Durango City Council voted Tuesday to give city staff and developers of the Best Western Hotel Conversion Project an extended due diligence period before the Nov. 22 deadline to gather more information about the property.
Since June, the city has been working to purchase the Best Western Inn and Suites at 21382 U.S. Highway 160 for the purpose of creating affordable and transitional housing.
“This has the potential to serve a huge need for us,” said Councilor Melissa Youssef. “Thank you so much to the city of Durango staff for all their hard work, and getting all this teed up. It’s an exciting opportunity.”
The city’s development partner, TWG Development, Construction and Management, requested the extension of the due diligence period because it was taking longer than expected to evaluate the building.
Now, with council’s approval, TWG has negotiated with the hotel owner to extend the period through Feb. 22, 2022.
“We needed a little more time for some of our third-party reports,” said consultant Jen Lopez with Project Moxie. “It’s going really well.”
TWG also renegotiated the closing date for the sale of the hotel. Originally set for Jan. 4, 2022, the new closing date for the sale of the hotel will be Sept. 30, 2022.
For an earnest payment of $70,000, the hotel owner gave the city a 90-day due diligence period starting in August to find a development partner and determine if the hotel will work for an affordable housing conversion project.
The city applied for $9.6 million in federal funding to purchase and convert the hotel, and learned in October that it will be receiving only $3 million for the project.
In October, City Council approved a letter of support for TWG to apply for the Colorado Department of Local Affairs Turn-Key funding in the amount of $7 million. TWG expects to hear about the potential grant award in January.
Currently, TWG plans to keep the existing 71 units and is proposing to add an additional 49 units for a total of 120 affordable housing units. TWG anticipates the total cost for acquisition and development of the hotel will be $30 million.
“Fantastic job,” Mayor Pro-tem Barbara Noseworthy said. “If I’ve got my math right, $75,000 in consulting costs, a no-risk contract and a potential $30 million investment in the community for over 120 affordable housing units. That’s leverage that I love to see.”
Aside from the $3 million in congressionally directed funding and the $7 million grant that has yet to be awarded, TWG hopes to use the low-income housing tax credit to pay for the remaining costs. The tax credit is a program that provides equity for development in exchange for federal tax credits.
“This would be the biggest project to date for the city using tax credits,” Lopez said.
It’s important to note that the city is not developing the hotel conversion. Addressing a need for affordable housing, the city took it upon itself to identify a property and secure funding to incentivize a developer.
Developer TWG is expected to take over the city’s contract with the hotel owners before the end of the new due diligence period in February.
“This is a great addition, I believe, to meet our housing needs here,” Mayor Kim Baxter said. “We have a lot more to do, and we need to keep moving forward.”
njohnson@durangoherald.com
