Downtown Frederick Hoteland Conference Center

PUBLIC BRIEFINGFrederick, Maryland, USA

Frederick Chamber Major Employers Group

MAJOR EMPLOYER GROUP• SAIC‐Frederick• State Farm• Frederick Community College• Bechtel• Wells Fargo Home Mortgage• US Army Garrison Fort Detrick• Chase Card Services• Frederick County Public Schools• Frederick Memorial Health Care System• Lonza BioScience• MedImmune• Mount St. Mary’s University• Plamondon Companies• CitiMortgage

DOWNTOWN HOTEL FEASIBILITY TEAM

Feasibility Study Prepared by:

Developing a full-service hotel with meeting, event, and conference space in Downtown Frederick is a key priority of Frederick’s Economic Development Partners and Major Employers. A feasibility study was jointly funded by this group.

Mark Gaver, Community ChairmanPresident & CEO Gaver Holding, Inc.

No full‐service hotel in Frederick and very limited conference, meetings, event facilities

Identified by business community as critical need for attracting, retaining and expanding employment in Frederick 

Opportunity for induced demand for meetings, business and family events, conferences, and overnight stays 

Job creation and tax revenue generator

Strengthens Frederick’s tourism by increasing likelihood of  overnight/multi‐day visits

Increases in tourism, business use, conference use will in turn strengthen the entire Frederick Hotel Industry

WHY A HOTEL CONFERENCE CENTER?

Downtown is centrally located within county and within residential and major employment base

No Hotel and very limited Bed and Breakfast overnight lodging inDowntown Frederick –– Strong Demand

Downtown has a high amenity value for guests – restaurants/retail

Strengthens Downtown Frederick Tourism

Hotel Conference Center will be a major Downtown anchor and retail/pedestrian generator – fueling stronger retail sales

Contributes to the goal for an “18‐hour Downtown” environment

Transit and pedestrian oriented

Catalyst for Area Wide Revitalization – builds on public investment in downtown

WHY DOWNTOWN FREDERICK?

Area Analysis

National Hotel and Meetings Overview

Lodging Market Analysis

Evaluation of Potential Demand

Hotel Facility Recommendations

Market Supply and Demand Projection

FEASIBILITY STUDYThe Feasibility Study by Pinnacle Advisory Group and OPX evaluated the following (assumes 12/31/14 opening):

Projected Hotel Performance

Financial Projections

Development Costs

Site Analysis and Building Layouts

Economic Impact

Financial Feasibility of Development

Assumptions and Limited Conditions

Key FindingsStrong Market for Full‐Service Hotel/Conference Center

Capture of unmet demand with core market demand growth will allow for 72% occupancy once stabilized.

Cash flow projections show a strong positive Net Operating Income once stabilized at 18.9% of revenue

Market is willing to pay more ($30‐$50) for an upscale, full‐service hotel

Downtown has excellent location, amenities, and sites with visibility and size to accommodate such a facility.

Positive Economic Impact will be substantial.Direct impact – approx. $30 million annually once stabilizedIndirect impact (multiplier effect) – approx. $60 million annually

Cost to Construct will be $225,000 to $250,000 per room

Private‐Public Partnership is the preferred development strategy

Impact of Proposed Hotel on Lodging Market

Proposed hotel will introduce a vastly different product (both rooms and meeting space) than what exists today 

Lodging market will absorb new supply and stabilize at 71% by 2016 (3rd year after the opening of proposed hotel)

Market will absorb new supply due to core demand growth and induced demand from proposed hotel

Proposed hotel will bring new overflow demand to existing hotels

Facility Recommendations200 Room Hotel – Branded as Marriott, Hilton, Westin, or Hyatt

14,000 square feet of meeting space including

5,000 – 6,000 SF ballroom accommodating 500‐600 people

4,000 – 5,000 SF Breakout Meeting Rooms

4,000 SF Pre‐Function Space (lobbies, hallways, etc.0

250 parking spaces minimum – adjacent to hotel for hotel guests.  (Larger events will pull on entire downtown parking system)

Restaurant and lounge (with frontage on Carroll Creek Park or Street Side)

Guest Amenities ‐ Indoor pool, Exercise room, Business Center

Green building design/construction – industry is trending that direction and will minimize operating costs by increasing energy, utility efficiency

Economic Impact

Total Economic Impact

YearConstruction Costs, Labor,  and Taxes

Operational Revenues and 

Taxes

Costs of Goods Sold and Taxes

Hotel Payroll and Taxes

Real Estate Taxes

Total

Pre‐Opening $48,008,000 $48,008,0002014 $17,156,140 $3,140,780 $7,354,640 $645,000 $28,296,5602015 $18,699,290 $3,379,280 $8,027,170 $664,000 $30,769,7402016 $20,195,870 $3,613,540 $8,638,000 $684,000 $33,131,4102017 $20,802,400 $3,723,780 $8,895,906 $704,000 $34,126,0862018 $21,426,190 $3,834,020 $9,163,684 $725,000 $35,148,894Source: Pinnacle Advisory Group

Downtown SitesPurpose of analyzing downtown sites was to determine if hotel/conf center could be physically be constructed downtown. 

Facility sizes ranged from 126,000 SF to 141,000 SF depending on site & building configuration

Sites are sufficient in terms of size, but each has variety of attributes – No priority set yet

There may be other sites not yet considered

Downtown Site Analysis

Public/Private Partnership Structure

Financial Requirements ‐ $45 million project cost (excluding land) 

Step 1 – Determine Financial Sources/Uses$20 (45%) – Bank Financed Mortgage

$25 (55%) – Equity$12‐ $13 (25%) Developer

$12 ‐ $13 (25%) Local Match (Private Investors, Foundations, Corporations, City, County, State (MEDCO, Stadium Authority, Earmarks), Federal, Tax Increment Financing)

Step 2 –Select Developer Using RFQ/RFP Process

Step 4 – Select site

Step 5 – Development Process – permits, financing, raise capital, mgm’t/franchise, legal documents, etc.