Gary Gorman says he's committed to hotel project in downtown Rockford
Gary Gorman asked for an audit on how much his company has invested into the vacant, asbestos-filled Amerock/Ziock building that he wants to turn into a $67 million Embassy Suites hotel and conference center.
The accountant's report: $760,418.16, said Gorman, CEO of the Wisconsin-based company that bears his name. That's what he'll lose if the project dies.
That investment, which doesn't include $75,000 to apply for a hotel franchise and staff time put into the project since 2012, will surpass $1 million Wednesday if, as expected, Gorman buys the property from the city of Rockford for $250,000.
"The concern I've heard is that Gorman is not committed to this," he said. "I just smile when I hear this."
But worried frowns and questions about Gorman's commitment rose last week when aldermen considered changes to the company's development plan. Those changes include a city waiver of $550,000 in fees for permits and utilities, a $3 million federal loan backed by the city and an option to sell the building back to the city for $250,000. The City Council is expected to consider the changes Monday.
"The real key in getting a project done is persistence, pounding away at it until it comes together," he said. "And I'm betting an awful lot that (Amerock) will."
So are taxpayers.
The Amerock deal has many parts. It relies on $16 million in city infrastructure investments; development of the $24 million Ingersoll indoor sports center; state and federal historic tax credits; EB-5, an immigration program that gives foreigners a green card for investing $500,000 in job-creating projects; a bridge loan for construction; approval of a hotel brand; and tight construction deadlines.
"This is a lot more complex than the average redevelopment deal that we have worked on," said Mayor Larry Morrissey, who expects the amendments to be approved Monday.
Gorman Illinois Market President André Blakley met with aldermen last week to address their concerns and questions about the hotel project.
One question centered on why Gorman needs an option for the city to buy back the Amerock building for $250,000. The answer is EB-5, which Gorman hopes will help it raise $25 million from investors in China.
Gorman said he hadn't anticipated buying the building until later this year, when what developers call the "financial stack" is in place: all of the financial elements — such as equity, loans, tax credits and outside investments — needed to finish a project
Part of that equation is raising EB-5 money in China, where Gorman has eight agents marketing the Amerock program to potential investors. One agent, Zhejiang Shinyway Overseas Development Co. Ltd of Hangzhou, helped Gorman raise $10 million in EB-5 to turn the crumbling Pabst brewery in Milwaukee into the Brewhouse Inn & Suites.
Shineway told Gorman that owning the building would help sell the Amerock project. Gorman decided to buy now but retain the option to sell it back to the city later this year so that "if for an odd chance" the financial stack falls apart, the company won't have the building on its books.
"They want us to own the building before they take money from investors," Gorman said. "I said OK, but if the world falls apart I don't want a large building that's full of asbestos."
EB-5 has become increasingly popular among U.S developers that need money for projects. Demand created a backlog with the U.S. Citizenship and Immigration Services to process.
Rachel Snethen, director of Gorman's EB-5 Regional Center in Oregon, Wisconsin, said a booming Chinese economy the past several decades has created a wealthy class that wants to live in the U.S. And they're willing to wait years for a green card. EB-5 allocates around 10,000 visas annually but has a backlog of 15,000. It has already run out of its visa allotment for 2015.
And processing applications are backlogged 14 months, she said, which slows down the flow of capital.
"Once applications are approved, money is released into a job-creating entity, like the Amerock project," Snethen said. An economic analysis of the project shows it will create nearly 1,000 jobs for construction and hotel workers.
As it waits for EB-5 money, Gorman & Company intends to get a bridge loan — a short-term financing tool that provides capital for construction.
Gorman plans to invest about $30,000 a month this summer doing demolition work and other preconstruction work at Amerock that it will not be reimbursed for if it sells the building back to the city.
Gorman said his company needs a waiver of city building permit and utility connection fees to help fill a funding gap for the project. He said that if the project doesn't go forward, there would be no fees anyway.
"There is a reason no one has built a hotel downtown for many years," he said. "It costs more than it's worth. That's the simple answer. That's why we need participation."
Source : rrstar
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