- Real Estate
- Food & Drink
May 7, 2019
The downtown Village on the River development is now proposed to be four stories shorter than once planned and include one hotel instead of two.
The developers, who include Jeff Lamont, CEO of Aberdeen-based Lamont Cos., reduced the scope of the project after incentives they had hoped to secure never materialized and construction costs came in higher than they had anticipated, Lamont said.
“We adjusted the scope to get it to a point where it works,” he said. “We’re still committed to making the project happen. It’s going to be an iconic structure for downtown Sioux Falls and for the city, and we still feel like it’s a much better project than what was originally approved by the city.”
The project now will include only an AC by Marriott hotel instead of an AC along with an extended-stay Residence Inn.
The 152-room property is Marriott’s version of an upscale boutique hotel and will include the same amenities initially proposed.
Lamont emphasized the new plan exceeds what was originally proposed to the city in the public-private partnership that includes a city-owned parking ramp.
The first version called for about 140 rooms in a hotel and $30 million in private investment paired with the city’s approximately $20 million public investment.
The developers then brought forward an enhanced plan that brought the project to 215 rooms and $50 million in private investment.
The new plan at 152 rooms represents an estimated $45 million in private development, “so we’re well above and beyond what the city approved for this project,” Lamont said.
The new version also eliminates a top-floor restaurant and bar that would have included rooftop access, although the plan is to build something that eventually could accommodate one, he said.
The current design is a seven-story parking ramp topped by a four-story hotel with an adjacent three-story building that includes the lobby, some retail, office and event uses.
“AC has its own lounge, which is a bar with tapas-style appetizers,” Lamont said. “The other bar is one in the retail building that we would lease out or operate as part of the hotel.”
There also will be space available for meetings and events that could be leased to an outside operator or operated by Lamont.
There has been interest from retailers, he said.
“We’ve got clothing stores interested in the retail, coffee shops, office space, things like that, but until we have an approved scope, we can’t necessarily move forward with any leases, so we’re trying to get the city to say they’re OK with the new design, and then we’ll be signing up tenants.”
The project scaled back after two potential incentives didn’t materialize, including new market tax credits from the federal government. While the credits looked promising last year, the location of the project changed from what the government considered “severely distressed” to “distressed,” Lamont said.
“That makes a big difference of who they award those to,” he said.
The government shutdown further delayed a decision, and while it hasn’t officially been turned down, it didn’t look promising, he said.
The developers also requested tax increment financing from the city, but city officials decided not to recommend it.
“They don’t think they can support it or that it would gain traction,” he said, acknowledging the parking ramp that supports the project was publicly funded.
“That definitely is nice,” he said.
The city offered a property tax incentive that the project automatically qualifies to receive as well as a business improvement district tax rebate. The latter will need City Council approval.
By making what Lamont calls “more efficient use of space,” the project was able to work with fewer stories. The city, though, built a parking ramp that can support multiple additional stories.
The two sides have not discussed whether the developers owe the city the excess amount spent to support a taller building.
“At this point, I don’t know. It hasn’t been brought up yet, so I’m not sure,” Lamont said. “We’re still getting them more of a better project than what was proposed and approved originally, so in our opinion we’re going above and beyond that at this point.”
The city is reviewing proposed changes to the project scope to determine the financial impact to the city, said Erica Beck, the mayor’s chief of staff.
“Our top priorities are complying with the existing agreement and avoiding financial burdens to the taxpayers as a result of any proposed changes,” she said in a statement.
It also hasn’t been determined whether there will need to be amendments made to the development agreement between the city and Village River Group, although Lamont said he doesn’t think so.
The group has the financial capacity to make the project happen, he added.
Lamont along with Paul Cink, Larry Canfield and Norm Drake serve as personal guarantors on the project.
“The city has to give us their blessing on the scope, and then we can get plans done and start. We have financing options right now that are good to go. It’s just that you can’t put the cart before the horse. You have to get the scope approved and get the project designed and then move forward, and that’s what we’re doing.”
Assuming construction can start this summer, Lamont said he still believes the project can open by the end of next year as originally planned.
“The media reports keep alluding the project is in jeopardy,” he said. “That’s absolutely incorrect.”
The proposed Village on the River development will be four stories shorter than once planned and include one hotel instead of two.