During Tuesday’s Owensboro City Commission meeting, Commissioner Larry Conder raised questions about the future of a proposed downtown hotel-apartment complex that has taxpayer money connected to it.
The city entered into an agreement with Gulfstream Commercial Services-affiliate Riverfront Brio in April 2019, and held a groundbreaking two months later to construct the hotel-apartment complex in the 500 block of West Second Street between Locust and Cedar streets.
The project involves a 120-room hotel, more than 180 apartments and no less than a 400-spot parking structure with permission to make the complex as high as 15-stories.
As an incentive, the city approved granting the developer $4.6 million — made in five incremental payments — based on the developer reaching certain construction benchmarks with the developer being contractually obligated to finish construction within five years.
Conder questioned whether or not the project is still feasible in the long term.
“This is a matter of the taxpayer’s money,” said Conder, who’s also a mayoral candidate. “Habits have had to change because of COVID and the concern is if these changes will be permanent. The hotel business is reevaluating its programming in the face of low-occupancy rates, and I don’t think the building of a third hotel is something that will happen in the near future, especially given that everyone is scrambling to figure out how and when things will rebound. The money is sitting there as we continue to pay interest on it, so the question is what are we going to do? Is it possible to get the housing development and parking garage up and running without the hotel to address those needs, or are the two projects so intertwined that doing the housing wouldn’t make sense? If we can’t move forward with this project, then the focus and the money needs to be redirected to projects that can work and are needed.”
For the developer, returning to construction of the development hinges on the market and when the downtown “tourism machine” is expected to rebound, said Ed Ray, Gulfstream chief operating officer.
“It boils down to the market,” Ray said. “We have entered into a dialogue with the city through City Manager Nate Pagan on when they expect the tourism machine downtown to restart. The big thing, for both the residential and hotel piece, is really understanding if under the current conditions and the unknowns of when events and businesses will be back in full swing if living downtown is as attractive to tenants as it was prior to COVID. In reality, no one knows the answer.”
Ray added that Gulfstream is still in compliance with the contract despite the COVID-19 pandemic playing havoc with tourism and the economy.
“We have time to consider where to go from here and believe that a continuing dialogue with all of those entities that want to see downtown grow. ...It will take all of us working together to change the course of Owensboro as we go through COVID, and we have been fortunate in the leadership and forward thinking that has been shown so far that puts us in a better position than most municipalities. Right now we will continue our discussion with the city as we move forward with this project.”
So far, the city has paid out $920,000 to Gulfstream as part of the deal.
Until more progress is made on the project, Pagan said no other funds will be released to Gulfstream.
“As of now, they have only received one payment,” Pagan said. “No other payments will be distributed until certain benchmarks are reached. They are within their five-year contract and are in compliance with their contract given that demolition is a major aspect of that development process. If they can’t meet the contract or the project is terminated, then we would expect repayment of those funds that have been released. But that isn’t an issue at the moment. In reality, we don’t know how long we will be dealing with COVID and its impact on business and tourism. The longer the pandemic goes, the more concerning it becomes across the board. At this point, we are in an contractual obligation with the developer and they are in compliance with that contract.”
Jacob Mulliken, 270-228-2837, email@example.com