News Column

Financing delays Hotel Indigo project

August 29, 2014

By Brian McGillivary, The Record-Eagle, Traverse City, Mich.



Aug. 29--TRAVERSE CITY -- Construction ground to a halt at the $15 millionHotel Indigo across from West Grand Traverse Bay, and awaits a downstate bank's approval of a construction loan for the developer.

Construction at the corner of Grandview Parkway and Hall Street won't resume until developers close on a construction loan and begin paying outstanding bills. Developer Jeffrey Schmitz, a principal at J.S Capitol Construction, said developers put $7 million of their own money into the project to date, but site contamination delayed closing on a construction loan.

"We are closing on (Sept. 2) now that we have a clean bill of health," Schmitz said. "We knew there would be a lag time. We were just hoping that there would not be as much."

Schmitz said once they close on the loan they will be able to begin paying outstanding bills. They also await delivery of materials to complete the fourth and last floor of the planned 105-room hotel with conference facilities, a health spa, pool, restaurant, a rooftop lounge and 79 underground parking spaces.

The short interruption in construction should not cause any further problems for the project and its planned opening in spring 2015, Schmitz said.

"The kinks are all out now," Schmitz said. "Once we close we are home free."

The delay is not the first one caused by financing woes. The project also went on hiatus in spring 2011 because Schmitz couldn't find financing. Developers found a funding source that summer, but new problems erupted.

Some city officials wanted to run a tunnel under Grandview Parkway to assist the hotel project, but dropped that idea when cost projections skyrocketed and developers discovered the water table was too high.

Then came word that development site ground water contained high levels of cyanide and other contaminants from an unknown, upstream source. That blow added almost $700,000 to project costs and boosted the total price of environmental cleanup and remediation above $2 million.

Construction began in spring 2013 and the site itself is not clean of contamination, county brownfield authority officials said. But barriers and other cleanup activities are designed to reduce contaminant levels and prevent human exposure.

Jean Derenzy, deputy director of the Grand Traverse County Planning and Development office, has worked on the project for the county brownfield redevelopment authority since its inception in 2010.

Derenzy said she is not worried about the project's viability, despite its rocky history.

"I'm not concerned, not at all," Derenzy said. "There is a lot of personal financing involved in this and they are not going to walk away."

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(c)2014 The Record-Eagle (Traverse City, Mich.)

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Source: Record-Eagle, The (Traverse City, MI)


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