This page is intended as a resource for potential hotel investors interested in the Seattle hotel market. This page will be periodically updated with relevant information.
Hedreen Hotel Proposal – Developer proceeds with “Plan B,” permit appeal and lawsuit filed.
Posted August 3, 2015
Hedreen approached the City of Seattle about the project at the site of the former Greyhound bus terminal in the summer of 2012[i], and initiated the permitting process in early 2013.[ii] The project has experienced repeated delays[iii] in the permitting process (Exhibit A). Hundreds of often critical public comments about the project have been received by the City of Seattle.[iv] The project permit and environmental impact statement was appealed in King County Superior Court on August 3, 2015 (Exhibit B). In December of 2014, the Seattle Department of Planning and Development issued a so-called “code interpretation” requiring over $3 million in additional housing fund payments from Hedreen compared to an earlier approved calculation.[v]
According to the Seattle Times, construction was anticipated to begin in early 2014.[vi] Hedreen employee Shauna Decker was quoted by the Puget Sound Business Journal as blaming UNITE HERE for project delays. She added that during those delays, “10-year interest rates have increased 1.2 percentage points. That’s a big impact when you’re talking about a $450 million project.”[vii]
In March of 2014, Hedreen introduced a scaled back version of the hotel with less guest rooms, banquet space, and overall useable space proposed. This alternative project is known as “Plan B.”[viii] According to City documents, Hedreen “would like to be prepared with an alternative project in the case that they are not successful with the alley vacation and other entitlement requirements on the 9th & Stewart project.”[ix] According to the SEIS, “Plan B” has a reduced number of hotel rooms (417), parking spaces (200), meeting space (27,010 sq. ft.) and pre-function areas (24,000 sq. ft.).[x]
This reduction in project, and especially ballroom size, may put the viability of the hotel at risk. The project’s two ballrooms are reduced in size from 35,900 sq.ft and 33,600 sq.ft. to only 20,100 sq.ft. each. As a result, the hotel will be unable to compete with the nearby Convention Center for some of the larger events, and in turn be forced to compete with various other venues for small and mid-sized banquets, receptions, and meetings (Exhibit C). According to the SEIS, the “alley vacation would allow for ideal ballroom configurations to be proposed and make the 1,680-room hotel viable.[xi] The attached letter from the Visit Seattle Customer Advisory Board (Exhibit D) to city leaders expresses strong preference for the larger project referred to as “Plan A.”
Consultant Convention Sports & Leisure (CS&L) raised concerns about oversupply of meeting space in a market feasibility study for the proposed expansion of the nearby Convention Center (WSCC). On January 28, 2014, CS&L concluded that Hedreen’s proposed hotel, in combination with a possible WSCC expansion, “could result in downward pressure on potential event and financial operating revenue for the WSCC and new center development due to added competition for small and mid-sized banquets, receptions, and meetings.” (Exhibit C)[xii]
Documents revealed in discovery suggest that prospective hotel operators raised concerns regarding the building design. For example, a memorandum from Hyatt states that the proposed 11’-6” width for guest room bays “has been recently tested by Hyatt and was found to be somewhat narrow for a spacious , functional layout; thus a minimum 12’0” wide bay is highly recommended.” (Exhibit E). An email from Hilton to Hedreen notes that “storage for these meeting spaces currently looks inadequate and should be improved as possible on all meeting levels” and that guest room levels 28-31 and 32-43 “have almost no housekeeping storage space” leading to the conclusion that “this will prove to be a problem with operations.” (Exhibit F)
The proposed expansion of the Washington State Convention Center (WSCC) recently failed to obtain a sales and use tax deferral from the Washington State Legislature that could negatively impact its construction schedule and/or feasibility.[xiii] The Convention Center is located across the street from the Hedreen proposal site and impacts its viability.[xiv]
The proposed hotel is a private development[xv] and unlikely to receive any public subsidy. This is in stark contrast to many large convention hotels built in recent years that have been partially funded by tax-exempt bonds or other forms of public assistance or government investment, with some even owned by government entities.
