City to seek new proposals for Majestic site

Two requests for proposals the city issued last year for the redevelopment of the Majestic hotel site returned one responsive submission, a consequence of the solicitations coinciding with the uncertainty wrought by the coronavirus pandemic.

City Manager Bill Burrough told the Hot Springs Board of Directors Tuesday that the timing wasn’t ideal for soliciting proposals for the Park Avenue property that’s sat idle since 2006.

“We might have put the RFP out at a bad time because of political pressure you have,” Burrough said at Tuesday’s board work session. “The staff feels that same pressure. The site has been there a long time. The site still sits there unoccupied. I don’t think it’s a sprint. I think it’s a marathon. I think we need to take the time to get what we think needs to be on the site and not be shortsighted.”

The board told Burrough to issue a third RFP with the hope it will generate more proposals than the first two rounds of solicitations. An authorization for the RFP is expected to be on the agenda of the board’s April 20 business meeting.

The board declined to continue exclusive negotiations with the Dallas-based team that submitted the only responsive proposal. The 90-day negotiation period with the Grand Point Investment Group and Cienda Partners-led team the board authorized last year expired in November.

Cienda Director Philip Wise and Grand Point President and Managing Member Matt Deuschle asked the board last month to renew exclusive negotiations for a minimum of six months. City directors questioned if the team has the wherewithal to build the $110 million thermal water resort envisioned in its proposal.

Burrough said Crews & Associates, the city’s financial adviser, confirmed Cienda and Grand Point’s claim that the Hot Springs market can’t support the $300-a-night rates needed to generate a return on investment in a luxury resort. Wise and Deuschle told the board the incompatibility of their proposal with the market is an impediment, one they could overcome if given more time to convince investors the project can turn a profit worthy of their risk.

“(Crews & Associates) shared that it’s a very difficult project to make something as grand as what we saw in the proposal come to fruition with the price points they need for those rooms,” Burrough told the board. “They called it a grand project in a market that may not

be ready for that.

“I’m not sure Mr. Wise is still completely invested in that project, but he does love Hot Springs. He doesn’t want to tarnish Cienda or Grand Point for any type of development that might happen.”

Burrough said interest in the property has risen since the first two RFPs were issued. Situated at the crossroads of downtown, it’s in a prime location, he said. The appraisal service contracted by the Garland County assessor’s office appraised the four parcels totaling 5 acres at 100 Park Ave. at $1.34 million.

Burrough said the city plans to commission a commercial appraisal of the property.

“That site is still at the end of one of the top 10 streets in North America,” Burrough, referring to the designation the American Planning Association conferred on upper Central Avenue, told the board. “We don’t want to lose sight of that. It’s a very prominent place in our downtown. What goes there is going to be very important.”

Burrough said Missouri trucking magnate Robert Low is interested in building a hotel on the site but didn’t submit timely responses to the first two RFPs.

“They’re still interested in the property and contacted me on multiple occasions,” he told the board.

Burrough said the third RFP needs to be less restrictive. Removing “celebrating the natural wonder of our thermal water” from the values and objectives the 2017-18 board adopted for the property’s redevelopment would generate more responses, he said. A resolution updating the values and objectives was added to the board’s April 6 agenda.

Only one of the current directors was on the board when the redevelopment parameters were adopted in March 2017.

“We can celebrate it, but we can’t provide it,” Burrough, referring to the city’s namesake thermal waters, told the board. “We don’t have hot water. The national park has hot water. We don’t control that. I don’t want to give the impression the national park doesn’t want to sell the water. I think they do. They want to make sure what they’re selling isn’t going to run one of their current customers and users out of water. They don’t know how much they have on a permanent basis.”

The market study the city commissioned Design Workshop to conduct in 2019 identified a thermal water complex, distinct from amenities offered at bath houses in the national park and area hotels and spas, as the best use for the property. A mixeduse development featuring retail and restaurants, an amphitheater or performing arts center and a residential development received the three lowest ranks.

The board said recouping the city’s investment should remain part of the evaluation criteria. Burrough said $2.33 million has been spent from the solid waste fund to acquire the property in 2015, demolish its condemned structures in 2016 and mitigate environmental hazards in 2018. The city finance department said the solid waste fund began 2021 with a $2.16 million cash balance.

A self-sustaining project the city doesn’t have to subsidize will also remain part of the criteria.

The consensus for leasing the property expressed by previous boards is also preferred by the current one, directors said, explaining that the lease could be structured to recoup the city’s investment during the first few years of the term. The leaseholder could pay a nominal rent in subsequent years.

“The concern was the property being sold and then nothing happens,” Mayor Pat McCabe, who joined the 2017-18 board a month after the guiding values were adopted, told the board. “We wanted to control it for the period of time to ensure what was being proposed is actually built.”