Construction on a new hotel in Orleans County has been suspended since late last year amid a financing snafu with the lender that threatened the entire project – and even led to legal filings – but work is now set to resume in six to eight weeks, officials said Tuesday.
Developer Medina Hospitality and county officials are working with Generations Bank and the U.S. Small Business Administration to quickly overcome a $5.8 million funding gap so that the project can be completed.
That's critical, officials say, because the proposed 58-room Cobblestone Inn & Suites in the village of Medina is potentially one of the biggest economic development projects in the rural county in years, and would be its first branded hotel.
Regardless, the project's completion is likely to be delayed at least by a few weeks, if not longer, because the expected loan dollars never flowed.
"Hotel projects like these are important to small towns," said Andina Barone, a spokeswoman for the Orleans County Economic Development Agency, which sold five acres of land to the developer while other county agencies provided tax breaks and a loan.
"So many Orleans County businesses would have been given a boost this spring with the opening of a new 58-room hotel in Medina that had the capacity for charter tours, business travelers, vacationers, and people coming to town for class reunions, family reunions and weddings."
St. Mary's, Pa.-based Medina Hospitality, owned and led by Todd "Booka" Hanes, is building a 39,000-square-foot hotel on Maple Ridge Road inside the Medina Business Park.
The $6.75 million project is the first toehold in New York state for Cobblestone Hotels, an 11-year-old Wisconsin-based chain that has over 125 existing hotels and another 75 to 80 in development in 26 states.
The project was announced more than a year ago to great fanfare, with county leaders and the developer touting the potential. The developer was approved by Generations in March 2019 for a series of loans, one backed by an SBA loan guarantee designed to act as reassurance for lenders.
The financing included a $3.9 million construction loan, a $3.4 million permanent loan to replace it, and a $1.9 million SBA loan arranged through the New York Business Development Corp. All three were contingent upon the SBA's approval.
But the money hasn't flowed since then, because of bureaucratic challenges related to the federal government agency and the inexperience of the lender with the SBA. Three loan closing dates were scheduled, but the SBA approval never came.
"We did not plan for the SBA loan taking almost a year to close," Hanes said. "It's a federal program and we really don't have much input or control over the process. Unfortunately, the loan process took much longer than expected."
The problem stemmed from the corporate structure of Cobblestone, the management agreement between a Cobblestone affiliate and Medina Hospitality, and a change in policy at the SBA, related to affiliations between franchisees and management companies. The change occurred in June or July 2019, three months after Generations approved the developer's project, but it's been applied to the Medina hotel nevertheless, with an SBA lawyer in Buffalo raising concerns.
Cobblestone is a privately held hotel company, owned and led by President and CEO Brian Wogernese, who developed the brand specifically to serve small rural areas. He is also owner and CEO of WHG Cos., a hospitality management firm that runs the Cobblestone facilities and other hotels in rural areas.
Although the affiliation between the two companies was disclosed early on, that's been the source of the SBA's objection, Barone said. The general contractor on the project, BriMark Builders, is also owned by Wogernese and Cobblestone. And Hanes' group has worked with Cobblestone on other projects as well.
Only after intensive lobbying in Washington by the developer and county officials did the SBA's headquarters grant an exception to the rule on Jan. 23, allowing Generations to move toward a loan closing, although no date has been set yet.
“When lenders fail to prioritize community endeavors, everything in the local economy suffers," Barone said. “It’s unfortunate the developers have encountered so many obstacles to doing business in New York State.”
Construction began last May on the project, and Hanes' group invested $2.975 million in cash – well beyond the original $1.4 million equity commitment – to maintain the progress until the financing came through. The building is now 80% completed, but the developer suspended work at the end of December.
However, that's also when BriMark filed preliminary foreclosure papers on two mechanics liens that it had previously submitted in October and November. The builder claimed it was owed $2.9 million for work it performed from April 16 through Nov. 25.
Hanes said the filing "was a necessary precaution for everyone involved" and "had to be taken for liability purposes," because so much of the construction had been completed.
But he said it did not actually reflect problems between his firm and Cobblestone, with whom he has a long relationship and even serves on an advisory board.
"I can assure you that we are all working together and Medina's Cobblestone will be completed as planned," he said, citing late spring as the new target for opening. "It’s definitely not a pleasant situation to be in but we are all diligently working together through this."