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City announces buyer for 100 Gordon Street

Developer to build 118-room hotel near Vancouver Island Conference Centre
PEG Development proposes to build a 118-room, six-storey Courtyard by Marriott hotel on the site behind the Vancouver Island Conference Centre. (NEWS BULLETIN file)

A developer is proposing to build a $23-million hotel next to Nanaimo’s conference centre.

At a council meeting Monday, Mayor Bill McKay announced an in-camera decision to give approval in principle to sell the city-owned 100 Gordon Street to PEG Development for $750,000.

The U.S.-based company proposes to build a 118-room, six-storey Courtyard by Marriott hotel on the site behind the Vancouver Island Conference Centre and anticipates to have it built by 2019, shows a city press release, which says a hotel in the downtown core will assist with the performance of the VICC and help expand the city’s tourism base.

The Gordon Street lot has long been reserved for a conference centre hotel, but has remained vacant after failed plans to build by Triarc and Millennium developments and SSS Manhao, which pulled out on its $50-million project in 2015. Last year the city issued a bid opportunity for sale offers on Gordon Street in December and received six responses, including luxury hotel and residential proposals.

McKay said he thinks council went with the proponent that put a firm price on the property and had something that was achievable.

“These folks seem pretty eager. They have work in progress now and they are competent operators, so I have all the confidence in the world that they are going to move ahead with it,” said McKay, who also said it’s a good project, the Courtyard is a good Marriott brand with a confident operator and has all the earmarks of success.

Coun. Jerry Hong declared a conflict and was not part of discussions about the different proposals, he said, but he likes the winning bid because it’s realistic. Key for him, he said was that the company is in the midst of building a hotel in Prince George so it has a track record of building.

“It’s a big deal,” he said of the development, pointing to a process undertaken by council to go through the request for proposals, screening and a look at whether proponents could accomplish what they say they could.

“We are confident that this project is going to go forward because of the due diligence that the council has put into screening out the projects to make sure that they are viable and not just pipe dreams.”

City real estate manager Bill Corsan said what differs this time is the city went out to the market and asked for the private sector to come back with ideas for the site. Councillors were able to look at different options, meet with proponents face to face and judged for themselves with whom they wanted to do business, he said. Having done the CBRE report, a market study on the VICC and a hotel, it gave the city the ability to, with confidence, choose a firm that showed commitment to the project. He also said hotel proposal is consistent with some of the recommendations of the CBRE report, meeting the target market, rooms and cost structure on what can be spent on constructing a hotel and still be able to make it profitable.

Previously there was a covenant on the property, with requirements around design and block booking rooms for the conference centre which is not in place for this project. It means it’s less onerous and there’s more flexibility for the developer, according to Corsan.

The agreement will include an option for the city to repurchase the site if the developer is not well underway on the project within 24 months. The developer also wants access to city parking at rates set in a bylaw, Corsan said.

The mayor pointed out that there’s no development cost charges for downtown and the 10-year tax exemption for hotels, adding it was a simple deal which was part of the appeal.

A document between the city and developer is expected to be signed this week, triggering a 120-day due diligence period for PEG to complete its development permit and perform other environmental and geotechnical studies on the site.