ATHENS, GEORGIA ADDENDUM No. 4 DATE: June
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ATHENS, GEORGIA ADDENDUM No. 4 DATE: June 18, 2020 TO: Potential Respondents/Interested Hotel Developers SUBJECT: REQUEST FOR PROPOSAL (RFP) for HOTEL DEVELOPER No. 05042020 HOTEL NOTICE TO ALL POTENTIAL RESPONDENTS The Request for Proposals (RFP) is modified as set forth in this Addendum. The original RFP Documents and any previously issued addenda remain in full force and effect, except as modified by this Addendum, which is hereby made part of the RFP. Respondent shall take this Addendum into consideration when preparing and submitting its Proposal. The Authority is aware of interest in market/feasibility information it has obtained for the envisioned project in the RFP. By issuance of this Addendum, the Authority is hereby providing such information, herein, as Exhibit A. The Authority reserves the ability to provide any additional new or updated information as it deems necessary in subsequent steps of the RFP process. End of Addendum #4 Exhibit A MARKET ANALYSIS AND PROJECTIONS: Proposed Classic Center Hotel Athens, GA Prepared for: DRAFT April 9, 2020 Table of Contents Assignment Scope 3 Location Overview & SWOT 4 Analysis Lodging Market Analysis 9 Proposed Hotel Programming 12 Financial Analysis 14 Appendix 21 Assignment Scope Jones Lang LaSalle’s Hotels & Hospitality Group (“JLL”) has been engaged by The Classic Center (“Client”) to provide an independent analysis regarding the financial feasibility of a proposed hotel to be located in Athens, GA (“Proposed Hotel” or “Project”). During the course of our analysis, JLL completed the following tasks in order to arrive at recommendations for the Project: Reviewed and visited the site to assess its locational attributes and surrounding environs. Reviewed existing hotel inventory and their amenities, branding and positioning in the market area. Identified a suitable set of competitive hotels and compiled a five-year history of the growth in supply and demand, as measured by average annual occupancy and average daily rate (ADR) for hotels, and analyzed their day of week and seasonality patterns. Compiled and analyzed relevant hotel supply pipeline to understand their influence on the Proposed Hotel’s performance. Projected lodging demand, occupancy, ADR, revenue per available room (RevPAR) and supply changes over a five-year horizon. Developed five-year pro-forma operating projections for the Proposed Hotel, based on benchmark statistics, projected hotel occupancy, average daily rates, departmental revenues and expenses and profitability. Calculated the unleveraged IRR for the Proposed Hotel using development costs provided by the Client, JLL projected cashflows for the Proposed Hotel, and estimates of as completed and reversionary value (exit value). Based upon hotel investors’ typical unleveraged IRR requirements for new hotel development in the market, the cash flow projections for the Proposed Hotel and estimates of reversionary value (exit value), JLL provided a range of residual land value for Subject Site as well as a range of supportable ground lease payments for the Subject Site in the event of its lease to hotel developer. 3 Location Overview & SWOT Analysis Location Overview The Subject Site is part of the Classic Center, in Athens, Georgia. The Classic Center is located in Downtown Athens, next to the University of Georgia campus on N Thomas St. The site is easily accessible via US-78, which connects Athens with Atlanta, located approximately 70 miles to its southwest. Athens is a vibrant college town. The downtown area is right by the entrance to the campus and offers a variety of restaurants, retail and entertainment options that are attractive to college students as well as visitors to the Classic Center. With a population of about 127,000, Athens is anchored by the University of Georgia, the state’s main university with an enrollment of close to 38,900 students. The University is the largest employer in Athens with 10,655 employees. Other major employers are St Mary’s Hospital, Pilgrim's Pride Corporation, Piedmont Athens Regional Medical Center and Caterpillar, located in nearby Bogart, GA. The Athens-Ben Epps Airport is located four miles from the Subject Site and currently operates mostly charter flights. The airport recently received a $750,000 grant from the US Department of Aviation that will be used to attract a commercial airline to offer passenger service to a Southeast hub. 5 Subject Site Overview • The Classic Center is a 95,000-square-foot convention center that also includes a 2,100-seat performance arts center. The center hosts over 600 events per year with a total attendance of over 385,000 people. The events range from conventions and conferences to meetings, social events, religious services and sport events. One of the unique characteristics of the Center is the high capture of student related events, with many student associations hosting events and