The city of West Allis could support the development of a 128-room hotel by guaranteeing up to $4 million on a $10 million project loan.
Milwaukee-based Cobalt Partners LLC plans to build a
Home2 Suites hotel southeast of West Washington and South 70th streets as part of its $130 million-plus
Allis Yards project.
The extended-stay hotel was
first presented to city leaders for approvals in January 2019. Construction hasn't yet moved forward, and the COVID-19 pandemic is a big reason for that.
Scott Yauck, president and chief executive of Cobalt, said he had all the financing lined up for the $20 million hotel development last spring. But lending on new hotel projects dried up once the pandemic hit, which deeply impacted the hospitality industry.
The city could help firm up the project financing by approving a guaranty of up to $4 million on a roughly $10 million Waukesha State Bank loan. Cobalt said this would limit the bank's exposure and allow it to execute the loan. The remaining financing comes from equity and New Markets tax credits.
West Allis' Community Development Authority and Safety & Development Committee will jointly consider the proposed guaranty this evening. The full Common Council will vote on final approval on Tuesday, said Patrick Schloss, the city's executive director of economic development.
Schloss said city staff have recommended the proposal be approved.
The guaranty does not mean the city will spend any money on the project. The city would only pay that amount in the event the developer defaults on the loan, Schloss said. In the event that happens, the city would either borrow money from a tax incremental financing district or a state trust fund.
Also, the guaranty would shrink to $3.5 million once the hotel is built. Other financial benchmarks would also eliminate the guaranty entirely.
Schloss said the market should recover by the time the hotel is built. He also noted that extended-stay hotels like Home2 Suites have performed better than other hotel types throughout the pandemic.
Yauck said the city will benefit from the hotel being built, even in the current market. That's because the property will generate more tax revenue as opposed to it remaining vacant.
"There's still value in building that, including for the city," he said.
Schloss said the hotel will also help spur new development in West Allis.
"We want to keep the momentum going," he said. "We definitely think there's interest in another hotel opening in the city."
Allis Yards is located along South 70th Street, south of West Washington Street. Cobalt demolished a former Allis-Chalmers office building to make way for commercial development sites, including new offices, retail and the hotel. The project also includes two renovated office buildings and
The Gage, an event venue in a former Allis Chalmers tractor showroom building.
Cobalt will also submit plans for a 180- to 200-unit apartment project within a month or two, Yauck said. The apartments would be located west of 70th Street.
Yauck said The Gage has been doing well since it opened last year. A hotel would benefit The Gage, since it gives eventgoers a place to stay nearby, he said.
