A little more than a week after its approval by the Green Lake Common Council, an agreement dictating the terms and conditions for the city’s proposed $3 million investment in the Heidel House redevelopment has been made public.
According to the developers agreement between the city and Green Lake Hotel Group LLC that was notarized Tuesday, Heidel House developers will work to finish the redevelopment in 12 months of the agreement taking effect.
The agreement was approved by the Common Council Monday, Aug. 24, a few weeks after it was announced that Fiore Companies reportedly accepted an offer from Lighthouse Development Group LLC and Green Lake Hotel Group to purchase the property. An expected closing date is set for later this month.
After the sale closes, Green Lake Hotel Group will own the Heidel House, while Lighthouse will serve as the operator, according to Mike White, a primary investor behind Green Lake Hotel Group.
He noted the revitalized Heidel House will be an operating hotel with 115 rooms, 15,000 square feet of space for conferences, meetings, weddings and banquets, along with expanded car parking and boat docking.
“We really want the general public to feel welcome and to enjoy this great landmark,” White said.
Additionally, the Grey Rock property will be offered for sale. If no sale occurs, it will be razed and could be sold as three residential parcels. No public funds will be spent on residential development.
Under the developers agreement, the city will reimburse the developer at a rate of 60% of eligible project costs up to $3 million. Project costs include, but are not limited to, renovation expenses, furniture fixtures, equipment and certain start-up costs.
According to the city’s financial advisor, Brian Della, a $3 million financial grant from the city “equates to $5 million or more of developer project costs.”
The city’s financial grant is expected to be disbursed in two installments, the agreement stated.
Green Lake Hotel Group cannot request the first payment before March 15, 2021. The installment cannot exceed $1.5 million, while the second payment cannot be requested until the revived Heidel House is open.
Both payments must be requested in writing and Green Lake Hotel Group must provide documents confirming project costs with each request.
To reduce the amount the city will pay, the agreement explained that the city of Green Lake can apply for a $250,000 community development investment grant from the Wisconsin Economic Development Corp. (WEDC).
Under the agreement, Green Lake Hotel Group must cooperate with the city in applying for the grant. If approved for the grant, developers may be required to provide documentation to verify that it is complying with the terms of the grant.
With the WEDC grant, Della noted the city’s expected debt from the Heidel House redevelopment would be roughly $2.75 million.
Additionally, the city has determined that if it doesn’t create a tax increment district (TID) encompassing the Heidel House property at 643 Illinois Ave., the developers will not redevelop the property.
“Right now, the city is being harmed,” Della said. “It doesn’t have the Heidel House, so this project is being put in place to, I think, lift the city out of the harm that is incurring right now.”
Likewise, Green Lake Mayor Ray Radis noted getting a revitalized Heidel House open is instrumental in allowing the city to grow, increase room tax revenue and generate business.
In creating a TID, the city will receive “tax increments” — taxes levied on the increased property value from redevelopment — each year from Green Lake Hotel Group that will be used to repay debt incurred by the redevelopment.
Under the agreement, the LLC’s tax increment payments will begin in 2023 and will continue until the city’s debt from the project is fully repaid, at which point the TID may be terminated.
The agreement projects the debt to be repaid by 2048, but Della noted the city is anticipating getting paid back earlier.
If Green Lake Hotel Group fails to generate the “minimum actual tax increment,” the agreement says it would be required to pay the city the amount it was short.
“We think that the [TID] is going to close early, so we think the developer is only going to have to guarantee those payments until 2044,” Della noted.
For the agreement to take effect for both parties, Green Lake Hotel Group LLC must acquire the title to the property.
Meanwhile, for the city to fulfill its obligations under the agreement, the Joint Review Board and the Wisconsin Department of Revenue must approve TID No. 5.
Della and Radis were confident that the developers agreement shielded the city from potential harm that could be inflicted by the project.
“We are protected,” Radis said. “Everything has a risk in business, but I think it’s a very low risk based on all the details in the developer’s agreement and the project plan, and from our due diligence [learning] about the developers.”