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11th November
written by clothcutter

It only cost the Virginia Beach taxpayer $400k to get away from GT.  It took our special folks $16,000,000. 

Developer quits Virginia Beach hotel project

By Deirdre Fernandes
The Virginian-Pilot
© November 5, 2010

The city and its chosen partner to build a Virginia Beach Convention Center headquarters hotel have broken up.

Dallas-based Garfield Traub had been in talks with the city for more than a year about developing a hotel that would lure larger conventions, although their initial flirtation started in 2006.

In the end, the relationship crumbled because neither could agree to the terms of the pre nup.

“We pretty much exhausted all opportunities to make this work,” said Councilman John Uhrin, who represents the Oceanfront.

In a two-sentence letter sent Tuesday, Ray Garfield, a principal of Garfield Traub, rescinded his company’s original proposal.

“It’s a great disappointment to our company that we didn’t think we could go forward,” Garfield said. “It would have been a wonderful project to claim that was ours…. We don’t have the confidence that we’re on the same page.”

There had been some tension, but the breaking point was a disagreement over who would pay for the predevelopment assessment – a blueprint that gets into more detail about what the hotel would look like and how much the city would contribute.

Garfield estimated that the total cost of the assessment – involving engineers, financial experts and hotel representatives – would have been $400,000.

Garfield Traub asked the city to pay for slightly less than $200,000 if the Beach eventually decided to use the company, slightly more if the city opted to go with another develop er, Garfield said.

The company didn’t want to take on all the risk to pay for it, Garfield said. “We have to feel like it’s a partnership, a true collaboration.”

City officials balked at paying before Garfield Traub could give them a cap for how much taxpayers would have to subsidize the project, which would require a complete assessment.

The difficulty to agree at this point raised red flags about the success of a long-term relationship, said John Richardson, the chair of the city’s development authority, which spearheaded the negotiations.

City officials were smitten with Garfield Traub when the company approached them in 2006. It beat out four other suitors, including locally based Armada Hoffler, to negotiate on the hotel project.

It seemed like the ideal match. Garfield Traub had experience building convention center hotels. It worked with Hyatt, a brand that would be new to the Beach hotel market. It even brought to its team the same architectural firm that designed the convention center.

Beach officials and Garfield said the economy wore on their relationship and delayed the negotiations.

Banks are less willing to lend for new hotels and are requiring private investors to put up more money, which made financing the project more difficult.

Beach officials still believe that building a convention center hotel is the right move, said Steve Herbert, a deputy city manager. The city, he said, continues to lose conventions and tax revenue because it doesn’t have a large hotel with conference rooms and meeting spaces right next to the convention center.

And maybe another partner could make the deal work, he said.

“We wish them luck,” Garfield said.

The development authority will discuss whether to place the project on hold until the economy improves, open negotiations with its second choice, Armada Hoffler, or start over.

Its next meeting is Nov. 16.


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