6-story hotel, upscale steakhouse planned in Kennewick. But only if this change is made

A1 Hospitality Group of Pasco wants to break ground in the spring on a new hotel topped with a sixth-floor restaurant and bar that would serve an expanded Three Rivers Convention Center in Kennewick.

The long-awaited project is dependent on the convention center expansion, with the hotel giving visitors for conventions, trade shows and sports tournaments a nearby place to stay.

An agreement has been reached with the Walla Walla Steak Co., with upscale restaurants in Walla Walla and Woodinville, Wash., to open in the restaurant and bar space of the new hotel, said Taran Patel of A1 Hospitality at a Kennewick City Council workshop.

The top floor would include a rooftop patio extending beyond the restaurant.

The project also would include a 40,000-square-foot retail development with an entertainment business, plus space for a second business, possibly a spa or coffee bar.

The city of Kennewick agreed in 2019 to sell A-1 Hospitality almost 3.6 acres of city land next to the convention center on Grandridge Boulevard for $486,000.

That could be followed with the sale of an additional 5.4 acres nearby for three towers with residential space, which four years ago was proposed as 800 condominiums, plus space for other uses such as restaurants and other retailers on the ground floor.

However, the development project was delayed by the COVID-19 pandemic.

And that delay derailed the original financing plan for the hotel. The Patel family had hoped to leverage the federal EB-5 investor program, which would have been a first for the Tri-Cities.

“EB-5” is the common term used for Employment-Based Immigration Fifth Preference.

Administered by the U.S. Citizenship and Immigration Services, EB-56 awards green cards to foreigners who invest in projects that create new jobs in distressed zones.

Kennewick appeared to qualify in 2019 as it was considered a federal Targeted Employment Area.

But since 2019 the focus of the EB-5 program has shifted and preference now his given to development in communities smaller than Kennewick.

A1-Hospitality Group owns 10 hotels in the Western United States, including the Holiday Inn Express in Pasco and the Courtyard by Marriott Pasco.

Hotel, convention center timing

Vijay Patel, president of A1 Hospitality, and Taren Patel, managing principal, recently told the Kennewick council that the EB-5 program no longer looked like an option but that the company had switched to a plan that relied on using private funds and was very close to having the capital in place.

But now it needs a commitment that the convention center expansion be completed in sync with the hotel expansion.

“I would prefer that the project break ground at the same time,” said Vijay Patel.

That would be an extremely aggressive timeline for the city, said Dan Legard, deputy city manager.

Voters have rejected proposals to raise local sales taxes, most recently in 2017, to update the Three Rivers Convention Center, owned by the Kennewick Public Facilities District.

Now, the plan is to finance the expansion center with councilmanic bonds, which the city council would need to authorize.

However, the expansion of the convention center could be completed more quickly that the hotel. Starting construction six to eight months later than the hotel but finishing both at the same time may be a possibility.

A-1 Hospitality plans to spend about two years building the hotel and have it operating in the the first quarter of 2026.

The convention center is proposed to add 100,000 square feet to its current space of 75,000 square feet.

The additional space would allow it to attract larger conventions and trade shows than it can accommodate now. Evenings and weekends the space could be reconfigured into courts for sports practices and tournaments, ranging from basketball and volleyball to corn hole tournaments.

Now some sports tournaments that are held in the Tri-Cities have to split activities among various venues to find enough play space.

However, depending on financing, the convention center might be expanded in phases — starting with 60,000 square feet and in later years adding the additional 40,000 square feet.

A-1 Hospitality wants the entire expansion to be done at one time to avoid the disruption for hotel guests of an adjacent construction project, the Patels said.

The two buildings would likely be connected by a short breezeway or walkway.

Marriott Aloft Hotel franchise

The success of both projects depends on them being ready at the same time, say the Patels.

“The sole purpose of the hotel is to service the convention center,” explained Taran Patel.

The new hotel will depend on people who come to conventions and sports events to fill its rooms and the convention center will need a place for visitors to stay.

A-1 Hospitality has a franchise agreement with Marriott to develop its new project as an Aloft Hotel, a boutique hotel brand.

Aloft hotels are designed with bright colors in public areas and simple, modern guestrooms.

The proposed hotel’s lobby would include a coffee bar by day that would convert to a cocktail bar in the evenings.

The sales agreement between A-1 Hospitality and the city to sell the land set a deadline for closing earlier this month.

But the city council has voted to extend the deadline for closing on the property another two years.

That allows hotel developers to finalize financing and could provide better timing for the city to issue bonds, according to city officials.

The market for municipal bonds has been severely limited this past year because of significant increases in inflation that led the Federal Reserve to shift its monetary policy and raise interest rates sharply, said a city staff report.

“Staff are hopeful that when the public project is ready to be financed, market conditions will have improved,” the report said.

Kennewick council concerns

The revised sales agreement also amends A-1 Hospitality’s option to buy city land for its follow-on phase of development, the residential towers, at the earlier negotiated cost of $7 per square foot, minus a redevelopment credit, for a cost of about $1.2 million.

Under the revision it must close on that property within two years of closing on the hotel property.

It also requires the developers to obtain a building permit to begin construction within three years of closing on the land. If deadlines are not met, ownership would revert to the city of Kennewick.

The city had asked A-1 Hospitality to focus on the hotel first because of the proposal to expand the convention center to attract more business there.

Some Kennewick council members were concerned that the value of the city land it agreed to sell has increased since 2019 and there has been another developer interested in the hotel property.

But city staff pointed out that A-1 Hospitality has worked for years on the project and pursued financing based on terms of the original agreement.

Staff also said the proposal is a good fit with the Kennewick Public Facility District’s long-term vision for the Three Rivers Entertainment District, which includes the Toyota Center, and is by the Vista Field development project.

A proposed master plan for the coming decades calls for the convention center expansion, the residential towers, a new 12,000-seat Toyota arena, retail space, more parking above and below ground, a performing arts building and an outdoor amphitheater.

The vote to modify the sales agreement and give both the developer and the city more time for financing was 5-1 in favor with Mayor Bill McKay not at the meeting and Councilman John Trumbo opposed.

Trumbo was concerned about linking the timing of the convention center expansion to the hotel construction during an undesirable bond market for the city.