Council approved the fiscal year 2022-23 operating budget and the general fund contribution to the operating budget for the Hyatt during the meeting, which was held three days before the opening of the Hyatt, which is slated for May 25.
Raymond Garfield Jr., chair of Garfield Public/Private, said during the meeting an additional $5.1 million cash infusion was needed to open the hotel and carry it through 2024 as there was a lack of working capital.
During the meeting, Collin Boothe, director of finance and assistant city administrator, said he estimates the hotel's contract development budget once bonds are finalized would be unofficially $100 million.
He said this excludes $6 million contributed by the Conroe Industrial Development Corp. and the $2.5 million contributed from hotel occupancy taxes that bring the hotel’s construction cost to an estimated $108.57 million.
However, Boothe said during the meeting current projections show operating revenue is around $2.9 million, and operating expenditures are around $4.5 million in the first year for the hotel. Boothe said including debt services and interest on the bonds the total project will be “way more” than $130 million.
Garfield, who is with Garfield Public/Private—the operating side of Garfield Construction that was selected for the hotel—said the reason there were seven contract revisions is due to inflationary issues; however, the reason for the May 22 meeting was due to a piece of missing capital—the $5.1 million. He said the projected cost that was established a couple years ago increased due to the COVID-19 pandemic that resulted in material shortages and supply chain issues. He said he believes Garfield is not responsible for managing the project's funds.
“Our team managed, oversaw the design and then monitored the construction of the program,” Garfield said. “We didn’t misuse any funds. ... There’s no failure on Garfield's part of managing your funds as the bond trustee had those funds since they were sold.”
The hotel's first guaranteed maximum price was set to $98 million in 2021, according to previous reporting. Since then the hotel has increased $10.57 million and officially cost $108.57 million to build after seven contract revisions, according to previous reporting. Council Members Howard Wood and Harry Hardman voted against the seventh contract revision in April, with Wood saying he could not support the continued increases in an April 12 workshop meeting.
“That $5 million dollar ‘oh by the way’ is just kind of unconscionable to me,” Hardman said during the May 22 meeting. “So I still don’t understand how we got here today and why this was not given its due diligence more so than three days before the damn thing was open.”
The hotel has been a project discussed within the city since 2015 and is set to open May 25, according to previous reporting.
According to previous reporting, the city initially contracted with real estate firm CBRE to conduct feasibility studies for a hotel project in 2015. The feasibility studies examined several metrics, such as occupancy, overall revenue and revenue per available room—which calculates how a property can fill its rooms at a given rate.
The CBRE’s study showed the Hyatt is projected to bring in $4.67 million in net operating income in fiscal year 2022-23, rising to $8.05 million in FY 2031-32, according to previous reporting.
Additional discussion regarding the hotel’s operating budget is placed on the May 24 and May 25 City Council agendas.
