Aug. 16–The owners of the Hilton Wilmington Riverside are challenging the city’s agreement with the developers angling to build a hotel next to the convention center.
In the short term, the challenge will delay the city’s negotiations with Harmony Hospitality, a Virginia developer with plans to build an Embassy Suites next to the center.
A frustrated Mayor Bill Saffo is casting the maneuver as a tactic to delay progress on the hotel deal.
Saffo said the council could have voted on an agreement to sell the land to Harmony at Tuesday night’s meeting. But the attorney’s letter prompted the city to postpone a presentation from Harmony on an expired agreement that was planned for Tuesday.
Dylan Lee, a city spokesman, said Harmony’s presentation will be rescheduled for a future meeting after the city addresses the Hilton’s concerns.
A seven-year-old court ruling is at the heart of the Hilton’s challenge, according to a letter to City Attorney Bill Wolak from Matthew B. Davis, a Wilmington attorney with Marshall, Williams & Gorham.
In the Aug. 14 letter, Davis says he represents Sotherly Hotels Inc., which owns the Hilton Wilmington Riverside. Davis alleges the agreement between the city and Harmony violates at least two provisions of a 2006 consent judgement.
Saffo counters that every decision the city has made has been based on the document.
“We don’t believe that we have violated any aspect of the consent decree,” Saffo said.
The judgment, issued by Superior Court Judge Paul Jones in August of 2006, ended a nearly yearlong legal battle over the center. The settlement listed multiple requirements, including a stipulation that the center and attached hotel be operated by separate companies.
One requirement says no public funds can be used to subsidize the convention center hotel. Davis, Hilton’s attorney, says that the city has agreed to sell the land for the hotel to Harmony for $579,000, an amount Davis alleges is “well below the property’s fair market value.”
An appraiser hired by Sotherly Hotels has estimated the site’s value is $5 million, Davis said. The site is “highly desirable real estate,” he said, given its riverfront location next to the center in a downtown area experiencing growth.
“Accordingly, the city is selling the property below fair market value and is therefore impermissibly subsidizing the hotel project,” Davis said.
Saffo said the land is a small piece of property being sold for fair market value.
“From everything that has sold down there as of late, it’s considerably more than what the other properties have sold for in the last couple of years,” Saffo said.
According to county records, the land is three quarters of an acre and is valued for taxes at $875,500.
The 2006 ruling also included a provision that said the convention center’s parking must be available to all users on the same terms. Davis said the city’s agreement with Harmony shows the city has agreed to reserve 250 parking spaces exclusively for the hotel. “This preferred parking arrangement runs afoul of the consent judgement,” Davis said. Saffo said the city has not yet come to terms about the parking.
Meanwhile, Davis has asked the city to disclose the parking arrangement with Harmony and all financial statements for the convention center. Lee said the city will fulfill the request.
In the letter, Davis said the expiration of the agreement with Harmony is the appropriate time to raise its concerns. (The agreement expired July 31. It was the third extension since it was launched in February 2012.)
Yet Saffo cast the Hilton’s inquiry as a delay tactic. He said they had many past opportunities to raise their concerns but waited until nearly the last possible moment.
“I feel personally that they don’t want any competition,” the mayor said of Hilton. He also said the hotel has benefited dramatically from the convention center, which opened in 2010.
In his letter, Davis wrote that the Hilton wanted to operate “on a level playing field.”
Both Davis and Wolak declined Friday to comment on the matter.
The city has been trying to attract a full-service, upscale hotel to the property next to the convention center since 2007.
Saffo said Harmony representatives are aware of the challenge.
“They want to continue to move forward and make this deal happen,” Saffo said.
Harmony has plans to build a $33.6 million, 186-room Embassy Suites on the site, sandwiched between the convention center, the Cape Fear River and the Wilmington Chamber of Commerce. The 163,000-square foot hotel would also include a full-service restaurant on its second floor and 6,600 square feet of meeting space.
Julian March: 343-2099
On Twitter: @julian_march
