By Ryan Gueningsman
DELANO, MN Scaling back the project to attempt to secure financing and fighting the economy, a local group attempting to get a hotel built in Delano is not giving up.
“We are looking at further reductions to the project scale due to the financial and lending market, but still intend to build a hotel with banquet and pool,” said Rick Schaffer of Innovation Investment Partners. “We may be down under 60 rooms in a three-story building rather than four.”
A group of investors has been attempting to get a hotel in Delano for a number of years. Struggles with financing aspects, and more recently, the economy, have set the project back. The investment group owns a 3.3-acre piece of land along Highway 12 between Ridgeview Medical Clinic and Delano Crossings for the hotel.
“We have also been examining changes to the layout in order to try and conserve space and reduce overall construction costs,” Schaffer said. “We feel we can achieve a more viable project given the current financial climate. Assuming we can get favorable financing, we should be in the right equity position to be able to move the project.”
Schaffer admits financing has been the bear through this entire process.
“We feel that the project, scaled down for the second time, is still very adjustable,” he said. “We have stuck to designs that allow us to add to the property as the demand is made evident.”
He said the group’s dream is still to build a larger hotel property with a full recreational waterpark, but said the group will have to settle for what it can borrow.
“We’ve reduced the project to try to achieve something more finance-able, but we have reduced it in such a way things can be phased back in the future,” he added. “Over the years, it has become more and more difficult to fund projects, and we have continued to make adjustments that we feel could bring a financial solution closer to reach.”
The investment group has performed a market study, and is continuing to update it as it is able to find additional data.
“The hard part is that Delano is really a new market, which makes it very difficult to predict what kind of business can be generated,” Schaffer explained. “Consultants have tried lumping us into the Plymouth market. We feel our market is more similar to Buffalo and Waconia. We also feel that there is new business to be found that other markets are not getting, such as visitors that might stay in a hotel in town rather than stay with family. We would like to draw on Coborn’s as an example.”
Schaffer explained that Coborn’s built bigger than its model suggested and performed far better than predicted.
“We feel that is the nature of the Delano area market,” he said. “People in this area are traveling far enough for services that, once they are made readily available, they would use in greater volume. It’s an easy argument to discuss, but it does not translate well into numbers, and lenders are only interested in the numbers.”
What the group’s market study has found is that Delano area businesses attract visitors from as far away as Bismarck, ND.
“We are very eager to see the results of the city-sponsored market study,” Schaffer said.
“We greatly appreciate the support that we have heard in Delano for the project,” he added. “Our market study experts said they heard ‘it’s a no-brainer’ at just about every stop. This means a lot to us and helps us to keep up what has become a very difficult struggle.”
As indicated in late 2008, Schaffer said the Comfort Inn franchise remains secured.
“We have also hired a management company with the hopes they can help us achieve financing,” Schaffer said. “At the same time, we haven’t gone just in one direction. We have different irons in the fire and are running any direction we think might bring some results.”
Schaffer said the group is speaking with bankers and brokers to present the scaled-back version of the plans, and said he’s talking to local banks throughout the process.
“The more local involvement we can get with the project as a whole, the better,” he said, admitting it’s hard to nail down a timeline yet for the ground to be broken on the project.
Schaffer said Innovation Investment Partners includes himself and Tom Schaffer, along with Steve King of Landscape Structures and Curt Christenson.