IS IT TRUE October 21, 2013
IS IT TRUE sources tell the City County Observer that the water department managers ALL have take-home vehicles?…these vehicles are reportedly not just Ford Festivas either?…we’re talking Ford F-150s and bigger, some quad cab trucks?…we wonder why does a water/sewer dept person need a take home vehicle?
IS IT TRUE it has been 3 weeks since we all celebrated the deal made by the Winnecke Administration that is intended to result in a downtown convention hotel in Evansville?…we have been in this position three times before where we waited around for financing to materialize so it is time to start thinking a little beyond the headline numbers and sources of funds and start asking questions about where will these funds come from and what is the probability that this will really happen?…as a reminder the construction cost of the hotel part of the project has been reported to be right at $44 Million breaking down to $7.5 Million from the City of Evansville and $11.5 Million from a group of local investors lead to the table by Bob Jones who serves as the CEO of Old National Bank, leaving $25 Million to come from HCW in some combination of cash and loans?…on the surface this seems like an approach that may really work if the stars align and the cash in the deal is sufficient to satisfy a lender?…we should not let the $44 Million construction cost blind us to the fact that this hotel will not appraise for $44 Million using either the projected cash flows or comparable sales?…the appraisal is expected to land in the $25 Million range making both the City and the local investment group’s dollars completely out of the money on day one?
IS IT TRUE the first hurdle in this financing is up to HCW and their banking partners whomever that may be?…given an expected appraisal of $25 Million that corresponds to HCW’s commitment to the project this makes this a simple loan to value transaction?…if their bank requires a 20% down payment for a commercial property then HCW has to come up with $5 Million, if the requirement is 1/3 the down payment will need to be $8.325 Million?…this is a simple go or no-go criteria. Either HCW has this and is willing to commit it or they don’t?…from all we have heard there is no reason to believe that this will not happen?…funding will certainly come with the contingency that both the City of Evansville and the ONB lead group comes through with all of their money?…it is safe to assume that the City of Evansville will come up with the $7.5 Million as their bonding ability far exceeds this amount?
IS IT TRUE the biggest challenge to success seems to be whether or not Mr. Jones is able to find local accredited investors who are willing to put up a total of $11.5 Million for something that has limited or zero value on day one?…local accredited ($200,000 annual salary or $1 Million liquid net worth) investors will want to know what the return on their investment is and what the exit strategy is?…it has been stated that the hotel cannot be sold by HCW for 5 years so assuming a 7% annual return (appropriate for this kind of risk) and a 5 year exit the $11.5 Million will have to grow to $16.12 Million to achieve that return?…when selling fees are considered this would require that the hotel would sell for roughly $70 Million?
IS IT TRUE a valuation like $70 Million would need an 80% occupancy rate with an average daily rate of over $210 per room?…one thing is for sure and that is the local investors will have to believe that this convention hotel will command rates that are more than double what Evansville currently averages at an occupancy rate that is nearly 50% higher than Evansville has ever achieved?…if the local investment group consists of a very small number of people all of whom are willing to take a giant risk in a project they strongly believe in this has a decent probability of working out?…if this gets cut into very small pieces like 115 investments of $100,000 each the risk of finding the investors increases?…we wish Mr. Jones well in his quest but do point out that it is the private investment dollars that will either make or break this deal assuming HCW is willing to commit to a down payment sufficient to satisfy their bankers?
IS IT TRUE then there is the issue that HCW is only going to own about 75% of the hotel and banks will only consider 75% of the appraisal as collateral?…that means a higher down payment unless the local investors are willing to subordinate their equity to HCW’s debt?…this will be trickier than the headlines and talking heads have lead us to believe?…this all may be possible but the probability indicates this is no slam dunk at all?
It was my understanding that the investors for the hotel were already signed, sealed, and delivered, and under contract. How else was the labor agreement already signed?
If Bob Jones can’t now find the investors, will he not therefore be obliged to use ONB money?
They did portray it as the investors were already in the bag.
I can’t see the investors ever making any money on this deal. I wonder what else they were promised with in order to make the deal smell sweet to them? Or, could they have been threatened with loss of business that would be far greater than the $11.5M?
That’s an interesting scenario, and not at all unreasonable. Are we really going to have this albatross around our necks again?
I’m really curious about the financing for the McCurdy and River House projects, too. Does CCO have any idea of what is going on there?
