Walnut Creek has chosen Illinois-based Tharaldson Hospitality Management LLC as the primary candidate for a proposed upscale hotel on a city-owned site at 490 Lawrence Way, as the East Bay hospitality market continues to see a rise in occupancy and room rates.
Tharaldson envisions a three-story, 127-key Hilton Garden Inn hotel at the site. The company now has one hotel under construction in the East Bay, a Springhill Suites and TownePlace Suites in Pleasanton.
“The city overall has an interest in realizing a hotel at that site so the council wanted to select based on all the information, the developer they thought could get the job done, and [that] presented a vision that aligned with the city,” said Ethan Bindernagel, Walnut Creek’s economic development manager.
He estimated that if a sale deal is reached, a completed hotel could be on the site within 24 months.
The council also decided on FPG Development Group as a secondary developer if a deal cannot be reached with Tharaldson. The Florida-based company is looking to build a three-story, 150-room Hilton Garden Inn (NYSE: HLT) that targets business travelers.
FPG Development has more than 70 hotels across the country, including a recently entitled 6-story, 160-room Marriott Residence Inn adjacent to the Walnut Creek BART station at 2050 N. California Blvd.
In a signal of city support for new hotel development, FPG Developmen’s downtown hotel project received a 462,000 subsidy and a deferral of various development fees. However, Bindernagel said he didn’t foresee the hotel at 490 Lawrence Way requiring additional subsidies.
Even with the increased interest from developers and East Bay city officials looking to bring hotels to their communities, financing remains the primary barrier to getting projects done, said Rick Swig, a hospitality consultant and Bay Area hotel industry expert.
“Financing is always an issue, even in this post-2008 up-cycle, hotel financing has not returned to the levels they were at ten years ago,” Swig said. “There are other sectors where they feel safer and more secure like residential and commercial development.”
City officials have been eyeing the property for a potential hotel site since 2015, driven in large part by a desire to diversify city revenue sources and spur redevelopment in the area. A staff report estimates an average of $520,000 in annual transient occupancy tax from the completed hotel.
Currently, the 2.26-acre site contains a Traffic Operations Center and a police department impound yard, which will be relocated with funds from the sale of the property.
Last year, a development deal to sell the site to hotel developers Harrick and Fillmore Capital fell through and the city initiated an accelerated request for proposals process in response.
For the first time in decades, new hotel projects have popped up across the East Bay, alongside with the region’s rise as a tourism and business destination. Emeryville opened its first hotel in decades earlier this month and the largest proposed East Bay hotel project, a 16-story, 334-room hotel at 2129 Shattuck Ave in Berkeley continues on in the entitlement process.
Article from bizjournals.com/sanfranciso
by: Kevin Truong