ROCKFORD — Market disruptions that have halted some major construction projects from Wheeler Development Group LLC aren’t stopping the company from reviving plans for a 54-room boutique hotel in downtown Rockford.
First proposed in 2019 and paused during the COVID-19 pandemic as hotel vacancy rates spiked, the Hotel Rose plan is now moving forward after securing local approval. The Rockford City Council on Monday approved a $450,000 purchase and development agreement with a Wheeler Development Group affiliate for the project on city-owned property.
The city in 2019 approved a purchase option agreement in 2019 with the company — then Orion Real Estate Solutions — to potentially develop a hotel at 12 S. Main St. The option was extended multiple times before expiring during the pandemic. Most of the preliminary design and engineering work for the project was completed, but site plans were scrapped at the beginning of 2020 when the pandemic caused record-high hotel vacancy rates. The city of Rockford connected again with Wheeler Development when the hotel market began to stabilize, Wheeler Development Communications Director Jason Wheeler said.
Planning documents filed with the city indicate that the Hotel Rose project would be a $10 million investment, but plans are still “too conceptual” to give an estimate on price or a construction timeline, Wheeler said.
“It could be months before we get the design finalized,” Wheeler said. “Once we have that finalized, we would begin seeking franchise and financing conversations. We would have to resurrect the parking discussion with the city. There are really big steps in front of us, but we’re opening the book again and beginning our next steps.”
The city acquired 11 and 12 S. Main St., the site of a former car dealership, in 2008. Initial discussions centered on whether both properties should serve as public parking, though 12 S. Main St. could be developed in a way that “enhanced downtown,” according to a memo from Rockford City Manager Thad Beard. The city later expressed interest in redeveloping 12 S. Main with a hotel in its request for proposals for the property. Wheeler Development Group was the only entity to respond to the RFP.
While Wheeler Development is “nowhere near” bidding the project out yet, next steps are finalizing a design for Hotel Rose, securing financing and creating a pre-development package, Wheeler said. Ghafari Associates LLC has served as the project architect.
The pre-pandemic hotel plan included a banquet hall, which has been replaced by a pair of restaurants. Conceptual plans call for a restaurant that would be open to the public in the evening and another for breakfast and lunch restaurant that would mainly serve hotel guests but also would be open to the public.
City Tower abandoned
Meanwhile, Wheeler Development Group has canceled plans for a 24-story tower in downtown Grand Rapids for offices, apartments and parking, media partner WOOD-TV8 first reported this week. The company allowed its option to buy the property from the city expire on Oct. 1.
Wheeler cited inflation, rising interest rates and unpredictable construction costs for dooming the proposal, known as The Wedge.
“We have been running the numbers, and we’re dealing with a very unique situation where it’s kind of like this equation of inflation being out of control and an unpredictable construction market and the fact that the numbers coming in for this particular project are just so inflated there is no way to justify the project,” Wheeler said. “The scope and level of quality we presented just doesn’t work on paper. We’ve tried looking at it a million different ways.”
The project would have included a significant amount of electric wiring, steel and glass, which have each been difficult to source in recent months, Wheeler added.
“It wasn’t one thing,” Wheeler said. “What it boils down to is the inflation rate and the high cost of construction right now.”
Wheeler Development Group also recently paused plans for a four-story apartment development in Grand Rapids’ Eastown neighborhood for similar reasons involving construction costs and interest rates. The proposed Robinson Flats project called for 39 apartment units.
The scope and logistics of the City Tower project is “much different” from Wheeler Development Group’s other projects, including Hotel Rose and its 92-unit Village East apartment project under construction in Ada, Wheeler said.
“Just because City Tower had problems that were too big for us to solve, doesn’t mean Village East, Hotel Rose or other projects we’re looking at will have those same set of issues,” Wheeler said.
CORRECTION: A previous version of this story incorrectedly stated that the city of Rockford in 2019 approved a development agreement with Orion Real Estate Solutions. The city initiailly approved a purchase option agreement that later expired.