Tallest hotel in Daytona of all time runs out of money for construction
DAYTONA BEACH – The troubled Daytona Grande hotel project – whose construction times have been extended several times, changed contractors twice and built a valet lane west on Oakridge Boulevard one way single eastbound – ran into another problem.
Protogroup, the Russian family-owned Palm Coast company behind the project, used up its construction loan for the 28-story, 455-room hotel before construction was completed.
“Protogroup now finds itself forced to close the construction finance loan and secure permanent financing in order to avoid bankruptcy and to maintain the ownership and operation of the convention hotel property,” wrote Deputy City Manager Jim Morris last week in a note to City Manager Deric Feacher.
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A measure that city commissioners are expected to vote on at their meeting tonight could remedy the situation and help the company regain its financial footing.
How Protogroup got into dire straits
An agreement with the city government forced Protogroup to restore the intersection in front of the new hotel on State Road A1A and Oakridge Boulevard after new water and sewer lines were installed under that crossing.
Those new, expanded water and sewage systems needed to service the 28-story hotel are now in place, but the intersection has a new elevation and is covered with a mixture of makeshift asphalt slabs and cobblestones. colorful. The rutted sidewalks around the intersection have yet to be redone.
“It’s a mess,” Morris said in an interview this week. “Aesthetically, this is unacceptable. This is not what we want in front of a luxury hotel. And we don’t want the intersection to fail in a few years.”
A proposed deal with the city could help Protogroup pay for delayed works at the intersection. City commissioners are expected to vote on the deal at their meeting tonight, a deal that would funnel part of the water and sewer reimbursement the city was going to give Protogroup for the costs of building the intersection. .
Protogroup agreed that part of the reimbursement for water and sewer costs be funneled into the intersection works to avoid losing the $ 100 million hotel. Company vice president Alexey Lysich signed the deal.
The Daytona Grande opened in June under a temporary occupancy certificate. Protogroup will only be able to guarantee its permanent loan for the construction of the hotel after having received a permanent occupancy certificate. But under the agreement signed by Protogroup, the city will not grant a permanent occupancy certificate until the intersection restoration is complete.
The business runs the risk of defaulting on the construction loan if it does not complete the project on time, obtain the permanent occupancy certificate, and obtain permanent financing. The permanent funder wants to know that a business license has been issued and that a permanent occupancy certificate that the building is safe is in place, Morris said.
The city’s agreement with Protogroup
The city had agreed to give Protogroup up to $ 1.1 million for the extension of new underground water and sewer lines from Halifax Avenue to the A1A, an upgrade that expanded the system. of public services in the city. The money was to be a reimbursement of Protogroup’s water and sewer impact charges to deal with the hotel project’s impact on the city’s utility systems.
City commissioners for the deal will be asked to vote tonight on calls to divert $ 283,829 of that $ 1.1 million towards intersection work.
Mayor Derrick Henry said he would likely vote yes on the deal.
“I don’t see this as a risk to the city,” Henry said.
The idea is for the Florida Department of Transportation to take over the restoration of the intersection, as happened when the westbound valet lane on Oakridge Boulevard next to the hotel parking lot had to be deleted.
The DOT has said it is ready to work with the city on the project, and the city has the money available to make the repairs, Morris said. He doesn’t know when labor might start.
“City staff, while being aware of the $ 100 million investment made by Protogroup, also recognize the need to restore the SR-AlA / Oakridge intersection to the proper aesthetics and levels of safety offered by a construction. , proper repair and operation of the intersection, ”Morris said in his memo.
The new lines are 15-20 feet underground, so it is important that the sandy soil on the beach above the pipes is properly compacted and topped with a solid concrete base in the area of the intersection that has been disturbed, Morris said.
In addition to repairing, resurfacing and repaving the beach side intersection with colored concrete, Protogroup is also obligated to complete the remodeling of the Oakridge Beach ramp and sidewalks.
But Lysich said the construction loan he got to build the hotel has run out and Protogroup has no other funds available to repair the intersection or complete the sidewalks and new landscaping around the beach ramp.
Thus, before the city releases the remaining money from the $ 1.1 million in water and sewer reimbursement, Protogroup will need to provide the city with a performance bond for the required sidewalk improvements, a Morris said. A performance bond is usually issued by a bank or other financial institution and guarantees the performance of a contract.
Lysich was reached by phone Tuesday morning, but after a News-Journal reporter explained why she was contacting him, the call abruptly ended. Lysich did not return an immediate follow-up phone call.
“We just want to do it right”
The hotel is part of a $ 192 million twin-tower hotel condominium project that has been in the works for almost a decade.
Excavation work on both towers began in March 2017, with a first completion date slated for summer 2019 for the 28-story south tower. The 32-story taller north tower, said to be the tallest building in Volusia County, was originally due for completion in 2020.
The city has accepted several extensions. The current deadline for the completion of the South Tower is March 18, 2022. The North Tower, which has so far only had foundation work, faces a deadline for completion of the construction of the March 16, 2024.
The city will receive large annual property tax payments from the new hotel and is grateful for the oceanfront addition. The city is not trying to sanction Protogroup for intersection issues, Morris said.
“We just want to do it right,” he said.
Paul Zimmerman, a former contractor and longtime Daytona Beach resident, said the city could have avoided some of the problems with the twin tower project had it required a performance bond before issuing a building permit.
Zimmerman, who lives by the beach and oversaw construction, believes city commissioners should send the deal back for a vote tonight to the city manager to design something that gives the city more leverage over the rest of the project .
Zimmerman is now worried about the future of the North Tower.
“If they don’t have enough money for the sidewalks, how will they pay for the north tower?” ” He asked. “We got out of the gate badly and we are paying for it. The city was desperate to make a deal.”
You can contact Eileen at [email protected]