Majestic undertaking slower than expected, developer says
The local developer who’s had the Majestic Hotel property under contract since July expected to have building permits for his outdoor entertainment venue by now.
“This is a giant undertaking,” R.A. Wilson Enterprises President/CEO Rick Wilson told the Hot Springs Board of Directors Tuesday night. “It’s not going to come fast. I thought when I approached you in 2021, I thought we’d be ready to permit this by now. I stand before you admitting I was wrong.”
Wilson requested a nine-month extension of the 270-day due diligence period that expires April 16, giving him until Jan. 20 of next year to close the $2,163,128 sale. The board gave him until the end of this year.
Wilson told the board the pandemic delayed the two-phase market analysis he contracted Integrated Insights of Fayetteville to perform. He said the delay had a “domino effect” on the project’s timetable, slowing negotiations with operators and putting later stages of due diligence on hold.
Walton Arts Center President/ CEO Peter Lane told the board the northwest Arkansas nonprofit and R.A. Wilson reached a “framework of understanding” on a memorandum of agreement for the lease and operation of the venue, which the real estate contract the board approved in July requires Wilson to secure before the sale can close.
Mayor Pat McCabe noted the Dallas-based development team that provided the only responsive submittal to the second request for proposals the city issued in 2020 also cited the pandemic when it asked for more time.
“If you get an extension and you haven’t paid for anything related to an extension, I think we as a board are treating you differently than previous developers,” McCabe told Wilson. “We did not give them an extension.
“Maybe I have more confidence in you and Mr. Lane than you guys have confidence in the project. I think if we’re going to offer an extension the initial $100,000 be the city’s at this time. When you close, that $100,000 is taken off the purchase price. Do you have that confidence, Mr. Wilson?”
Wilson said he wasn’t comfortable forfeiting the deposit until he gets deeper into due diligence. He offered to make the deposit nonrefundable on Oct. 20 in a letter to the city last month.
“With all due respect, we’re not far enough along in due diligence of this property in order for me to make a logical decision to do that,” Wilson told McCabe.
He agreed to make $25,000 nonrefundable July 20, the one-year anniversary of the board’s adoption of the ordinance ratifying the real estate contract. The balance of the $100,000 will
transfer to the city on Oct. 20, provided the sale hasn’t closed by then or R.A. Wilson hasn’t terminated the contract.
McCabe said Wilson had done more due diligence than the Grand Point Investment Group and Cienda Partners-led team that proposed a $115 million thermal water resort for the site. Its 90 days of exclusive negotiations with the city expired in November 2020, with the board declining the team’s request for an additional six months March of last year.
“We had another entity that put forth a project on this property, and they ran out of time,” McCabe told Wilson. “In my opinion, they didn’t appear to have moved the needle much at all in their development. They also used COVID as a major issue, as well.
“From what I’ve seen and heard tonight you have done an enormous amount of effort in doing an analysis on the project. April 16 is next week. What is your assessment of where you’re at? Is this is a done deal? Is this going to be built? Your market analysis said it’s great and all wonderful.”
Lane said the market analysis “really validated there was a strong desire for a new concert venue that provides a first-class audience experience.” Wilson said almost 80% of central Arkansas residents who were surveyed said they’d patronize the venue.
A market study the city contracted from Design Workshop in 2019 found that an amphitheater or performing arts center is “financially unfeasible for this site,” recommending a thermal water complex and hotel as the best uses. But the recommendation was made when the city and developers were under the misapprehension water from Hot Springs National Park’s thermal springs would be available.
The park said last year that no process was in place to apply for thermal water access.
City Manager Bill Burrough told the board Tuesday night Wilson had made a “bona fide” offer for the Majestic property, whereas the Dallas team responded to a request for proposals. After declining the team’s request for more time, the city was set to issue a third solicitation when Wilson offered to buy the property last spring.
“The board charged the city manager and city attorney to negotiate a contract,” Burrough said, referring to the resolution the board adopted in August 2020 authorizing him and City Attorney Brian Albright to enter into exclusive negotiations with the Dallas team. “We never got to that contract. There was one evening that the developer did bring me a check, but I did not feel comfortable taking that at 6:30 at night in my office. I did not keep that check.”
Grand Point Investment Group LLC Managing Member Matt Deuschle delivered the $2.1 million check to Burrough in 2019. Earlier that year, he pitched his thermal water luxury resort concept at public input sessions the University of Arkansas Fay Jones School of Architecture facilitated at the Hot Springs Convention Center.
The city said Grand Point’s letter of intent to purchase the property amounted to a sixmonth option, explaining the offer could be rescinded if a purchase and sale agreement weren’t completed within six months of the letter’s execution.
“One of the comments we get from the public is we’ve got people coming in presenting as our saviors, often,” District 1 Director Erin Holliday told Wilson. “I don’t like to see that, and I don’t like to hear that, but it ends up happening. A lot of people come in with big ideas and they disappear.”
The Majestic property is in her district. She was the lone director to oppose the real estate contract the board adopted last summer but was part of Tuesday’s unanimous vote to give Wilson more time.
“I will say of all of us who go home tonight, I will probably be the one with the most phone calls,” said told Wilson. “I’m a little bit conflicted about it, but I do just want to state for the record that I do feel like you’ve looked into some of the biggest concerns and are addressing them already.”