competitions that attract thousands of students from all over Georgia. • The Classic Center is planning an expansion that will include the construction of a new arena with 5,500 seats. The arena will host a variety of events including concerts, sporting events with a focus on hockey and gymnastics, conventions, and religious events. Overall, based on a study contracted by the center, total attendance of over 360,000 people is expected to be generated by the Proposed Arena. • The expansion project also includes a senior living residential building, an expansion of the existing parking deck with an additional 300 spaces, a new parking deck with 500 spaces, a 150,000-square-foot office building and the new Judicial Center Building. The proposed hotel would be built over the existing auto bridge. The structure of the auto bridge was reinforced to be able to accommodate the new tower. Classic Center Proposed Site - Auto Bridge Proposed Arena View to new arena site Proposed Residential 6 SWOT Analysis Strengths Weaknesses The Subject Site is located next to the Classic Center, the main The Subject Site’s functionality is somewhat constrained due to its events venue in Athens, GA. It is located within walking distance of location over the auto bridge next to the Classic Center. The auto restaurants, bars and retail in the Downtown area, as well as bridge’s structure was reinforced to be able to accommodate a walking distance from UGA’s campus. building on top of it. However, this may affect the construction cost as compared to typical ground-up construction. The Classic Center attracts more than 600 events every year, including conventions, conferences, meetings, sports and religious The lack of major corporations in Athens makes it difficult to retain events, concerts and social events that generate demand to all the graduates that tend to move to Atlanta in search of higher-paying hotels in Athens. jobs. As a result, the broader economy is left vulnerable to shifts in funding and slowdowns in enrollment at UGA. Athens is a vibrant college town home to Georgia’s main state university, UGA, with a total enrollment of 38,900 students in 2019, a Other than Caterpillar and Pilgrim’s Pride, there are no major number that continues to grow every year. The university generates corporate demand generators for the hotels. Therefore, occupancy a wide range of demand to the local hotels, from visiting parents at the hotels is concentrated on the weekends, generated by and faculty, to recruiters, meetings and sports events. student related events, sports events and tourists. The Healthcare sector is the second largest employer in Athens and favorable demographics are allowing the sector to grow. The Piedmont Athens Regional Medical Center is undergoing a $171 million expansion to be completed by 2022 and has recently been appointed as the official healthcare provider for UGA’s Athletic Association. Athens is growing as a tourist destination, attracting tourists from Atlanta that come to enjoy the music scene and restaurant and entertainment options in the Downtown area. 7 SWOT Analysis Opportunities Threats The construction of the Proposed Arena by the Classic Center will UGA has been growing every year during the past ten years and its allow it to capture additional events as well as accommodate expanding enrollment has led to the need for additional faculty and current events that on the verge of outgrowing the existing facilities. staff. While this has positively impacted the Athens market, According to a study by CLS, it is expected to bring an additional budgetary and infrastructure concerns have the potential to 125 events to Athens with a total of 365,000 attendees. negatively impact UGA’s enrollment at some point in the future. Athens’ music scene is noteworthy with internationally recognized Increasing construction costs could potentially erode project bands such as REM and B52 having their origins in the city and with returns. an abundant calendar of live performances throughout the year. The current Covid-19 crisis that has been developing since the The Proposed Arena will allow Athens to host larger concerts for up beginning of March has had an unprecedented negative impact on to 5,500 people. the economy in general and the hotel industry in particular. As of Currently there is no new hotel supply being developed within two April 2020, it is very challenging to predict how long the crisis will miles of the Classic Center. After three new hotel openings in the last and how long it will take for the economy to recover. last three years, new development has slowed down and is limited to locations further away. There is opportunity to increase accessibility to Athens via the existing airport. A recent $750,000 grant received by the Airport will allow it to attract a commercial airline to offer passenger service to a Southeast hub. 8 Lodging Market Analysis Competitive Set The Athens hotel supply is comprised of 27 hotels totaling 2,955 rooms.