A developer and the city of Kent terminated the agreement for a new hotel to be built on the vacant Naden Avenue property.
The deal fell through this month when Boise, Idaho-based Braintree Hospitality failed to pay a $150,000 franchise agreement with Hilton to construct a Hilton Garden Inn on the city-owned property, one of the conditions for the sale to move forward.
The Kent City Council unanimously approved in January a purchase and sale agreement with Braintree to sell 2.2 acres on the south end of the 7.7-acre city property for $2.6 million so the group could build a four-story, 136-room hotel. The property sits just north of Willis Street, west of the new roundabout going in at Fourth Avenue South and east of Highway 167.
“Braintree has struggled to make a project feasible on the construction cost side at the Naden Avenue location,” according to city documents.
The city will refund a $100,000 deposit that Braintree put down for the property late last year.
The hotel industry has been hit hard by COVID-19 with fewer people traveling and staying at hotels. A survey in September by the American Hotel and Lodging Association showed the state has lost more than 16,000 of its 42,000 direct hotel jobs since the outbreak in March. The lodging association predicts 539 of 1,100 hotels in the state will foreclose without another round of federal stimulus.
Hotel industry studies show it could take three to five years before hotels recover from the COVID-19 impact, said Bill Ellis, city economic development manager, in a report to the council.
“This is disappointing, but somewhat expected at this point,” Council President Toni Troutner said at a Oct. 13 Committee of the Whole meeting after Ellis announced the deal was off the table.
Braintree informed the city in July that it had put the project on hold because of the pandemic.
The city began to purchase the Naden properties in 2002 with plans for an aquatic center. But city leaders later abandoned that plan because of the high costs, and then agreed to partner with the YMCA to build a fitness facility on the East Hill that opened in 2019. Kent bought the properties for $7.2 million using $5.8 million in bonds and $1.4 million from other city funds, according to city documents.
Meanwhile, two developers will be interviewed by a city panel for their interest in the Naden property. The city posted to its website a Naden Avenue Manufacturing Campus request for qualifications Aug. 21 to see which developers might apply to take on the project. Four applied and a city panel chose two to move forward to the next stage. City leaders and staff want to know what interest developers have in trying to find manufacturers to build on the property.
Ellis said while the initial city posting for the manufacturing campus listed 5.7 acres of the property, the development could add the 2.2 acres where the hotel was going to be built to a proposal.
“It leaves us with new opportunities, and all of the preparation we have done for the site helps set up future developments,” Ellis said.
The city will complete this fall a new roundabout at Fourth Avenue South and Willis Street at a cost of $4.75 million, with the state Department of Transportation covering $3 million of the cost and the rest covered by city revenue from the B&O, utility and drainage tax funds. The state required the roundabout after the city requested access from the Naden property to Willis Street in an effort to market the property to a developer.
Ellis estimated that the 5.7 acres could sell for about $6.9 million based on the sale price of 2.2 acres to a hotel developer for $2.6 million. That puts a potential price of the entire property close to $10 million.
“We are look at sliding from one development team to another development team given the hotel industry doesn’t see any opportunity,” Ellis said.