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Sunday, 03 September 2017 16:40

Public-private partnership explores $15M convention center in Muskegon

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MUSKEGON — Public and private partners hope to leverage existing assets as they move ahead with plans to develop a $15 million convention center in downtown Muskegon.

Executives with Muskegon County, the city of Muskegon and Parkland Properties LLC believe that with a burgeoning downtown entertainment district and existing hotel capacity, it’s the right time to push forward with long-held goals of marketing the region for professional trade shows.

“For us, it’s exciting because it’s the next logical step (as) a catalyst project,” said Jon Rooks, principal with Parkland Properties, a real estate development and hospitality firm. “The real boon is all the extra dollars of economic spinoff and extra jobs it creates. It wouldn’t have worked 12 years ago. It’s the first time we have the entertainment district to support the convention center.”

While the partners remain confident the long-discussed convention center will come to fruition, they must still execute on several steps in the process.

In late August, the Muskegon City Commission approved having City Manager Frank Peterson sign a letter of intent with the county and Parkland Properties. The partners — who must still sign various legal agreements related to the project — have yet to determine an exact location for the proposed convention center.

The use of a public-private partnership to develop the proposed convention center allows the three parties to move forward in a fiscally responsible manner, according to Peterson.

“It builds a strong team and spreads the risk a bit,” he said. “We all want it to be successful, but convention centers are often loss leaders for hospitality (firms). The big thing is knowing our capacity. Based on all of the pro formas we’ve run, we’ll have money to pay the debt and we’ll have money for upkeep.”

ROOMS ON HAND

Under the current plans, the city of Muskegon would carry the debt associated with developing and building the convention center, while Parkland Properties would manage it and assist in marketing the facility alongside the Muskegon County Convention & Visitors Bureau.

Parkland’s two downtown hotels — Shoreline Inn and Holiday Inn Muskegon Harbor — would pay a 4 percent annual assessment that the city would use to help pay off the debt associated with the construction costs.

Additionally, the city could use municipal bonds to pay for the development and construction of a convention center, as well as explore grants, philanthropic funding and naming rights.

According to Peterson, Parkland likely would see the most immediate return on investment from the facility since convention season typically runs in non-summer months when the firm experiences its highest vacancy rates at its hotels.

No additional hotel capacity is needed in downtown Muskegon at this point to support a convention center, according to sources contacted for this report.

“The silver lining of this is that convention center users are looking for places with lots of rooms,” Rooks said. “If there’s 1,000 rooms available (around Muskegon County), that’s big for conventions. Down the road when the average occupancy is in the 65 percent range, then I could see another hotel downtown. But that would be down the road.”

Under this management model, Parkland Properties pays to operate the convention center and recoups that cost in added room rentals and food and beverage sales.

It eschews a model used in other cities — including Grand Rapids — where outside firms are paid millions annually to operate and manage a local convention center.

The project partners expect to target professional associations as the most likely market for the proposed facility, which would compete with other Michigan cities such as Grand Rapids, Lansing and Kalamazoo for conventions.

BOOSTING DOWNTOWN

Although an exact location for the project remains up in the air, the partners are considering a stretch of Fourth Street between L.C. Walker Arena and the Holiday Inn as well as building it atop the hotel’s parking structure as the two top possibilities. They expect it will open in 2020.

For more than a decade, a variety of local groups have discussed the feasibility of a standalone convention center in Muskegon, which was bolstered by the findings of a 2014 independent study.

In it, Minneapolis-based Convention Sports & Leisure International suggested “moderate” demand for a new facility that could not be met by existing space available in the area, adding that meeting planners strongly favor downtowns for their amenities.

Over the last five years, Muskegon’s downtown revival has come about in fits and starts, with the addition of two microbreweries, a distillery, new restaurants and investments from institutional users like Muskegon Community College, which bought the former Muskegon Chronicle building  for its Downtown Center that opened last month.

In that same timeframe, real estate developers like Parkland Properties and Port City Construction have worked on mixed-used projects aimed at getting more housing stock in the downtown core and surrounding neighborhoods. However, those plans have often faced key hurdles to development, as MiBiz previously reported.

“People believe in Muskegon and everyone believes the convention center is the next big thing,” said Rooks, adding that the proposed facility helps the downtown area move away from having to rely on tourism in just the summer months to remain sustainable. “It’s year-round and not just seasonal.”

While he acknowledged that business often slows in downtown Muskegon in the colder months, some companies have experienced significant growth during the wintertime, said Michael Brower, co-owner of Pigeon Hill Brewing Co. LLC and 18th Amendment Spirits Co.

“We’re not the Arctic wasteland you might expect,” Brower said. “I see (a convention center) as a major benefit. We like to think we’ve created some sort of destination. Having a convention center downtown brings in a captive audience.”

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