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On to "Plan B" for Hotel Covington as New Market Tax Credits are Denied

The Hotel Covington will not receive New Market Tax Credits this year, funding that was presented to the public to be the final step before construction begins on the more than $25 million project at the former Covington City Hall. 

The US Department of the Treasury announced the tax credit awards Thursday and no Cincinnati area development funding group received any, including the Cincinnati Development Fund (CDF). It was through CDF that the hotel project had applied for the credits.

Since its big announcement in December 2012, The Hotel Covington has been viewed by many in the city as the cornerstone of a revitalized downtown. New businesses have cited the hotel plans as their reason to open in the city, or in the case of Rima's Diner across the street from the project, to reopen. The upscale hotel is the largest development project put together in the city by The Salyers Group, a business responsible for, among others, the thriving Madison Events Center, located across Seventh Street from the hotel site, a place expected to be responsible for many of the 128-room hotel's guests.

"We are sitting with a holding pattern on New Market Tax Credits," van Rooyen said at a Covington City Commission meeting in April. "We see New Market Tax Credits as a final piece. There's nothing we can do till that gets announced."

The project was seeking roughly $5 million from the tax credits.

(SEE PREVIOUSLY: Renderings of The Hotel Covington released for the first time)

Van Rooyen spoke to the city commission just before it approved an extension of a "due diligence" period in the complicated deal. Last fall, the City of Covington vacated the building at 628 Madison Avenue, which was built in 1908 as the Coppins department store and became City Hall in 1990. The City is now housed in a property on Pike Street where it rents from the Salyers Group. The City is selling the Coppins building to the Salyers Group for the purpose of developing the hotel but in terms renegotiated in January, if the hotel project becomes an impossibility, the developers can walk away, leaving the City as a renter in one space while still owning its old building.

City Manager Larry Klein remained optimistic, calling the denial of New Market Tax Credits "a bump in the road".

"It just means the hotel project must seek out another entity that did receive an allocation," Klein said. Community Ventures Corporation in Lexington received $45 million in New Market Tax Credits,  which are aimed at revitalizing low-income communities and increasing economic opportunity there. 

UPDATE: The River City News spoke with developer Guy van Rooyen on Friday morning. His comments are below.

"I still think there's a likely opportunity for New Markets," van Rooyen said Friday. "It's unfornuate for CDF and (Cincinnati-based) 3CDC that there wasn't Market support."

"Our project is going to be successful regardless of funding stack. It's not contingent that New Markets are the only way this can get done. We're very hopeful that we have New Market potential. Our advisors are some of the best in the country with access to other firms nationwide, so we're still in the pipeline for others."

Van Rooyen said that The Salyers Group, which is working closely with Chicago-based Aparium Hospitality on the hotel project, is moving forward with closing on the Coppins building, completing the purchase from the City. "We're not going to fold up our tent and move on," he said. "We're committed to getting a hotel in that place and whether it's New Markets or not, it's going to happen. We woundn't be closing on the building if we didn't think we can put a hotel there."
 
"Nothing shows more resolve and certainty that we can get something done than to put hard money down, closing on the site. There's a lot of good people committed to seeing this work."
 
Van Rooyen added that if New Market Tax Credits are not used and other financing sources are secured, the project could actually accelerate in pace. "It may be even quicker because New Markets are a more challenging structure," he said. "It might actually accelerate things because it takes out that complexity."
 
"There's always a silver lining, so if that window closes, the structure changes, but in a very positive way."

-Michael Monks, editor

Photo: Rendering of The Hotel Covington/RCN file