We are aware that some deadlines missed by the McCurdy have it back to square one and that George is still planning to do the Riverhouse project. Financial details are not available to us at this time.
It’s back to George?? The last I heard was that it was going to be apartments for seniors!
Selling that hotel for $70 Million in Evansville? No effing way, not now and not ever. Jones is looking for donors to the cause because no serious investor would ever bite on this deal. We will know by spring if their enough moneyed people of Evansville that are just plain dumb enough to consider this worthy of investing. Now if they are upfront and make it about donations he may find some good hearted souls to take pitty on Winnecke and bail him out.
My intuition says these “investors” will end up being Winneke “campaign contributors”
I was wondering this same thing. Would making a donation here give an investor a leg up on something else?
This whole project, from the magic money that showed up at the 11th hour, to the city announcing an old folks home for the river house, to even some council members fearing for their lives as they walked into the civic center, just flat out stinks all around and is yet again another fine example as to why and how the system here isn’t working.
Not only that, one Council Member even reported someone tried to BRIBE them! This allegation was turned in to the County Prosecutor, Nick Hermann, I was told.
I have not heard what came of it.
$50k and no opponent in the next election cycle. That was the alleged bribe offered during the time it was looking like only one vote would swing it.
Make sure you keep us updated on the status of the investigation into this. I would really like to see what comes out of this.
Wow, I bet they are sitting on that for a few months til election season. If there is sufficient evidence of this, wouldn’t that make a big stink come Nov 3, 2015.
This was told to me directly by the council person in question after another council person tipped me off about it.
The council person who was allegedly bribed had filed a formal disclosure with the County Prosecutor before I had even asked. This council person claimed the person doing the alleged bribing was a “good friend” and they did not know whether it was “a serious bribe”, but thought they should cover themselves legally “just in case”.
I was told the following: “I was offered $50,000 and a guarantee of no opponent.”
I have withheld this information until now because at the time it was irrelevant – we had the votes on our side regardless.
At this point I’m thinking this all needs to come out.
I’d love to have the CCO or some other news organization ask Nick Hermann if it is true that this was turned in. I have no doubt it happened, just wonder whether it was truly reported.
You make a good point, there. I wonder, too.
I left a message for Nick Hermann this afternoon. I did not hear back yet.
Guys, HCW will only have a 75% stake in this hotel that will only have a value of $18.75 Million if your $25 Million appraisal is correct.
At a 70% LTV the loan limit will be only $13.125 Million leaving HCW with a down payment of $11.875 Million.
I don’t know about Evansville but investors in Atlanta would not touch a deal like this with a 10 foot pole. If I were a betting man I would bet this goes south.
If it goes south, the trick will be getting the worms, i.e. the RESPONSIBLE SIX Council Members, back in the can and reminding them why they opposed this deal at the previous level.
Our Facebook group will be right back to lobbying mode if the Administration tried to reneg now.
There are 17.5 million reasons for these six to revert to their previous position. If this turns out to be a big bait and switchback these council members had better have the good sense to say no to the panhandler in the mayor’s office.
50′.
I see the hotel staying on its usual course. Each day you can graph it almost identically. Job projection goes up, Investors goes down.
evansville is not far off from detroit status……infrastructure crumbling……rundown housing…..all the money heading to the suburbs……incompetent city council…..spending millions upon millions the city does not have for bells and whistles just to appease the labor unions…….
I know this is slightly off topic but I watched the movie “Fifth Estate” about Julian Assange and Wikileaks Friday night. From what I have seen of this publication (CCO) it seems very similar except you guys deal with local stuff that needs to be exposed instead of national and international stuff. Congrats on being on the leading edge. Keep protecting your Moles and you will keep scooping the CP.
Wow, talk about delusions of grandeur.
“nihil est Invita priore ego imperator romanus fui.”
“That’s nothing in a previous life I was an roman emperor.”
Mens rea, te igitur te nosce.
Guilty mind, thee therefore know thyself.
men sibi conscia recti.
a mind conscious of its rectitude.
“Autem,pro di immortales! tua toga suspina est.”
‘Also,good heavens! “your” toga is backwards.” 😉
I think the PLA is a major stumbling block to a hotel.
CCO – numerous times you have used the word “lead” when you should use the word “led.” I can overlook it no more. I LOVE the CCO!
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