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City approves loan to hotel developers

WORTHINGTON -- It took more than 90 minutes of discussion and questions, but in the end the Worthington City Council unanimously approved the $400,000 bridge loan to the Lexington Hotel Development (LHD), contingent on the stipulation that all of the personal guarantees are verified.

The loan, which LHD representative Bob Campbell said is more likely to be used as a line of credit, will come with a 7 percent interest rate for three years and a balloon payment, and will be used if needed as a "safety net" for the hotel for startup costs at the end of the construction.

Campbell said the development was put together in a very short time and needed additional time to sell shares, but if the sales were successful, the loan might not ever be used. The $400,000 would "ensure an opening by late April or early May," Campbell said, "which is the busiest period in hotel industry.

Having the loan from the city would add validity to the project, he added, and any shares sold after the opening of the hotel would be pledged toward repayment of the loan.

The hotel, a 75-room facility adjacent to the city's planned event center, would be located on U.S 59 near the Bioscience Park and would have as an owner the Worthington Hotel Group, LLC. The hotel group would be owned jointly by LHD Group 1 and the Worthington Hotel Investment Group.

Campbell said LHD would not start building without the additional funding, whether it came in the form of a loan from the city or with the time it would take to sell the shares.

Howard Anderson of AmericInn, representing hotel owners in Worthington, said he and the other owners are in support of an event center, but strongly disapprove of the city as a funding source for the hotel.

"I disagree with the representative that the market can bear" a 75-room hotel in Worthington, Anderson said, adding Campbell was basically telling the council the event center and hotel would not be open by next summer without the loan.

"If a development group can't get half of its investors..." he said, then let the sentence stretch out. "And pre-operating costs should come from the owners' equity, not last-minute funds from the city."

Judy Rieckhoff of Holiday Inn Express said the city only gave them a $66,000 loan when they ran into soil problems during construction, and all of it had to be paid back.

She had attended a meeting stating the developers were ready with their funding, then suddenly she was reading they were asking for $400,000 because they hadn't sold shares, she said. Between the land, the tax increment funding and the loan, they city was contributing 12 percent of the entire project, she added.

Glenn Thuringer, manager of the Worthington Regional Economic Development Corporation, offered a letter of support from his board of directors with the justification that any other business can apply for a similar loan from the city's revolving loan fund if qualifications are met.

"We do not see the city favoring one business over another and realize this project is better with a hotel attached," the letter states. "Furthermore we realize the Event Center will create opportunities for other businesses such hotels and restaurants."

Council member Ron Wood stated the community has flourished from looking forward and not getting stuck in the past, adding the only two communities he sees moving forward in the area are Worthington and Marshall. He also said there are several tiers of hotels in the community, and only two are comparable with what the proposed hotel would be.

Travelodge owner Sunny Patel said he does not disagree with the new hotel, but was against the city loaning the additional funds.

"If he has the money, he can build a 75-room hotel," he said.

A proposal to expand his banquet room was ignored, he said, so if the city was willing to loan money to the LHD, Patel wants the money to make his hotel improvements.

"Did you own the hotel the new grocery store currently sits on?" Mayor Al Oberloh asked Patel. "We assisted in helping to improve that property."

Oberloh then listed several other projects Patel and his family have funded partially through tax abatements and loans.

"Nobody has excluded you from what the city has to offer," he pointed out.