The Council found its way to a better (not best) outcome. In general, we are not critical of the current arrangement that the city is working on with Mr. Horve. In a more perfect world, we would always prefer giving more genuine consideration to both lease/management alternatives (Ritchfield & Horve), but there was no political consensus for keeping Ritchfield as an alternative.
As described in the news article linked below, the City has decided to focus on entering a lease/management contract with Mr. Steve Horve to operate the hotel for a period of time. This will provide Mr. Horve the best opportunity to determine if he will buy and operate the hotel. As the Council has come to understand, the hotel must be sold or leased in this kind of arrangement due to liquor license restrictions on the city's control of the hotel.
The pending lease/management agreement with Mr. Horve is not a purchase. It is better described as a master lease with elements of a hotel management agreement. Horve may purchase it in the future, and this arrangement may provide the best way to encourage him to do that.
A significant change was the removal of Horve’s option and right of first refusal. Mr. Horve volunteered that. The removal of this provision and issue significantly changes the character of the deal and gives taxpayers a chance to participate in the possible upside. Some will complain about Mr. Horve's 50% profit share of the gain on sale. Such an incentive creates a meaningful reward for Mr. Horve to improve financial performance and promote the sale of the hotel. This is good for the city. We should not overlook the significant risk associated with this hotel, for the City, Mr. Horve and any possible purchaser. These incentives help the city reduce those risks. (Mr. Horve said it would take $2 to $7 million for rehab of the hotel and to get a national franchise agreement – not $500,000.)
It is also good that the Council will get to vote on the contract next week as opposed to granting a proxy to the Mayor to act on behalf of the Council.
We do not believe that the “Jones Purchase”, presented at the last minute, deserves serious consideration without serious actions by Jones. Adequately capitalized buyers can put a valid signed purchase contract in front of the city with meaningful earnest money. The Jones representative could produce a purchase agreement in a couple of hours. They can also show evidence related to their sources of capital to effect a purchase. The city should be guarded of the Jones deal given Jones' lack of performance. There is a very narrow window left open for Mr. Jones and his interests to produce a purchase agreement. (Their objection to Mr. Horve's right of first refusal is no longer an issue and was a red herring, in our opinion.)
We think it would be preferable for Mr. Horve to try to make peace with the labor guys as it would build support for Mr. Horve and the hotel, and help book business for the hotel. One of the key elements of a successful turnaround strategy will demand full community support. Labor is a very important group in our city.
We believe it is very positive that the city showed some wisdom today that is not often present. We believe that it resulted from open discussion with adequate time for community awareness and input. Hmmmmm.
When we are so used to disagreeing with folks it is important to catch a breath and agree on a “better outcome” when it happens. “Best” would have been never to buy it, but that was another story on another day.
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