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Hilton hotel planned downtown

Rochester Business Journal
May 4, 2012

Another Main Street hotel is in the works for downtown Rochester, with a more than $15 million Hilton Garden Inn proposed to open in 2013 next to the Hyatt Regency Rochester.
 
DHD Ventures LLC, led by Rochester-based managing partner Thomas Masaschi, wants to turn three vacant properties on the south side of East Main Street, between Stone Street and South Avenue, into a 107-room upscale, mid-priced hotel.
 
This development comes as city officials begin to weigh options following the apparent end to a proposed $21.9 million rehabilitation of the Lincoln Alliance Building at 183 E. Main St.
 
The buildings targeted for the hotel are at 155 E. Main St. and 159 E. Main St. and at 25-29 Stone St., formerly home to the Stone Street Grill. The hotel would total 90,000 square feet, Masaschi said. The estimated cost of the project is $15 million to $16 million.
 
DHD Ventures bought the buildings in April 2010, Masaschi said.
 
"We thought we were going to turn them into loft apartments," he said. "As we went down the development stage of doing that, the idea of reaching out to a hotel came up. We approached Hilton and the Hyatt, and they were ecstatic about doing it.
 
"Hilton Garden has been trying to get a product downtown for the last four or five years," Masaschi added. "They were struggling, trying to find the right, cost-effective way to do it."
 
Hilton Garden Inn, part of Hilton World-wide, is based in Memphis, Tenn. Spokeswoman Dawn Ray thinks downtown Rochester can support a Hilton Garden Inn.
 
"Our feasibility team is based in Memphis as well," Ray said. "They look at whether the market can hold it, what the demand generators are, all that kind of stuff. And then we approve it. We won't approve it if we don't think the market can hold it."
 
A location might be rejected because of too much competition from other hotel chains or because a Hilton brand already is in the area, Ray said.
 
"It's made it this far, and it's going through the approval process," she said. "As the franchisor, he's already paid us franchise fees and everything. We have dates in the system. That's always a good sign."
 
Masaschi is working on financing for the adaptive reuse project and expects to begin work in September.
 
"Hilton Garden Inn is probably one of the hottest brands they have right now," he said of holding company Hilton Worldwide. "It's not a full-service hotel. It's probably going to have a restaurant in it, but it's breakfast and dinner."
 
The target guests are value-conscious business and leisure travelers, representatives said. Room rates are based on the market in which the hotel is located but are at the upper end of the midprice category.
 
The Rochester hotel would be on the smaller end of the scale. The number of rooms ranges from 80 to 369, with most in the range of 125 to 175, representatives said.
 
"They seem very serious," said Bret Garwood, director of business and housing development for the city of Rochester. "They're doing a lot of really good due diligence. They're going through the approval site plan review process. That takes a lot of time and money.
 
"When a developer is spending that kind of effort towards the realization of a project, we get pretty optimistic. People don't advance a project through site plan review and spend the money that they're spending to get their documents and designs together unless they are confident."
 
The building at 155 E. Main St. was constructed in 1940, Monroe County property records show. The property at 159 E. Main St. was built in 1898. The 25-29 Stone Street property was built in 1900.
 
"It's going to be historic adaptive use, because we're going to have to keep some of the historic elements of the buildings," Masaschi said.
 
He declined to say how much was paid for the three properties. County records show that 155 E. Main, assessed at $306,000, was bought for $70,000 in April 2010. The 159 E. Main property, assessed at $544,000, was purchased in April 2010 for $105,000.
 
The most recent purchase listed for the Stone Street property was in 1996, when it was assessed at $170,000, county records show. The purchase price is not listed.
 
A deed filed Aug. 30, 2011, in the county clerk's office includes a transfer amount of $275,000. Stone Street Properties Inc. is the grantor; 155 East Main St. LLC is the grantee.
 
The contract to develop the properties was signed last September, Masaschi said.
 
"It takes a long time," he said. "Going through the historic process and designing with Hilton is a process. They have to sign off on everything. We had to do some negotiations with the city for things we needed there, with parking and all the stuff going on around there.
 
"We're going through the final designs right now and final site plan approval from the city."
 
RBA Group Inc. of Charlotte, N.C., is the hotel designer, Masaschi said. Beardsley Design Associates in Syracuse is doing the mechanical work. Marathon Engineering in Rochester is the civil engineer.
 
In addition to its Rochester office at 339 East Ave., DHD Ventures has offices in Charlotte, N.C., and Austin, Texas.
 
Hyatt Place, a Hyatt Corp. brand, is comparable to the Hilton Garden Inn brand and to Courtyard by Marriott in its limited-service product. Masaschi decided not to negotiate with Hyatt, he said.
 
The Hyatt Regency Rochester ranked 18th on the Rochester Business Journal's most recent list of hotels and motels with an average room rate of $151. It has 337 guest rooms and 17 meeting rooms. In both areas the Hyatt ranks second in the region to the Radisson Hotel Rochester Riverside, also on East Main Street.
 
"There are a lot of different markets for hotels," Garwood said. "These developers believe this is going to bring a type of hotel and a type of use that doesn't currently exist and would draw some hotel use that would otherwise not come downtown.
 
"There have been several market studies of downtown," he added, "Even the Midtown market study suggested, I think, that a 100-room hotel was necessary in this area of the city. It's a good sign that people want to make this investment, and it's good to have a mix of hotel use, levels of service and different types of hotel flags."
 
As plans for the hotel are being finalized, the city will look for new opportunities for the Lincoln Alliance Building, Garwood said.
 
A joint venture between Rochester developer Patrick Dutton and Syracuse-based Franklin Properties LLC was unveiled last May to buy and convert the 15-story building to 40,000 square feet of Class A office and commercial space and 113 loft apartments.
 
The project, scheduled to begin this year and be completed in 2013, is off the tracks for now because of disagreements over the amount of asbestos in the building and the cost to remove it.
 
Abatement would cost $2 million, the developers say. Representatives of building owner Conifer Realty LLC disagree.
 
"We're going to work to try to confirm whether there's a $2 million problem, as the developer suggested, or whether that problem is substantially lower, as the owner suggested," Garwood said. "Once we have that information, I think we'll be able to know how we can proceed."
 
The developers' interest proves there is hope for the Lincoln Alliance Building, Garwood said.
 
"It did show that a revitalization of this property is possible," he said. "We're going to work to try to drive that type of investment with the project. We have to work with the current owner and obviously work with developers. Whether it's possible to still work with the proposed developer or we'll have to find somebody else, that's hard to say."
 
The roadblock is an exception to the city's recent development history, Garwood said.
 
"There are large, complex projects," he said. "We've been very successful trying to enable projects like this throughout the city and downtown. Sometimes projects take a long time, but one good thing to note is that most of them happen.
 
"The number of projects that we've been working on in the last five years that actually don't go forward is pretty small compared to the number of projects that did go forward. This is a largely vacant building. It has a lot of potential. But the buyer and the seller have to come to terms."

5/4/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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