By Brian Leaf, Rockford Register Star, Jan. 29, 2015
ROCKFORD — Warren Buffett’s money has joined Gary Gorman’s plan to turn the former Amerock building into a $64 million hotel and conference center on the west bank of the Rock River.
But the water is not placid.
Gorman is concerned about a separate downtown hotel plan pitched by Joseph James Partners. The Rockford developer wants to put a $14.5 million, 76-room boutique hotel at 134 N. Main St., about six blocks north of the 150-room project that Gorman hopes will carry the Embassy Suites banner. Gorman has applied for the brand with Hilton Worldwide.
A Jan. 24 report from Chicago-based Hunden Strategic Partners, which was hired by the city and Rockford Area Convention & Visitors Bureau to assess the local hotel market, suggests that there is enough room for both projects, saying the proposals represent distinctive products and would provide a critical mass of lodging options downtown instead of just one.
Gorman was drawn to Rockford by a group of historic preservation, Friends of Ziock, that didn’t want to see the city’s original skyscraper demolished. Gorman originally estimated that it would cost $53 million to turn the old factory, first known as the Ziock Building, into a hotel and meeting space.
The price is now $64 million and includes an $18 million investment from a subsidiary of Buffet’s Berkshire Hathaway Inc. The Wall Street Journal highlighted the Amerock project in a story Thursday about EB-5, an immigration program that allows foreign nationals to obtain a U.S. visa if they invest $500,000 in a U.S. project that creates at least 10 jobs.
Gorman’s EB-5 investors, mainly from China, will put $46 million into the Amerock project, which city leaders see as a cornerstone to revitalizing an aged central city.
“A lot of aldermen see this as a showcase development and don’t want to do anything to hinder that,” said Ald. Tim Durkee, R-1, who chairs the city’s Planning and Development Committee.
Late last year, Joseph James, a development company run by SupplyCore CEO Peter Provenzano, proposed developing two hotels: one in the city’s oldest building, the Chick Hotel, and another in the building known for its last tenant, Trekk, an advertising agency that dropped its lease in the decaying building and moved to the east side.
Joseph James later dropped the Chick Hotel from its plans and decided to focus on the two-story Trekk building, 134 N. Main St. The company would add three floors, turning it into a five-story hotel and restaurant. Joseph James has been working with IDM Hospitality Management of Madison, Wisconsin, on its proposal, which has been introduced to the Rockford City Council but not approved.
Joseph James cited a memo from Hunden to support its proposal to Durkee’s committee. The memo suggests that there is room enough in the market for Joseph James and Gorman to succeed. The proposal was introduced but laid over for a month so the City Council could hear from Gorman.
The Register Star could not reach Provenzano or Bryan Davis, director of government affairs for Joseph James, on Thursday for comment.
Observers have commented that they thought they’d never see the day that developers would compete for projects in downtown Rockford, so it is a “positive trend that should be encouraged by both the public and private sector,” Gorman wrote in an email Thursday to Mayor Larry Morrissey, aldermen and city staff.
“It is very clear from our experience that a vibrant city center is the key to creating a thriving community. Having said that, I am very concerned about too many hotel rooms coming into the unproven downtown Rockford market at one time.”
Gorman said his company, which operates in 25 cities in five states, had relied on an earlier Hunden report when it made its decision to invest in a downtown hotel. “The fact that the Hunden letter stated that the market could absorb both our project and the Joseph James proposed project seems to contradict their concerns expressed in the market study they completed just over a year ago.”
Gorman wants first crack at opening the downtown hotel market. Final plans for Amerock will be complete by next Friday, and construction bids will go out the following week, he said.
“We remain confident that we will get the Amerock project done successfully, but bringing on competition before our project is stabilized is not helpful,” he wrote. “I hope that once we are up and stabilized, the market is such that it will support additional hotel rooms. If that is the case, we will welcome the Joseph James project or others like it.”
Hunden reiterated in a Jan. 24 memo to the city and the tourism bureau that two hotels would be better than one and would attract the guests needed for success. Hunden said the market could handle the extra rooms, although simultaneous openings could be problematic.
“However, if the projects open at least six months apart, this will allow each a ramp up-period,” the latest Hunden memo said. “Such a period is the toughest for any hotel, so the spotlight and market demand should be focused on each for their first few months.”