Value of a signature: Breaking down the broken down JQH development contract

CIMG0322 250x282 Value of a signature: Breaking down the broken down JQH development contract

City manager Greg Burriss addresses the media on Wednesday.

City manager Greg Burris could have given developer John Q Hammons another extension to break ground on the Embassy Suites next to the Expo Center. Instead, he said SGFers deserved more credibility from their local government.

“If you don’t hold people accountable, what does your word mean?” Burris said during a press conference on Tuesday. “We have an obligation to the citizens of Springfield to enforce that contract.”

Burris was referring to the ultimatum he gave JQH – start building or sell the land back for $1, a proposal Hammons called “ridiculous”. At first glance, it seems like a measuring stick competition, while Burris appears to be the first to publicly stand up to the entrepreneur.

There are, however several other variables to take into account. Thus, I will present the keys to the issue that have created a tangled mess on St. Louis Street by answering the questions that came to mind.

Why does this hotel/contract matter so much?

* When SGF built the Expo Center it was to not only host an incredible Chili Cookoff each year, but bring in several conventions a month which would be almost pure revenue. When these events and conventions book their sites, an attached hotel is a huge selling point. According to Burris, SGF has already missed out on several events.

* The Embassy Suites would not only serve as the host for these tourists, but would offer a full kitchen – something the Expo Center is missing – for catering these events.

* The deal not only was to build the hotel but to provide $550,000 worth of improvements to the Expo Center – including: enhanced acoustics, new sprinkler system, electronic sign board, and marketing among others. “We weren’t just looking for cash,” Burris said.

How did it fall apart?

* In one word: Financing. You’d think that word wouldn’t even come into play with America’s top solo hotelier, right? Neither did SGF. According to Burris, Hammons got the contract because he said it was “not contingent upon financing.” In a letter from JQH dated April 13 (received by Burris on May 3), Hammons said, “Financing is not available and won’t be for another one to three years … Money is available but at horrible costs, and business-wise, it is not advisable.”

* Hammons received one free extension in September of 2008, which is damn near unheard of in development talks, but in what looks like an act of good faith it happened. Another one would have cost JQH a half-million dollars. He didn’t want to pay and Burris needed to put his foot down.

What’s the whole $1 thing about?

* It’s the part of the deal that’s not expected to come up. Hammons is supposed to do his contractual obligations, and it shouldn’t ever be an issue. In the contract, if Hammons didn’t break ground on April 1, 2010 (after the ’08 extension) the city could buy back the land for $1 after a 45-day grace period and sell to another developer. “We’re trying to get financing right now to come up with that,” Burris joked. JQH said it’s “ridiculous”, but as Burris said about the value of a contract … it was part of the contract. If you don’t like the clauses in an agreement, you probably shouldn’t sign the thing.

* The cost to Hammons was $7 million. With that, Hammons not only purchased the land for the site of the Embassy Suites, but the adjacent Car Park, taking on the city’s debt of the garage.

Where does it go from here?

* The city can start taking official offers for the development 60 days after Burris sent the letter to Hammons. At least one interested developer has already made contact. City officials expect several nods. Perhaps the most interesting twist is when the process begins again? Burris said JQH will have the same opportunity to make a bid as anybody else, which screams Groundhog Day. The City Manager expects to have a new proposal to city council in June.

* If Hammons doesn’t get the development, there are many other pieces that make it a tricky puzzle to fit together. JQH owns the parking garage on one side and the food and drink rights to the Expo Center (even though the city owns the building … huh??). This could slow down negotiations with other hotels and events, even though contractually Hammons must “operate in good faith.”