NIAGARA FALLS – The CEO of the company that sought to buy the Hotel Niagara before the state announced its own purchase plan said a lack of available financing prevented him from completing the purchase.
“We couldn’t find a bank that was willing to fund a development deal of this size in downtown Niagara Falls,” said Matthew Shollar, CEO of Reception Hotels. “There was just a total unwillingness to lend to a deal in downtown Niagara Falls.”
But Gary J. Coscia, CEO of Largo Real Estate Advisors, of Getzville, a full-service commercial mortgage banking company, said he doesn’t detect a bias against Niagara Falls, just a bias against projects that don’t make financial sense.
“I think if you have a well-conceived project where the numbers add up, you can get financing,” Coscia said.
Shollar said his company intends to respond to the request for proposals for a Hotel Niagara redeveloper that is to be issued later this year by USA Niagara Development Corp., a state agency that intends to use money from the Buffalo Billion to buy the hotel from JSK International Corp., of Ontario, for $4.4 million.
Shollar’s company last year announced a $27 million plan to buy and renovate the 92-year-old landmark hotel, turning it into a Radisson with slightly fewer than the 200 rooms that it had when it was last occupied in 2007. The purchase price in that package would have been the same $4.4 million that USA Niagara is paying.
Coscia said, “One of the issues there is the cost to renovate. You can build a new hotel for that price.”
The Niagara County Industrial Development Agency granted Reception an incentive package, but the deal never closed.
Shollar said that a local bank, which he didn’t name, stepped away and that a local mortgage broker also failed to find a lender. He said he then turned to a national mortgage broker, who had finally managed to find a bank with some interest in the project before USA Niagara stepped in.
As far as lenders are concerned, “Niagara Falls is not looked at as a sparkling market,” said Shollar, whose company owns four Pittsburgh-area hotels and is currently developing two more.
The Hamister Group, which has a contract with the city and USA Niagara to build a $35.7 million, 128-room Hyatt Place hotel on Rainbow Boulevard, also has cited difficulty with financing in explaining why its project has yet to begin construction almost three years after it was approved.
“Financing is always available if the project makes sense,” Coscia said. “The bigger problem in Niagara Falls is, the market is so seasonal. … Some national lenders have a hard time going there because of the seasonality, but that’s not just Niagara Falls. It would be true of any place with seasonality.”
Christopher J. Schoepflin, president of USA Niagara, said, “I am going to point to the other four or five hotels that are currently under construction in downtown Niagara Falls.” Those projects all found construction financing, even without the state aid and historic preservation tax credits that USA Niagara is offering for the Hotel Niagara.
Shollar said, “The deal economics are reasonable, but without some level of state involvement and the inclusion of historic tax credits, it’s very difficult.”
Schoepflin said when the Hotel Niagara plan was announced March 23 that USA Niagara would be willing to sell the hotel to the winning developer for less than the $4.4 million that it intends to pay. He said the tax credits could account for between one-quarter and one-third of the eventual redevelopment cost. Direct investment by USA Niagara in the other hotel projects that it has assisted has ranged between 8 and 13 percent, Schoepflin said.