AURORA | Aurora’s $800 million Western-themed hotel might not be built by Tennessee-based Gaylord Entertainment, but local officials say the project could move forward with some other developer.
The hotel’s fate remains in question as Gaylord Entertainment made no mention of the Aurora project in their quarterly earnings report on Aug. 7, and the deadline to finalize negotiations between the company and the state’s economic development board is fast approaching.
Informational materials about the project’s size and scope have been put together by the Aurora Economic Development Council and Gaylord executives to start marketing to potential developers, said Wendy Mitchell, president of the Aurora Economic Development Council.
Mitchell said she’s working on getting a third-party developer interested to build the project in case Gaylord backs off the project.
“We’d have to get a developer, and it would have to be somebody that’s done a big project like this,” Mitchell said.
She wouldn’t name the developers she’s marketing the project to.
The hotel project’s future has been in limbo since the division handling the development was sold to Marriott International, Inc. in May, just a few weeks after the project was awarded state tourism incentives in a competitive application process.
After the sale, Gaylord officials said the company would continue working on the project with “minimal financial commitment.”
The company reaffirmed that position in a statement about the quarterly earnings report on Aug. 7, saying they “will no longer view large-scale development of resort and convention center hotels as a means for growth. As a result, the company will not proceed with its previously announced development projects in the form previously anticipated.”
The Gaylord Rockies hotel and conference center is large in scope. Plans call for a $824 million hotel with 1,500 hotel rooms and 400,000 square feet of exhibition and conference space to be located in Aurora near the Denver International Airport.
A developer would have to have millions of dollars worth of cash just to get the project off the ground and start construction, according to hotel and development experts.
Joe McInerney, president of the American Hotel & Lodging Association, estimates that a developer’s equity would have to be between 20 and 30 percent of the project’s total cost in order to start the construction of any hotel project. The developer would have to then finance the remainder of the balance to fund the project.
That means a developer would need to have between $165 million and $247 million to spend on the beginnings of a project like the Gaylord Rockies hotel and conference center.
Even as one of the world’s largest hoteliers, Marriott’s financial reports show that at the end of the second quarter 2012, their cash balances totaled $105 million.
But Marriott would not have anything to do with building the Gaylord project, Mitchell said, because of the terms of the proposed agreement between the two companies.
The Gaylord Hotels brand, along with the rights to manage its four resort hotels, was sold to Marriott for $210 million May 31.
Under the deal, Gaylord would continue to own its hotel properties and would reorganize itself to become a real estate investment trust as of Jan. 2013, focused mostly on group-oriented destination hotels in urban and resort markets, according to a statement.
The deal with Marriott is expected to be finalized at a special meeting of shareholders on Sept. 19.
As a REIT, the organization would not be able to build new development, said Brian Abrahamson, vice president of corporate communications for Gaylord.
The REIT would pursue growth mainly through acquisition of existing hotels that are already producing cash flow, as opposed to large scale development, he said in an email.
Gaylord “still loves” the Aurora location for a large-scale hotel and conference center project, though, he said.
“As a REIT, however, we cannot be in the ground-up development role. In order for the project to go forward with our involvement, we need to bring on other investors, particularly until the project is up and running.”
Mitchell reiterated his statement.
“If the REIT happens we’ll have to find a third-party to develop it, pay for it, and structure it so Gaylord can own it in the end,” she said.
Michael Sheldon, a Greenwood Village-based developer, said he’s optimistic about the prospect of attracting a new developer to build the hotel project.
“I think that is definitely possible and probably doable based on the city’s attitudes and their incentive history for this property,” he said.
He reiterated that a developer would need about 25 percent
equity to start a hotel construction project.
The deadline for negotiations to be finalized between the state’s Economic Development Commission and Gaylord Entertainment is Sept. 18.
Before the Marriott announcement, the commissioners awarded the project about $81 million worth of tax rebates over 30 years to help build the project, and the city of Aurora offered an additional $300 million in tax rebates to help with construction.
If the Gaylord deal falls through and another developer wanted to construct the project using state tourism funds, another application would have to be submitted to the commission in the next round of state incentive disbursements, said Kathy Green, director of communications and marketing for the Colorado Office of Economic Development & International Trade.
“As of now, no one’s got a clear understanding about what will happen to that project,” Green said.
The commissioners are expected to begin accepting applications for the second round of incentives in late fall or the first quarter of 2013, she said.
The commissioners will formulate a schedule of deadlines for applications at their meeting on Sept. 13.
If the Gaylord project does not move forward, the Pueblo project to expand the Historic Arkansas Riverwalk of Pueblo and build an exhibition hall along the riverwalk would be the only project to receive incentives from the state.
The AEDC has worked for about two years to bring the Gaylord project to fruition, and Mitchell said she’s not giving up hope on the project until she receives word that it’s been abandoned.
“My job is to work every single angle on this thing as long as it still has legs, and as long as it’s viable,” she said. “I will do that until the moment I’m notified that there’s no longer a deal.”
Mitchell declined to comment on how much money has been spent in courting Gaylord Entertainment to Aurora and going through the process for state and local incentives.
The AEDC receives about $400,000 from taxpayers via the city annually that goes toward helping to attract or retain businesses and spur economic development in the city.
The fact that Gaylord made no mention of the Aurora project in its quarterly earnings report didn’t concern Aurora Mayor Steve Hogan.
Hogan said Gaylord’s quarterly earnings report was just that — a quarterly earnings report.
“Obviously we’ll be having conversations with Gaylord now to find out what the next steps are,” he said.
He said he won’t know what the project’s status is until he has those conversations.
Reach reporter Sara Castellanos at 720-449-9036 or [email protected]