Sunday, July 21, 2024

Cavalier Hotel developer hopeful for state, city funds to pay for Atlantic Avenue redesign, third hotel

The proposed Atlantic Avenue redesign plan as of Jan. 7 (Photo courtesy of the City of Virginia Beach)
The proposed Atlantic Avenue redesign plan as of Jan. 7 (Photo courtesy of the City of Virginia Beach)

VIRGINIA BEACH — The Cavalier resort area developer is looking to make more moves at its Oceanfront site with additional help from the city and the state. City staff presented the developer’s requests to city council at its informal session Tuesday.

Proposed Atlantic Avenue redesign grant

Cavalier Associates LLC wants to apply for state money to pay for a proposed Atlantic Avenue redesign to mitigate traffic its upcoming Oceanfront developments will create, according to a McPherson Consulting traffic study conducted last year.

Thomas Leahy, deputy city manager of infrastructure, presented how the developer could move forward in applying for a $2.5 million grant to cover the proposed redesign.

Deputy city manager of infrastructure Tom Leahy presenting to city council (Justin Belichis)
Deputy city manager of infrastructure Tom Leahy presenting to city council (Justin Belichis)

“Council has made it pretty clear that they have no interest in it, and we’re fully aware of that and there are no plans to look to the city to pay for it,” Leahy said about funding the potential redesign. “As it turns out, the state does have some opportunity funds. The one that looks like it lines up pretty well with this project is called a transportation partnership opportunity fund.”

This state-awarded grant addresses transportation costs or aspects of economic development projects throughout the Commonwealth, according to Leahy.

“If the [transportation partnership opportunity fund] grant was to be used to pay for this, the city has to apply for the grant … we actually have to be the entity that would be the owner and manager of the construction,” Leahy said.

The city must meet the grant’s eligibility criteria, which include meeting an investment threshold, job types and salaries and out of state tourism revenue. It must also acquire part of the right-of-way owned by Cavalier Associates LLC and the state to get the grant money.  Leahy said the city staff is confident it can meet this criteria.

If the city council agrees with this design and wants to move forward, city staff would provide it with a resolution authorizing it to apply for the grant and request the land it needs to acquire from the state.

City manager Dave Hansen said there is no time constraint in applying for the grant and city council will vote to apply for the grant at its formal session March 7.

“I hope we realize we’re asking the state to spend $2.5 million on something we won’t spend $2.5 million,” Councilman John Moss said. “If I was on their end, I’d be saying ‘what?'”

An Embassy Suites hotel across the street from the Cavalier Hotel

Cavalier Associates LLC requested to amend its tourism development financing program, increasing its grant from $18 million to $24.5 million to pay for a third hotel at its Cavalier resort location — an Embassy Suites.

City finance director Patricia Phillips presented how this could affect the city.

Phillips said the city supports a third of the grant total at $8.1 million plus interest, which will come from 1 percent of sales tax generated at the Cavalier Resort projects until that amount is met.

“It was going to originally be a timeshare project, but now it’s a hotel,” Phillips said.

City finance director Patricia Phillips presenting Embassy Suites numbers to city council. (Justin Belichis)
City finance director Patricia Phillips presenting Embassy Suites numbers to city council. (Justin Belichis)

The estimated cost to develop the third hotel is $56 million, plus its equity and tax credits at $11.2 million and anticipated bank debt is $38.3 million, it leaves a $6.5 million gap in funding. That number, added to Cavalier Hotel’s $4 million gap and the Marriott hotel’s $14 million gap, brings it to $24.5 million.

The Embassy Suites could bring $17 million in additional taxable sales, increase the hotels’ parking garage spaces from 300 to 521 and have a $30 million economic impact on the area in 20 years, according to Phillips. It could also feature 150-200 rooms and an 8,000 square-foot conference area.

The city will vote on an ordinance approving to amend the developer’s finance program at its meeting March 7.

Follow justin on Twitter @justinbmmj and contact him at justin@wydaily.com

 

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