Hotel developers will get nowhere in Madison if they cannot convince the city or lenders to put up the money for the projects.
Getting that money is especially hard because banks are reluctant to hand out loans and private investors are still too worried to kick money into a shaky market, said Tom Arnot, owner of De Pere-based Beechwood Development LLC.
“All the people with equity have pulled their money from projects because no one knows where the bottom is,” he said. ‘There’s more money on the sidelines now than there is in play.”
Arnot speaks from experience. Beechwood last year proposed a 128-room Hilton Garden Inn for John Nolen Drive, but the company suspended plans as lending dried up during the past year.
Arnot said his consultants report limited access to money for at least another year, and he called his hotel project “probably dead.”
But the hotel proposals keep popping up in Madison. Though Hammes Co., Brookfield, has not formally applied, the developer on Monday presented its proposed $100 million renovation of the Edgewater Hotel.
Also this week, Madison-based Apex Enterprises announced a planned $100 million new hotel to be constructed across the street from the Monona Terrace Community and Convention Center in downtown Madison.
The city already is discussing with Milwaukee-based Marcus Corp. plans for a different hotel near Monona Terrace. That project could be built on the Madison Municipal building.
But David Merritt, Marcus’ senior vice president of development, declined to comment on the company’s plans or a project timeline, saying only the project is still under consideration.
If the city approves Madison-based The Fiore Cos. Inc.’s plans for a central library project, the mixed-use complex of buildings would include a hotel, also in downtown Madison.
“It’s a good problem to have,” said Rachel Strauch-Nelson, spokeswoman for Madison Mayor Dave Cieslewicz. “We’re happy to have to consider information from so many different developers.”
Cieslewicz, Strauch-Nelson said, also is tempering the burst of downtown hotel interest by cautioning city staff to prevent saturating the market.
According to a city hotel study last year, more rooms are needed to boost attendance at the city’s two primary convention centers, the Alliant Energy Center and Monona Terrace.
Steve Yoder, Apex president, said company studies also showed the need for new downtown hotel space, and the 300-room project his company proposed could be connected to Monona Terrace with a skywalk.
He also said Apex is talking to three hoteliers to find a partner on the project. Yoder said the site is financially “ripe for development.”
Alderman Mike Verveer said he does not think companies such as Apex, Hammes or Fiore would be putting together such sizeable proposals without some sort of financial commitment.
Peter Ostlind, chairman of Capitol Neighborhoods Inc.’s Basset District neighborhood group, said he would not speculate on any project until he sees plans moving through city commissions.
“All of these projects are a long way from being done,” he said. “You see these booms of interest in condos, apartments and hotels. But a lot of the projects never move forward.”
Arnot said there is a lot to be attracted to in downtown Madison, and developers are understandably showing interest.
But if money stays scarce, he said, a lot of projects might only remain ideas.
“I’m curious,” he said, “to see how many of these will have financing secured.”