LITTLE ROCK — Both the Little Rock Board of Directors and the Little Rock Advertising and Promotion Commission approved a lease agreement Tuesday to convert the Peabody Little Rock hotel to a Marriott.
An updated property survey and the signatures of officials at Fairwood Capital LLC - the Memphis-based company purchasing the lease from the BG Excelsior Limited Partnership, an affiliate of the Memphis-based Peabody Hotel Group - are required to complete the transfer.
However, guests might not see the Marriott name for as long as six months. Fairwood has permission under the lease to operate under the Peabody name for up to six months until all of the renovations and upgrades - $16 million total - are finished.
The Peabody Little Rock building and property are owned by the city, and the property and convention center are managed by the Convention and Visitors Bureau. City officials have said the move will be good for Little Rock’s coffers, bringing a national booking system and rewards program to the city’s 418-room conventions hotel - which is attached to the Statehouse Convention Center on Markham Street.
Some of the provisions in the lease include:
A 40-year initial lease term through 2052 and the option to renew the lease for two more terms of 25 years each.
Rent would increase incrementally starting at $85,000 annually for 2013; $90,000 for 2014; $95,000 for 2015; $105,000 for 2016; $120,000 for 2017; $135,000 for 2018; and $150,000 per year in 2019 through the end of the first lease term in 2052. If Fairwood renews the lease, rent will increase to $400,000 or 1 percent of the total annual profit if that number is greater than $400,000.
Fairwood will invest $16 million in renovations and changes so the hotel meets Marriott’s standards.
Fairwood will have exclusive concession rights for convention center events.
The city will start collecting the full 2 percent hospitality tax charged on hotel rooms and prepared foods, nullifying the previous arrangement with the Peabody group to refund 95 percent of the tax to the hotel operators.
Fairwood can ask to rebrand the hotel every five years to a luxury hotel brand approved by city directors.
Fairwood will have the right of first refusal on nearby property owned by the commission if another offer is made to turn the property into a hotel or parking for a hotel, and if the commission is interested in that offer.
Fairwood will take over the current parking agreements from the Peabody group in a consolidated parking agreement approved by both the commission and the board.
Both Fairwood and the city will take out or renew insurance policies to cover various parts of the operation and facilities.
Gretchen Hall, chief executive officer of the Little Rock Convention and Visitors Bureau, said the Peabody’s insurance carrier will be responsible for repairing damage from a Christmas Day fire that spread from the restaurant kitchen through a vent and did about $1 million in damage.
“Most of the expense will be replacing kitchen equipment,” she said. “I’m not sure how much renovation Fairwood will do on the kitchen areas, but the replacements wouldn’t interfere with that. It’s already begun, and the restaurant lost a total of one day’s business and opened back up the day after Christmas.”
At-Large City Director Dean Kumpuris had raised several concerns about the lease terms at the board’s December meeting but said Tuesday that he would support the final lease. The board voted unanimously to approve it.
“I think the right of first refusal is not perfect for me, but it’s something I can live with,” he said. “I appreciate what [you] have done to try to get the best deal we can for the city and secure our future in this situation.”
The Peabody Little Rock was the third Peabody hotel to open after the brand’s flagship hotel in Memphis and one in Orlando, Fla.
Arkansas, Pages 9 on 01/23/2013