Hedreen is the owner of the Grand Hyatt Seattle and the Hyatt at Olive 8, which are very close to the proposed project. Consumer boycotts have been called at both properties.[xvi] Attached is the Seattle City Council’s letter to Hedreen in support of the workers at these hotels (Exhibit G).[xvii] The boycott has been endorsed by the Washington State Democrats, the Washington State Labor Council, the Washington State Insurance Commissioner, and a growing number of local leaders and organizations (Exhibit H).
Exhibits: Click on links to access documents
A: Puget Sound Business Journal Article regarding project hurdles and delays. Click here
B: Permit appeal and lawsuit filed on August 3, 2015. Click here
C: Excerpt from Convention Center Market Feasibility Analysis. Click here
D: Letter from the Visit Seattle Customer Advisory Board to Seattle City Council. Click here
E: Potential Project Review – Hyatt Regency Seattle (Eighth & Howell), October 23, 2014. Click here
F: Email: Proposed Hilton Seattle Convention Center, November 10, 2014. Click here
G: November 2013 letter from Seattle City Council to project developer R.C. Hedreen. Click here
H: List of Boycott endorsements at the R.C. Hedreen owned Grand Hyatt Seattle and Hyatt at Olive 8. Click here
Footnotes
[i] Site plan, survey and legal description filed with Seattle Department of Planning and Development, 8/17/2012
[ii] Seattle DPD Application for Scheduled Pre-Submittal Conference, February 11, 2014
[iii]Another delay for Hedreen’s mega hotel project in downtown Seattle, Puget Sound Business Journal, October 31, 2013
[iv] See http://web6.seattle.gov/dpd/edms/, under project number 3013951
[v] DPD Interpretation No. 14-009 (DPD Project No. 3019031)
[vi] Developer ready to build on downtown’s Greyhound block, Seattle Times, February 15, 2013
[vii] Hedreen’s mega hotel in downtown Seattle not quite as mega, Puget Sound Business Journal, April 21, 2014
[viii] Hedreen may scale back plans if city doesn’t grant alley vacation, Daily Journal of Commerce, March 17, 2014
[ix] Meeting Notes – R.C. Hedreen Co. 8th & Howell Hotel Pre Submittal Conference, p. 1
[x] 9th & Stewart Mixed-Use Development Final Supplemental Environmental Impact Statement, p.1-3
[xi] 9th & Stewart Mixed-Use Development Final Supplemental Environmental Impact Statement, p. 3.1-33
[xii] Expansion Market Feasibility Analysis for Additional Convention and Meeting Facilities in Seattle, CS&L, p.4, Jan 28, 2014
[xiii] Minutes – Washington State Convention Center Public Facilities District – Regular Meeting of the Board of Directors, May 20, 2014, p. 3 (http://www.wscc.com/sites/default/files/find-it/files/05-20-2014.pdf)
[xiv] Developer ready to build on downtown’s Greyhound block, Seattle Times, February 15, 2013
[xv] Dispute may stop construction of major hotel, Puget Sound Business Journal, July 19, 2013
[xvi] Union activists call for boycott of 2 Seattle Hyatt hotels, Seattle Times, August 27, 2013
[xvii] Seattle City Council letter to R.C. Hedreen, November 12, 2013
Seattle Times: Convention Center Expansion “still has to clear significant hurdles.”
Posted August 2, 2015
Seattle Times on the WSCC expansion: “The megaproject, which officials say would double the convention center’s capacity to host national meetings and events, still has to clear significant hurdles. For one thing, the convention center still does not control the proposed site — a full block bounded by Pine Street, Olive Way, Boren Avenue and Ninth Avenue that’s now the northern terminus for the downtown bus tunnel. King County Metro Transit owns the Convention Place bus station, and the two public agencies are still negotiating the terms of a deal for the property. Both the negotiations and the union’s activist push could spell delays for the expansion.” To read the entire article, click here.