Hyatt Regency Wichita focus of debate as council examines city-owned real estate

03/28/2014 6:58 PM

03/29/2014 6:45 AM

Some at City Hall want out of the real estate business – from the city’s downtown five-star hotel to vacant development parcels.

Debate is likely to focus on the Hyatt Regency Wichita, the crown jewel of the city’s real estate portfolio. Some council members favor a sale; others say city ownership is crucial to the viability of the convention hotel.

“If anyone thinks we’re going to sell the Hyatt just to sell it – at a loss or whatever – they are very mistaken,” said Wichita Mayor Carl Brewer, who added he would consider selling it at market value.

The city owns a lot of real estate, everything from City Hall to surface parking around the city, much of it large enough to be redeveloped. It also owns numerous small chunks of unused land left over from various road projects. No estimate was available on the value of those real estate holdings.

The city bought the Hyatt for $18.3 million in 2001, seeking to maintain it as the city’s premier convention hotel. In October, the city and county together are expected to acquire the State Office Building – known to longtime Wichitans as the Macy’s building – from the city’s public building commission for $1. And even real estate skeptics at City Hall acknowledge the need for the city to have plots of land for redevelopment downtown.

City Manager Robert Layton and some council members say it’s time to get out of the property business, although Layton is open to acquiring the State Office Building, which state agencies plan to vacate this year, and reselling it to retail or residential developers.

“I don’t want to be a landlord. I don’t want to be in the building ownership business,” Layton said. “... I believe the mayor and the council are supportive of that.”

He wouldn’t say whether the Hyatt is included among the city properties he’d like to sell.

“That’s a little more complex issue,” he said. “But that’s a great question.”

In the past, city officials bought up downtown parcels – several of which are still available – for future redevelopment.

“There was a time for that,” Layton said. “Now that we’re in a period where redevelopment makes sense. It could be the time to shed some real estate.”

Quipped John Philbrick, the city’s real estate administrator: “We could sell City Hall, you know.”

Layton is talking in general about properties that could be developed and that are largely not in use by the city.

Commercial broker Rod Stewart of Keller Williams Signature Partners in Wichita said the city’s presence as a land-holder doesn’t negatively affect the Wichita real estate market.

What does hurt developers, Stewart said, are controversies that arise when the city partners with developers, such as the bidding flap between developers Steve Clark and George Laham over the west bank apartment development on public land last year.

Sell the Hyatt – or not?

Council member Jeff Longwell said he “agrees in total” with Layton’s desire to get out of the real estate business.

Longwell supports getting the Macy’s building and putting it back on the market. And he supports putting the Hyatt on the market.

“I don’t think it’s right that we’re competing for business with a hotel industry that we just approved $3 million a year for to market,” he said.

Plus, the proceeds of any real estate sale could go toward the project list identified through the city’s ACT ICT community engagement process, he said.

Council member Janet Miller called the Hyatt a special case and said she’s opposed to selling it.

“We have to maintain a high quality convention hotel,” she said. “The hotel makes a profit, but we reinvest the profits back into it. If we sell that property, a hotelier is unlikely to invest as much back into it as we do – debt service, stockholders, things like that. We don’t have that burden.”

Council member Jeff Blubaugh, a real estate broker who is obtaining commercial certification this spring, said all city real estate sales should be viewed independently.

He said he doubted that now is the time to seek a fair price for the Hyatt.

“I think that the financials on the hotel have been a little bit low the past three or four years, so if you’re going to sell it based on the historical income of the last five years, I don’t know,” Blubaugh said. “Now, if someone wants to make us a fair offer, that’s different.”

City officials haven’t released financial reports on the hotel, but they say it’s consistently profitable. Last year, the city banked a $150,000 profit-sharing check from hotel operators.

Brewer told The Eagle last week that he would be interested in selling the hotel under certain conditions.

“My feelings are if we can get a good price for it, sure we should listen,” he said. “I’m not at all interested in giving it away. We have to have a five-star hotel downtown that can host conventions.

“The dynamics of a Hyatt deal are totally different. My position is it’s an important hotel that was put there for a particular reason.”

He said any hotel sale he would approve would require several stipulations, including a quality operator and a long-term commitment to keep the hotel with a major brand like Hyatt.

“That hotel is not going to be a Christmas gift to anybody,” Brewer said.

Other city interests

Council members support acquiring the old Macy’s building and offering it for sale. The state occupies 222,000 square feet of the building, but its lease expires in September.

The 300,000-square-foot Finney State Office Building originally was acquired by the city in 1991, according to records in the city’s urban development office. The purchase price isn’t clear, but when the public building commission issued bonds two years later for the project, the city was reimbursed for the purchase price.

The bonds totaled $16 million, to cover the city’s purchase of the Macy’s property, pay for building renovation costs and pay for a portion of the nearby parking structure.

The building has been subdivided for state use, and is appraised at $157,500.

Earlier this week, the city approved a $9.7 million facelift for the old Macy’s parking structure, built in 1966. The move is intended to provide parking for redevelopment in the area, including the old Macy’s building, council members said.

The county could use the building for extra office space. Sedgwick County Manager Bill Buchanan said the county has toured the building and is “keeping all our options open” as it seeks additional office space.

Layton said the city is talking to the Kansas Department for Children and Families about a short-term lease extension.

“If that happens, that would give us some time to get the property on the market and have the revenue stream continue,” the city manager said.

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