Executives of American Hospitality Management, I feel for you.
After losing out on a bankruptcy auction bid for the Clarion in downtown Green Bay, Wisconsin, several months ago, you probably felt that you had the acquisition of the hotel in downtown Green Bay, Wisconsin, finally wrapped up last month. And who could blame you? You’re the management company for the hotel, you’re familiar with the market as you have several other hotels in the area and you put in a $2.7-million offer for the hotel that was conditionally accepted.
There was one problem though: The Clarion Hotel is owned by the city of Green Bay, which acquired the hotel out of bankruptcy for $2.9 million. And as I’m sure many hotel investors are aware, any time you look to do business with a government body, there’s a lot of political finagling that is bound to come into play.
And that’s exactly what happened during an 18 June meeting of Green Bay’s Common Council. After watching a recording of the meeting, I would think twice before considering acquiring a city-owned hotel. There have to be better ways to waste your time.
Despite AHM’s verbal agreement, some councilors expressed the opinion that the council should not be so quick to strike a deal because another bidder arose from the shadows promising to inject between $10 million to $12 million to bring the Clarion up to the quality of a Courtyard by Marriott or Hampton Inn. AHM, by the way, guaranteed up to $4 million to do the same. Keep in mind this property had been available for the past five years.
“Anytime the city is involved in a project, we get calls,” Rob Strong, the city’s community development director, said during the meeting, which was webcast. “(The callers say), ‘We can do it better, bigger, taller, faster.’”
There was also concern that the court of public opinion would look down upon a deal that saw the city of Green Bay sell a hotel for less than it paid to acquire the property.
“The city just gave up $150,000,” Councilman Jesse Brunette said. “How do we, as a city, kind of present this to the public in a way that makes them think we didn’t waste a lot of money?”
Well, how about you tell your constituents that you secured a deal that injected capital into your downtown while securing air rights to the hotel, which would help defray the difference in sales price?
Or, as Councilman Joe Moore put it: “We’re not in the hotel business. It’s time to get rid of this hotel.” It’s unclear if AHM plans to walk away from the hotel. I emailed AHM’s President, CEO and Co-founder Donald R. Schappacher this week but had not heard back by deadline.
A motion to ask AHM executives (who were in attendance) whether they would consider paying $2.9 million for the property did not make it to a vote as a motion on whether to block the deal entirely took precedence, according to Robert’s Rules of Order. Too bad, as having a public negotiating session in council chambers would have made for some interesting viewing.
So much for the old saying, “A bird in the hand is worth two in the bush.”
I also feel badly for the unnamed company that arose to possibly trump AHM, which has 22 hotels in its portfolio. Turns out, this bidder had contacted the city a week or two before the meeting to inquire about putting in a bid on the Clarion. The city brushed off that request.
“We did not spend a lot of time with those people,” Strong said. Council members seemed to not know that the city had not explored these opportunities further—one of the dangers of working through a public entity’s multiple departmental layers.
After a half-hour-long discussion, the council voted 7-5 to temporarily block the AHM deal. By that point, Green Bay Mayor Jim Schmitt, a proponent of the transaction, had his head in his hands.
“The headline should’ve been: ‘City saves $350,000 a year in air rights and gets $4 million in new investment,’” he said. “But we’ll hold it. That’s all. Let’s move on.”
Maybe next time.
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