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City Council expresses cautious optimism about proposed hotel development

Heron, a proposed hotel development at 699 Prince Street, image via Monarch Urban

Alexandria’s City Council was overall supportive of an arrangement presented earlier this week to invest — sort of — in a new Old Town hotel.

A proposal backed by the Alexandria Economic Development Partnership would have the city help fill gap-funding for a hotel project at 699 Prince Street that fell through when the pandemic hit. Interior demolition was already underway when the pandemic made it impossible to secure financing on a new hospitality project, said AEDP President and CEO Stephanie Landrum in a presentation to the City Council on Tuesday.

Landrum said the city’s hospitality industry has plummeted over the last couple years and in some cases it’s more beneficial to convert those properties to residential, here Landrum said the city’s economy would benefit more from a luxury hotel.

“We’re seeing what we could classify as obsolete hotels, dated in terms of their age or their amenity base isn’t what travelers want today, or their location isn’t amenity approximate,” Landrum said. “We’ve decided as a city that [hotel conversion] is helping achieve priorities like housing availability, but we need a good mix of commercial projects in the city to balance the tax base. while we continue to improve or encourage hotel conversions in some places, have to encourage hotels to be built in viable locations.”

Landrum said a hotel at 699 Prince Street would generate 500% more revenue to the city than a residential project and require little social or infrastructure uses, with no burden placed on schools and little pressure on park use.

“The cost of people who reside in a hotel is much less than residents,” Landrum said.

The site was once the Hotel George Mason, built in the 1920s but was later converted to offices and served as headquarters for the National Center for Missing and Exploited Children.

Landrum said the financing structure being proposed limits the risk involved for the city. The city, through AEDP, would pay bond trustees out of a 1% cut of the sales and use tax generated by the hotel after the project is complete and begins to generate revenue. The project is estimated to generate roughly $2 million annually in revenue, which Landrum said was a “significant amount of money” for the city to come from one project.

“We are agreeing to support this project, but if this is unsuccessful that debt has no bearing on the city, it’s all on that project,” Landrum said.

But Landrum said while she expects AEDP will likely get “phone calls” from other potential hotel developments if the project is approved, Landrum warned that the circumstances around the city’s involvement with this project were relatively unique.

“This project unique in historic preservation, in size and scale,” Landrum said. “I don’t think a new hotel being built for long-term stay in the West End or to service the new Virginia Tech campus in Potomac Yard will have the same set of circumstances. The number one provision is that you have to prove you have a gap you can’t close.”

The City Council approved first reading of the proposal, which is scheduled for a public hearing at the Saturday, Jan. 22 City Council meeting.

The main concern expressed by the City Council was over the handling of labor on the project. City Council member Alyia Gaskins asked about creating project labor agreements and other progressive labor arrangements for the hotel development, but Landrum said the profit margin is already so slim it’s unlikely the project would be able to support that.

“This project came to us because of a gap in financing,” Landrum said. “A lot of the things you’re talking about unfortunately comes at an additional cost. We’ve talked a little about this… we understand how real and impactful those additions are. For a project of this scale to enact some of those things would make the project not feasible. [We’re] talking about a 20-25% increase in cost for some of the labor concessions.”

The project presentation boasted that the project would bring in 19 full-time jobs and 90 part-time jobs, but City Council members expressed uncertainty at whether those employees would be paid a wage that would allow them to live in Alexandria.

“I really like the model for this, where what we put into this is based on what we’re getting out of it in terms of revenue,” City Council member Kirk McPike said. “We’re not talking about a dime of city money going forward without coming to us from this project… [but] without paying levels where they could live in Alexandria, we’re not benefitting Alexandria workers.”

Staff agreed to come back at the Jan 22 public hearing with more information about wages for employees at the hotel.

“There are things that as good human beings, citizens, and representatives we want to do but we also need to get projects done for the greater good of the community and what is the cost-benefit of some of these decisions,” Landrum said. “We try to thread that needle right now when there isn’t a clear policy at the council level and brought forward a project we think is obviously a great community good.”

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