Digging back into the Rio Nuevo minutes to find the beginnings of the HVS report and what do we find? A strange cast of characters indeed. Who stands to make money on the tax payer owned hotel? Garfield Traub as developer, HVS as feasibility study firm and Piper Jaffory as bond seller.

Here’s the chain of events:

1. Under Mike Hein an RFQ is put out to find a developer of a hotel adjacent to the convention center. The RFQ called for a non-publicly funded project. Five developers submitted proposals included  Humberto Lopez the owner of the Hotel Arizona and Alan Norville the owner of the land directly west of the convention center. The five ideas were scrapped and parts of each of them were put together to come up with the plan we have now.

2. Garfield Traub was the chosen developer and the deal switched to a fully publicly funded project. Steve Moffet from Garfield Traub was the local guy behind the effort.

3. In order to sell the project to bond holders and politico’s a hotel feasibility study was suggested by……wait for it……wait for it…… Steve Moffet of Garfield Traub. (The guy that hired Brent Davis, Fred Ronstadt and Michale Guyman to lobby the city, and the guy that was recently covered by O’Dell back peddling from the HVS feasibility number – HERE ) What firm did he recommend to add credibility to the hotel plan? Wait for it ….. wait for it…… HVS. From the Rio Nuevo board minutes:

Rio Nuevo Multipurpose Facilities District Board

Meeting Minutes for September 15, 2009

4. Hotel and Convention Center due diligence

(a) Consider (and, if appropriate, Approve) solicitation for proposal to prepare a targeted report analyzing and estimating the economic contribution of the convention center expansion and new hotel
(b) Consider (and, if appropriate, Approve) preparation of an update by HVS of its hotel market and feasibility analysis to reflect current market conditions.

Steve Moffett from the hotel team discussed the two reports:

He started with discussing the HVS hotel market and feasibility analysis. In order to sell bonds, the bond underwriters need an updated market study for the hotel and convention center expansion. The purpose of the study is to access the market demand, to estimate the average daily rate for the use of the hotel for a period of 10 years; to estimate the occupancy that will be generated by this hotel; and to take into consideration current convention center business and the expanded convention center, the number of rooms and the amount of meeting space they are programming into the hotel. These are all the things that the Hotel Team is putting into place right now in designing the hotel. The study will take the rate and occupancy projected for the 10 years and generates a complete 10 year proforma and cash flow projections for this hotel starting from the day it
opens through the 10 years.

HVS is an internationally recognized firm. All of the bond underwriters in the country are very comfortable with their work. They have one of the largest data bases in the world for hotels and convention centers. At the end of the process of gathering the information from the likely users of the convention center and hotel, they will develop a very comprehensive report that will access the market demand and competition. The report will discuss their assumptions for the revenues, expenses, and rates of occupancy.

This report must be from an independent, third party firm that is recognized for providing these studies. It compares their proforma with Starwood’s proforma, and if there are any differences they will reconcile both to come to an agreement. There has already been negotiation with HVS. The first thing they will provide is a PowerPoint summary, then they will provide an expanded report for the bond underwriters to use. If approved today, the timeline will be approximately 4-5 weeks, with a preliminary report in about 3 weeks. HVS already has their data base for Tucson and Arizona, and this
information is based on current market data that is gathered just before bonding.

Steve Moffett, then discussed the Economic Impact Analysis.

This is the most important thing that a City, County, State, or District can look at for a publicly owned hotel. This report estimates the total economic impact to the City of Tucson, to Pima County, and for the entire region. It covers all aspects of possible income, ie, the employment it generates, taxes at all levels, (payroll taxes, income taxes, sales taxes). It also takes into account all spending that takes place when a convention comes to the hotel. This study starts with the HVS report.