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San Marcos Hotel

The question that San Marcos residents ask Mayor Jim Desmond most often: What's going on with the unfinished Marriott hotel project?

The project, on the corner of Las Posas Road and Los Vallecitos Boulevard, has sat untouched for months, its steel skeleton sits exposed as yet another fatality in a sickened commercial real estate economy.

At Tuesday's city council meeting, Mayor Desmond asked city manager Paul Malone to update the council on the project.

"We now have a signed term sheet with the firm that was building, then wasn't building, and hopefully will again be building the Marriott hotel," answered Malone.

Back in 2008, when the city sold the 2.25-acre site for $3.92 million, funding was in place. Shortly after, construction on the 192-room Residence Inn began.

Months later, as work continued, the developer, Palmetto Hospitality, suddenly lost their funding and were forced to suspend the project indefinitely.

Last June, in an effort to jumpstart the project, the city agreed to buy back the land and allow Palmetto to use the money to finish the project. San Marcos would then lease the property to the hotel chain for the next 60 years.

There's one problem, says Malone, the nearly four million dollars the city will give to the developer for the land still falls about seven million shy of what's needed to finish the project, leaving the developer responsible to come up with the remainder of the money before the project restarts and before any city money is spent.

Malone remains optimistic and hopes construction will begin in November. "That is, assuming all goes as planned. We can't make them build, but it appears they are spending money and headed in that direction."

According to Malone, the ground lease furnished by the city calls for an eight percent interest rate through five years, and if the hotel does not decide to repurchase the land at that point, the interest will increases to ten percent.

"It's infinitely better than any investment that we've had in memory," says Malone.

"Worst case scenario, we own the San Marcos Hotel," added vice mayor Hal Martin. "Then we'd be the first city to own and operate its own hotel."

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The question that San Marcos residents ask Mayor Jim Desmond most often: What's going on with the unfinished Marriott hotel project?

The project, on the corner of Las Posas Road and Los Vallecitos Boulevard, has sat untouched for months, its steel skeleton sits exposed as yet another fatality in a sickened commercial real estate economy.

At Tuesday's city council meeting, Mayor Desmond asked city manager Paul Malone to update the council on the project.

"We now have a signed term sheet with the firm that was building, then wasn't building, and hopefully will again be building the Marriott hotel," answered Malone.

Back in 2008, when the city sold the 2.25-acre site for $3.92 million, funding was in place. Shortly after, construction on the 192-room Residence Inn began.

Months later, as work continued, the developer, Palmetto Hospitality, suddenly lost their funding and were forced to suspend the project indefinitely.

Last June, in an effort to jumpstart the project, the city agreed to buy back the land and allow Palmetto to use the money to finish the project. San Marcos would then lease the property to the hotel chain for the next 60 years.

There's one problem, says Malone, the nearly four million dollars the city will give to the developer for the land still falls about seven million shy of what's needed to finish the project, leaving the developer responsible to come up with the remainder of the money before the project restarts and before any city money is spent.

Malone remains optimistic and hopes construction will begin in November. "That is, assuming all goes as planned. We can't make them build, but it appears they are spending money and headed in that direction."

According to Malone, the ground lease furnished by the city calls for an eight percent interest rate through five years, and if the hotel does not decide to repurchase the land at that point, the interest will increases to ten percent.

"It's infinitely better than any investment that we've had in memory," says Malone.

"Worst case scenario, we own the San Marcos Hotel," added vice mayor Hal Martin. "Then we'd be the first city to own and operate its own hotel."

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Sounds like Obamaenomics to me.....

Aug. 26, 2009

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