Board of Trustees: 30-year lease for hotel approved
The Board of Trustees voted Thursday to approve the authorization of a ground lease allowing the construction of a six-story Courtyard by Marriott hotel adjacent to Kelly/Shorts Stadium.
Mount Pleasant Hospitality, also known as Lodgco, will be building and funding the construction of the hotel. Lodgco is expected to pay an average rental fee of $175,000 for 30 years, with payments between $150,000-$200,000 a year.
At the end of the 30-year period, the fee is expected to increase to $200,000, with total revenues projected to reach $5.2 million by the end of the 30-year lease.
“The project is an exciting project, one that adds opportunities for student internships and creates diversity in our revenue stream,” said Barrie Wilkes, vice president of Finance and Administrative Services. “I didn’t mention this at the committee meeting, but we can also receive tax revenue on this lease from the city.”
Although the lease is set for a 30-year period, there is an option for four renewals after that time frame lapses and could potentially stretch the lease period to 70 years, according to President George Ross.
The opportunity for student internships was a main driver for approving the lease – the internships in question are directed at students in the Marketing and Hospitality department.
“There are 24 hospitality programs in the state of Michigan, and this hotel could put our program on the map,” said Gary Gagnon, a Hospitality Administration professor and the faculty adviser to the Hospitality and Tourism Society registered student organization.
Included in the hotel will be a full-service restaurant, as well as conference centers – facilities that could be vital to instruction, Gagnon said.
“If we have a student-run hotel, it could be the face of our program,” he said.
Gagnon added that Lodgco predicts construction will begin by April 2014 and is projected to be completed in August 2015.
Aside from hospitality students, the athletic department would benefit from the hotel project, according to Dave Heeke, director of athletics.
“We view this as a real amenity to the athletic complex,” Heeke said. “It’s going to be a tremendous asset and I think we’re deserving of that.”
The measure passed with overwhelming support, while Trustee Robert Wardrop voiced opposition to the proposal.
“The opportunities here are great, but I am opposed to this on a philosophical basis,” Wardrop said. “We’ll be, essentially, putting another building on campus and ‘selling’ it to a third-party. We’d be essentially hooking up with a third-party on the education side of it, and we don’t know who that party would be 30 years from now.”
Wardrop also expressed a concern that university officials did not follow the correct procedure when looking at other parties to rent to. The decision to choose Lodgco as its developer and funding partner was made by Marriott, not university officials.
During a discussion on the motion, Board of Trustees Chairperson Brian Fannon said due to Marriott’s reputation and status in hotel management, he trusted they had made the right decision.
“Marriott is one of the best in the world, and if they say it’s OK, it’ll be OK,” Fannon said. “They aren’t some off-brand, standalone hotel chain.”
Even with his confidence in the project, Fannon agreed with a few of Wardrop’s concerns.
“One concern that I have has to do with whether or not we have architectural control over the project, meaning as we move forward, do we have the final say in the facade and how the building looks?” he said. “We just can’t build a hotel. It has to blend in with the area, something that looks good on all four sides.”
The Marriott building project was initially proposed in 2010, yet CMU was involved with trying to get another hotel built on university land since 2008. That project attempt was between the university and LaBelle Management, a well-known Mount Pleasant hospitality management company.
Those plans were dismantled when the Board of Trustees approved moving the hotel to a different location on campus, which was not a part of the original verbal agreement former University President Leonard Plachta, Ross said.
The arrangement ended in a lawsuit between CMU and LaBelle that was dismissed, appealed and settled out of court.
Steve Smith, CMU’s director of Public Relations, would not provide details on the settlement citing an agreement with LaBelle Management.
Despite these concerns and delays, Trustee William Kanine said the project could be a revenue powerhouse.
“Turning that space into a revenue stream could be a very important opportunity to generate new income,” he said. “It’s also on par with our strategic priorities, and student success is No. 1 on that list.”
