancy rates and room charges, are also considerably higher for TownePlace Suites than citywide averages. The average daily rate in 2021 would be $116, a figure that would grow to $131 in 2024, according to the prospectus; the revenue per available room would start at $81.20 in 2021 and swell to $95.63 in 2024. The city’s average daily rate last year was $86.59, with $47.66 in revenue per available room, Dahl says.
The prospectus describes two ways to invest. Those who put up between $1 million and $6 million would receive “a projected 25 percent return beginning in 2024,” according to the three-page document. An investment of between $7 million and $12 million would deliver a projected 31 percent return starting in 2027, the prospectus says. It’s not clear how long it would take for investors to recoup their money.
“The repayment installments can be determined by the investor (i.e., monthly, quarterly or annually) until the full investment and its percentage return is paid in full,” the prospectus says. “The executed term sheet with DK Collection SPI will incorporate the agreed upon financial investment, projected percentage return and repayment schedule.”
According to the prospectus, tourism is Springfield’s second-largest industry, with an “annual impact” of more than $388 million in Sangamon County. The area has “nearly 400 annual events, including the Illinois State Fair, art fairs, plays and BBQ events,” the prospectus says. TownePlace Suites, the prospectus promises, will be a “landmark project and anchor attraction to a city that hosts business travelers and families for tourism year-round from across the nation.”
The property across the street from the downtown Amtrak station is “steps away” from the Capitol as well as restaurants, bars, shops and “a host of museums,” the prospectus says, and the TownePlace Suites will be “the number one choice for nurses, doctors, hospital patients, lawyers, lobbyists, elected officials, government employees, government contractors, state associations’ executives, Fortune 500 company executives, families, students and tourists.”
Contact Bruce Rushton at firstname.lastname@example.org.