Shrewsbury Hotel Lodged In Limbo | Developer tries to secure financing for already-begun $12.8-million project
Construction on a Holiday Inn Express hotel in Shrewsbury has been halted for nearly a year as the developer seeks financing for the project.
Andrew Surabian has informed town officials that he’s seeking financing, according to Town Planner Kristen Wilson.
“They had financing at the beginning of the project but it fell through when the economy fell out,” Wilson said. “They have every intention of moving forward.”
Surabian’s attorney, Richard Ricker, did not return a call seeking comment.
Another attorney for Surabian told planning officials in a December 2009 meeting that an area credit union would be financing the 151-155 Main St. project, according to meeting minutes.
The town’s planning board approved the project in January of last year and construction crews worked until late fall. Wilson said no work has happened at the site since.
Surabian secured a $1 million mortgage on the property from North Middlesex Savings Bank in September 2010. A year earlier, he told the Telegram & Gazette that construction on the project, which includes a 90-room, four-story hotel and separate restaurant, would cost $12.8 million.
The hotel and restaurant would provide an estimated $120,000 in property taxes for the town.
“We certainly want to see that site developed,” Wilson said. “We don’t want to see it sitting vacant.”
Surabian’s permits are active and he has plenty of time to finish the development. Special permits typically expire after two years, but the hotel project qualifies for an automatic extension under a law enacted last year. The Permit Extension Act, aimed at bolstering developer confidence in Massachusetts, provides the extension to various local and state permits approved between August 2008 and August 2010.
Supply And Demand
A bank or investor evaluating a hotel financing proposal is going to look at several key metrics on other hotels in the area, said Jan Freitag, senior vice president of global development for Tennessee-based Smith Travel Research (STR).
While the recession had its impact on area hotels, recent room occupancy data from STR shows bright spots in the Worcester market over the past year and a half, though not all signs are positive.
Freitag noted that revenue per room, an important indicator of the health of the industry, has seen monthly increases at Worcester’s six hotels. The second half of 2010 saw an average increase of 27.4 percent over the same period in 2009.
Freitag also said it’s interesting that demand levels appear to have kept up in Worcester even after the Crowne Plaza Hotel was converted to housing and academic space for the Massachusetts College of Pharmacy and Health Sciences in 2010.
“Even though a lot of rooms were taken out of inventory, the demand decline is actually rather muted,” Freitag said.
But on the other hand, average daily room rates only grew 1.5 percent in 2010 after falling 4.2 percent the year before.
Hotel lenders and investors typically like to see steady growth in rates and revenue-per-room figures over several years, Freitag said, so a hotel boom in the area seems unlikely now.
“It’s a good start, but you need to look at land prices and you need to look at demand generators and occupancy over time,” he said. “It’s very easy to say ‘Well, my hotel is full.’ Well, what did you charge?”
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