Sunday, June 24, 2012

Mesa must downsize hopes for big resort -

What many Mesa residents had long feared now seems inevitable:

A world-class resort and conference center on the north end of the former General Motors Desert Proving Ground probably never will be built as originally planned.

As phone calls ricochet among Mesa officials, the Gaylord Entertainment Co. and DMB Associates, which owns the property, that is the clearest statement that can be made about fallout from last week's announcement that Gaylord is getting out of the resort-development business.

The Nashville-based company knocked Mesa's socks off in September 2008 when it announced it would build a hotel of at least 1,200 rooms and an adjoining convention center. Coupled with another resort, a championship golf course and high-end retail, Mesa officials estimated a total investment of about $1billion.

That was to have been the grand kickoff for DMB's development of 5 square miles of former GM land, a project now known as Eastmark.

Mesa voters endorsed the plan and its associated tax incentives by an 84-16 percent vote in March 2009.

The original deadline for breaking ground was Dec. 31, 2011. The Great Recession forced Mesa to extend that by three years as Gaylord struggled through the downturn.

Now, according to Mayor Scott Smith, even the extended deadline may be a moot point.

Gaylord said last week that it will sell its hotel brand and operating rights to Marriott International Inc. for $210million.

Gaylord will still own the four mega-resorts among which it rotates conventions and business shows. Operating as a real-estate investment trust, Gaylord will no longer develop properties on its own.

The plan takes effect Jan.1 if shareholders agree.

At the very least, Smith said, the sale might mean the Mesa resort being financed by a third party, but only time will answer the many questions raised by Gaylord's decision.
Among those questions: The degree of Marriott's willingness to back a large Mesa resort when it already operates the JW Marriott Desert Ridge, a 950-room hotel with 240,000 square feet of meeting space and 10 restaurants in Phoenix.

Even if there is an eventual green light, Smith said, Mesa's resort "may be physically different, and it certainly will be financially very different."

The package of incentives that Mesa voters approved may prove attractive to another company wanting to build a resort there, Smith said.

Gaylord was promised up to $44million in bed-tax rebates, and a second resort would be entitled to up to $7million, to be used to market their properties and Mesa tourism.
In addition, Mesa promised to buy both resorts and the convention center for $5,000 apiece, leasing them back to the companies for $5,000 a year per property.

That would trigger a tax break called a government-property lease excise tax.

Property-tax savings for Gaylord over 50 years were put at $72million and for the second resort, $13.5 million.

To what degree those arrangements could transfer to another company is uncertain, however.

Mesa executed a development agreement with DMB and Gaylord in 2008 that required Gaylord itself to build a hotel and conference center to certain minimum specifications, and assigning tax breaks specifically to that company.

Language regarding the second resort was not as precise.

Even if the business-travel economy and room rates don't recover to the point of making a Gaylord-scale resort feasible, Smith said the Gateway area will someday need high-end lodging.

Passenger counts at the nearby airport are soaring, other firms are building in the area and DMB already has broken ground for housing at Eastmark.

"We didn't sit back and wait for Gaylord to happen, thinking Gaylord was the only way we could kick-start Gateway," Smith said.

"We'll go on to Plan B, C and D. We believe there will be a major resort facility there. When? We don't know. Who? We don't know."

By Gary Nelson, The Republic| Jun 9 2012

Mesa must downsize hopes for big resort -

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