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Hotel Developer Given till February 15 to Secure $12 Million Performance Guarantee

by Mary Serreze | Dec 24, 2009 10:02 am | Comments (0)

Posted to: City Hall, Zoning and Planning

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The city of Northampton has given the Pioneer Valley Hotel Group until February 15 to come up with a performance guarantee in the amount of $12 million if the Hotel Group wants to move forward with its proposed 112-room Hilton Garden Inn project downtown. The purchase and sale agreement between the city and the Hotel Group for the so-called Roundhouse lot had called for the $12 million performance guarantee to be in hand by December 31.

The deadline has already been extended several times at the request of Hotel Group president Shardool Parmar, who has met with delays in securing both project financing and bonds sufficient to meet the city’s performance guarantee requirements. In a December 21 letter to the City Council, Parmar said that he now has project construction financing in hand, but that he still needs more time to “complete the bond application process.”

In the December 21 letter, Parmar asked the city to lower the amount of the $12 million performance guarantee, citing his firm’s experience, the arrangement of an “absolute, fixed-price construction contract,” a construction bond that will “kick in” if the contractor cannot complete the project for the fixed price, and $4 million of equity that will be “in the ground before the first dollar comes from the bank.”

On December 23, attorney Louis S. Moore, representing the city of Northampton, responded to the Nicolai law group, representing Parmar and the Hotel Group.

“The City recognizes and appreciates your client’s serious, long-term commitment of time, effort and financial resources to move its hotel and parking garage project forward. The City also understands the challenges posed by the property being a brownfields site as well as your client’s difficulty in securing financing in the current economic conditions. Accordingly, the City is willing to extend the performance date in the Agreement to February 15, 2010,” wrote Moore.

Moore explained that the city would be unwilling to lower the amount of the performance guarantee. “Consistent with the RFP [Request For Proposals] and our prior communications, the City requires the performance guarantee in the amount of $12 million. As we also stated previously, this amount would be reduced upon the City’s issuance of the temporary certificate of occupancy for the hotel to an amount sufficient to fund the parking garage portion of the project.”

Moore’s letter also referred to “a myriad of significant open matters that the parties set aside while your client has pursued the performance guarantee,” and emphasized that the Hotel Group’s obtaining a “Letter of Credit or Surety Bond in a form acceptable to the City sufficient to fund the construction of the proposed building on the site” remains an “essential next step in determining whether we can close the real estate transaction.”

GazetteNet: A play for time: Hotel developers say bonding rule is hard to satisfy
MassLive: Hotel Project Given February Deadline

Tags: Hilton Garden Inn, Pioneer Valley Hotel Group, Roundhouse lot, Downtown

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