K Partners tapped for civic center hotel

K Partners Hospitality Group, the San Antonio-based hotel developer, was chosen by the Terrebonne Parish Council’s Community Development and Planning Committee at its Oct. 22 meeting to construct a 125- to 135-room Hilton Garden Inn on parish-owned property next to the Houma-Terrebonne Civic Center.

Terrebonne Economic Development Authority CEO Mike Ferdinand told the committee TEDA was recommending K Partners. All committee members voted in favor of TEDA’s recommendation.

K Partners has indicated it will sink $18 million into developing the hotel.

Ferdinand told the committee K Partners has 30 days to sign a Cooperative Endeavor Agreement, or the contract could be offered to a second developer represented by local group LaRussa Real Estate.

In an Oct. 2 letter to Parish Manager Barry Blackwell, Ferdinand said the competing group’s proposal lacked “confirmation of key criteria” and information needed by Louisiana Economic Development to evaluate the project.

Mike LaRussa, representing the real estate agency, told the committee his group will spend $12 million dollars developing the Hilton.

However, LaRussa said the $12 million figure was just a projection. The amount could go as high as $25 million.

Ferdinand described both developers as “good businesspeople.”

He said K Partners projects an annual payroll of $900,000 to $1 million. The group anticipates paying the parish $405,000 in annual sales taxes on yearly sales of $4.9 million.

The competing group’s projected payroll is a similar $900,000. It anticipates paying $270,000 in sales taxes yearly on sales of $3.2 million.

Ferdinand said “baseline investment makes a difference,” but cautioned that the sales figures are a projection. The only figure that could be guaranteed is the hotel’s ad valorem (property tax) payments to the parish.

“What if we go with K Partners and they don’t spend $18 million?” said Councilman Clayton Voisin before the committee voted. “What can we do if they don’t spend $1 million on payroll? What if these numbers are voodoo numbers?”

Other committee members were more supportive.

“Go ahead and accept K Partners’ proposal,” said Councilman Peter Rhodes. “These people have been discussing with us for a while. They deserve that.”

Councilman Harold Lapeyre liked the larger dollar amounts coming from K Partners.

“Eighteen million, $12 million-they don’t just pull these figures out of the sky,” he said. “It’s a super-important project for the community. Let’s get the contract signed.”

Councilmember Kim Elfert expressed support for K Partners as well.

LaRussa told the committee his client has developed eight or nine hotels in Terrebonne parish, including the Holiday Inn on Martin Luther King Boulevard in Houma, and the Hilton Garden Inn in Lafayette.

“You gave us strict guidelines – 125 rooms,” he said. “This group comes in and says $18 to $20 million. My guy gave an honest number.”

Ferdinand said the guidelines included jobs created, payroll, and a specified occupancy.

He added, “Hilton says points and amenities are the difference.”

LaRussa’s group is offering to pay 50 cents more a square foot than K Partners for the property next to the Civic Center, which amounts to $75,000.

The larger figure impressed Voisin.

“The other group (represented by LaRussa) put $75,000 on the table, but TEDA recommended the other group,” he said.

Voisin said later, “They’re building the same hotel.”

Developer S.P. LaRussa, also with LaRussa Real Estate, was adamant about Terrebonne Parish tapping Texas-based K Partners.

“It’s a slap in the face,” he said. “We’re local people.”

Ferdinand reminded the committee neither developer can proceed unless land is secured for the project.

Both developers have applied for benefits from the federal Gulf Opportunity Zone (GO Zone) Act, which provides tax breaks for businesses expanding in hurricane Katrina-affected areas. The Act expires in late 2008.

“K Partners seemed eager to get things going,” Ferdinand said at the Oct. 23 TEDA board meeting in Houma.

He said the council, as a guarantee, wants the investment figure projected by K Partners to be placed in the Cooperative Endeavor Agreement between the parish and the group.

The parish still needs to send a formal request to the state for permission to sell public land for economic development purposes.

If the council did not choose K Partners to develop the hotel, Ferdinand said, the state would want to know the reason because K Partners projected higher income figures.