Garrett’s lease agreement falls through at last minute
State Land Office says bidding process will start anew after company was unable to show it could secure $250K performance bond
The state land commissioner has decided not to move forward on a deal with a hotel company seeking to redevelop the 2.7-acre property occupied by Garrett’s Desert Inn on Old Santa Fe Trail about two blocks south of the Santa Fe Plaza.
Land Commissioner Aubrey Dunn said Friday that negotiations on a final contract with GreenTree Hospitality and Peak Hospitality have been terminated, just two days before the start of the proposed lease period on Jan. 1.
The bidding process will start anew in 2018 with the current leaseholders, 221 Santa Fe Innkeepers LLC and the Santa Fe Bite restaurant, remaining on the property until the matter is resolved.
“A lease must be completed based upon what was presented in the bid packet,” Dunn said in a statement, “and GreenTree and the State Land Office were unable to agree on satisfactory terms.”
In a telephone interview, Dunn said the final sticking point was that the bidders were unable to show they could secure the $250,000 performance bond required by the land office.
In November, GreenTree Hospitality of Scottsdale, Ariz., and project partner Peak Hospitality of Albuquerque submitted the highest and best offer of $300,000 annual base rent, a one-time $100,000 bonus bid and 5 percent of annual gross revenues. The University of New Mexico is the sole beneficiary of revenues earned from the property, located next to the Santa Fe River just across the street from the State Land Office’s own building.
The lease was for 20 years with two possible extensions until 2078.
“It is unfortunate that this partnership will not move forward; however I will not leave future administrations with a less than favorable lease,” Dunn said. “This property is a tremendous asset for the community, and the beneficiary it supports and will be managed with the utmost fortitude and in the most responsible manner so as not to provide something less than what is deserved.”
The only other bidder, a subsidiary of HRV Hotel Partners owned by Richard Holland, offered a lower base rent and no revenue split. Holland, who lives in Santa Fe and Atlanta, and HRV Hotel Partners are part of a partnership that recently purchased the Bishop’s Lodge Resort & Spa just north of Santa Fe and is investing some $70 million to redevelop that historic ranch property on 300 acres.
Both bidders called for using as much of the existing Garrett’s footprint as possible without significantly increasing the building heights or density. The property is within the city’s Downtown Historic District, and its prospective redevelopment had been a source of concern for preservationists who feared the possibility of a high-rise structure at the site.
Holland and his partners envisioned using a portion of the Garrett’s property as a retro Route 66 hotel complete with Airstream camping trailers that would be rented as hotel rooms.
The State Land Office acquired the property at 311 Old Santa Fe Trail in September 2016 by way of a land exchange with Cochiti Pueblo. Dunn returned 9,000 acres of ancestral lands, formerly Dixon’s Apple Orchard, to the pueblo, and Cochiti purchased the 60-year-old inn from the Catron Family Trust and transferred ownership to the State Land Office.
Dunn said he learned from both bidders that the zoning of the property makes it difficult to make significant investment in its redevelopment and then pay the lease and earn a profit. He might change the terms of the proposal when his office re-solicits proposals next year.
“One problem with the whole property is that it’s hard to develop downtown because of the zone,” Dunn said. “It’s harder than I originally thought. We learned some things going forward and that process might change.”
Contact Bruce Krasnow at brucek@ sfnewmexican.com.