HOT SPRINGS -- The Hot Springs Board of Directors expressed disappointment Tuesday that the team the city entered into exclusive negotiations with in August hasn't advanced the $110 million thermal water resort it has proposed for the Majestic Hotel site.
The Dallas team led by Grand Point Investment Group and Cienda Partners asked the board to authorize an extension of the 90-day negotiating period that ended in November.
"The next step is going to be an expensive step for us," Cienda director Philip Wise told the board. "We're going to have to reengage the consultants. We're going to have to see where the market is post-covid. For us to do that, based on just goodwill, that's a risky proposition for us.
"[Exclusive negotiations] give us a minimal level of comfort we'll have the time to complete the due diligence and be able to come back to the city with the terms we think will be required to build this project. Exclusive negotiation doesn't bind the city to do anything, other than to listen to us exclusively for a period of time."
Mayor Pat McCabe questioned the ability of Wise and Grand Point's president and managing member, Matt Deuschle, to bring their ambitious vision into focus. The board made the redevelopment of the city-owned property that's sat idle since 2006 its top priority for 2021.
Grand Point and Cienda submitted the only timely response to the second request for proposals the city issued last summer. The team's response to the first solicitation the city issued last spring was rejected for failing to demonstrate the financial wherewithal to build the hotel and luxury residential complex.
The city's reservations were eased after the team's surety assured the city that the team could secure up to $300 million of bonding the city could make a claim against in the event the group was unable to deliver on the project.
"I'm disappointed I'm hearing this today," McCabe told Wise and Deuschle, both of whom participated in Tuesday's work session by teleconference. "The fact that covid came about appears to be an excuse everybody hides behind. Actually, it's a great opportunity to move forward, because everything else is dead in its tracks.
"Maybe this is too big of a project for you. Matt had indicated a couple years ago there was money ready to come in and invest in Hot Springs. It's all in Dallas ready to come. Now we're here basically twiddling our thumbs."
McCabe questioned if the team had developed financial projections to present to investors.
"Are you telling us you have the forecasted financial statements for this project ready to go to a financing entity, but if not for covid it would already have been delivered?" he said. "I don't believe you have those financials created."
Wise and Deuschle said investors are waiting out the pandemic, complicating the team's ability to secure capital.
"If we fail to have the right capital structure, none of this will be successful," Wise told the board. "Doing a public-private partnership requires trust of both parties. You're not any more disappointed than we are. We all are disappointed. Instead of trusting our assessment of how difficult covid has made getting new resorts launched, I would say you don't respond to our proposal, that you engage a team to quickly engage the market yourself."
City Manager Bill Burrough, who along with City Attorney Brian Albright has represented the city in the negotiations, told the board he could ask Crews & Associates, the city's financial adviser, to do an independent assessment of the market's appetite for a luxury resort, one Deuschle said would have $300-a-night rates, in Hot Springs.
"We may need to reach out to some of those who we work with in the investment community and get an understanding of what that market looks like today for a project such as this," he told the board. "That may give us a better comfort level with what these gentlemen are facing."
Burrough said that the enthusiasm Grand Point and Cienda have expressed hasn't translated into progress.
"I'm very concerned our timeline has been stretched as far as it has," he told the board. "I know Philip and Matt have been extremely excited about the project every time we talk to them. The needle has not moved with that excitement."
City Director Erin Holliday asked Wise and Deuschle what the board should tell its constituents. The public is eager to see something happen at the site the city razed in late 2016, she said.
"I need to be able to come back after this meeting and give them something that's going to keep them in the game," she said. "This has put us in a really uncomfortable position. We've made commitments to the residents, particularly the ones who live the closest. We've put Bill Burrough in a position where he's been obligated to bring deliverables he hasn't been able to do fully."
Tell the public we're working on it, Deuschle responded.
"We've been slowed by covid," he said. "But we're moving forward, and we're excited about it. We're going to find a way to make this work. We're ready to rock and roll in a way we weren't in the late summer and fall because of covid. We want to work with you and get this done."
City Director Carroll Weatherford said the lack of communication the board has had with the team hasn't inspired confidence. With the bond market signaling a potential rise in borrowing costs, he said the team may have missed an opportunity to secure favorable loan terms.
"It's fixing to rise again here soon," he said of interest rates. "We can all see it. I think you missed your opportunity to make this project happen. I'm disappointed in the 11 months we've been discussing this that this is the first time we've seen you guys. If you don't come and explain what's happening, then we think there's nothing happening, which I think is what's going on right now. There's nothing happening with this project."
Deuschle questioned if the board has the resolve to see the project through, telling city directors that they might be more comfortable entertaining some of the less ambitious proposals offered during public planning sessions the city held in spring 2019.
"I think you could go out and get somebody who's inferior in quality and scope and appease all the folks who are in town that want the splash pad," he said. "This is a much bigger transformational catalyst. You've got the right team and the right guy to do it."