Proposal for five-star luxury hotel in Kansas City is back, but does it have support?

·8 min read

Developers on a quest to build a high-end luxury hotel in downtown Kansas City may soon resurface at City Hall.

The project was first proposed in 2018 but developers are still in pursuit of the political support to land taxpayer assistance that they say is crucial.

Eric Holtze, the developer of what’s called Hotel Bravo, has been meeting with key figures at City Hall recently, including Kansas City Mayor Quinton Lucas and council member Lee Barnes, who is in charge of a council committee that would first consider the proposal. Holtze is trying to shore up support for a project that its backers say would result in the first five-star hotel in town.

Barnes said Hotel Bravo is tentatively scheduled to come for a hearing before the Neighborhood, Planning and Development Committee on June 23.

Hotel Bravo would be located at 1601 Wyandotte St., currently a grassy, empty lot across the street from the Kauffman Center for the Performing Arts. The average cost for a hotel room there could approach $240 and would include high-end amenities.

Holtze said Hotel Bravo would provide the type of experience missing from Kansas City’s current hotel scene.

“The market is dominated by three and three-and-a-half star hotels, what I call beige hotels,” Holtze said. “You know, nice, decent places to stay, but not attractions. We call this an experiential hotel.”

But the project has encountered political headwinds, primarily because the hotel seeks millions in public funds through tax-increment financing. That’s a program often used in Kansas City that lets a development project capture future increases in tax revenues that it generates from sales and property taxes, for example.

Some at City Hall have misgivings about the optics of approving incentives for a hotel that’s squarely aimed for the enjoyment of wealthy guests.

What’s more is the project needs nine of the 13 votes — a supermajority — on the City Council to receive TIF. That’s because in 2019, a majority of members on the Tax Increment Financing Commission recommended against granting Hotel Bravo the taxpayer assistance it seeks after questioning the project’s need for public help.

Support for Hotel Bravo?

A year ago, Holtze and partner Whitney Kerr Sr. held a press conference and forecast that they had garnered enough support on the council to get the TIF, only to learn otherwise when enough members said publicly that they opposed the project.

This time around, Holtze is more circumspect about his project’s prospects if and when it comes up for a vote.

“We have more council support now than we have ever had,” Holtze said. “Whether we have nine votes, we have to go and find out. I mean, we have not counted nine rock solid votes, no.”

Some on the council are enthusiastic about Hotel Bravo, including Teresa Loar, a Northland council member.

Lucas was non-committal when asked about the project.

“For some to claim we spend too much south of the river, and to turn around and back this year’s largest taxpayer-funded giveaway to a luxury hotel south of the river is interesting,” Lucas said in a statement, referring to recent complaints by some council members that the Northland does not get enough investment. “That said, I look forward to further review and school district comments.”

Mark Bedell, superintendent for KCPS, said he continues to see developers ask for more incentives than is appropriate or necessary.

“Each dollar that goes to an over-incentivized project is a dollar that isn’t going to support important public services, including education in Kansas City,” Bedell said in a statement to The Star. “While we continue to stress that we are not anti-development, Kansas City’s children should not be bearing the financial burden for luxury hotel and apartment amenities.”

Barnes did not offer his opinion on Hotel Bravo when reached on Wednesday.

“There’s some things I feel have to be worked out before I totally commit to it,” he said.

Parking garage revenues

Among those are how to spend money generated by Hotel Bravo’s use of the parking garage for the Kauffman Center.

Hotel Bravo envisions paying City Hall so that its guests can park at the Kauffman parking garage. Holtze anticipated that payment would be between $400,000 and $500,000 each year.

Of that amount, Holtze said in an interview, he plans to ask City Council to consider earmarking 20% for the Love Thy Neighbor Fund, an initiative between City Hall, Kansas City Municipal Court and others to help senior citizens who lack financial resources or physical ability to keep their homes in compliance with city codes.

Another 40% of the parking revenue, under Holtze’s plan, would go to Onyx Development Corporation for development projects at the 18th & Vine District.

“I haven’t seen all the plans but they have a development plan for revitalizing 18th & Vine,” Holtze said. “But it’s Onyx’s purpose, as I understand it.”

Mark Bryant, the executive director of Onyx, said his organization exists to promote the redevelopment of blighted areas east of Troost Avenue. He said it has no development projects at 18th & Vine.

Bryant said Onyx, whose chairman is barbecue entrepreneur Ollie Gates, would support Hotel Bravo if it meant that it resulted in more resources for development in 18th & Vine. But he added that his organization would not receive funds or work on the projects itself.

“I think that’s a misunderstanding, because they conveyed that to us as well,” Bryant said. “And I clarified it.”

Asked if Hotel Bravo could make payments to Love Thy Neighbor and 18th & Vine projects out of hotel cash flow instead of earmarking it out of the garage payments to the city, Holtze said no. “Because that would lower the amount of profits in the hotel,” he said.

‘Do you know any bankers?’

Hotel Bravo’s current financial proposal has $16.5 million in equity from investors. There’s plans for a $27 million mortgage.

Then, $20 million would be issued in bonds. Institutional investors would buy those bonds, resulting in an additional $20 million to build the hotel.

Those bonds would be paid back by future taxes that Hotel Bravo generates if the city council approves the TIF plan. The payback amount over 23 years with interest works out to $47 million, according to Holtze.

That means $47 million worth of taxes — sales tax when a guest makes a purchase at the hotel, or when the property value increases because a vacant grassy field is replaced by a five-star hotel — goes not to the city, school district and county for their use, but to pay off the bonds instead.

The project would generate some $20 million in taxes over the 23-year life of the TIF that would make its way to taxing jurisdictions, the developer says. The Star has not independently verified that figure.

A fact sheet from Holtze that he circulated Wednesday said, “The city will put ZERO cash into this deal...EVER.”

That’s true in that under the TIF proposal, there’s no direct subsidy from City Hall in the form of an upfront payment. The TIF proposal also doesn’t call for taxpayers to guarantee debt on the hotel project if it doesn’t do well financially.

Holtze said the deal doesn’t work without TIF. Asked why the hotel can’t get a loan from a bank instead of issuing $20 million in bonds, he said a bank’s loan committee was unlikely to make such a commitment.

“They won’t support it...It’s just the realism of the market,” Holtze said. “You go to a banker — first of all, do you know any bankers? Because they’re conservative.”

Holtze was also asked if he could seek more equity investors instead of TIF.

No, “because doing that is not going to increase the profitability, right?” Holtze said. “I only have so much net operating income, right? So instead of paying (bond underwriter) Stifel 6 percent, I (would have to) pay these equity guys 25 (percent).”

Skepticism about incentives isn’t limited to City Council members. Visit KC, the tourism and visitors bureau for the region, has expressed reservations about providing incentives for more downtown hotel development.

That’s after Visit KC hired a real estate firm in 2019 to study the market and concluded that room rates and occupancy rates were starting to fall because several new hotels were built in Kansas City. Holtze questioned the methodology of that study.

“We at Visit KC have not changed our position on the continued incentivization of downtown hotel development,” said Derek Klaus, a spokesman for Visit KC, in an email statement. “We have not had conversations with this particular developer recently, but welcome that opportunity should it present itself in the future.”

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