Standing on the corner of Water and Second streets off Charlottesville’s Downtown Mall this past September, two men tilted their heads back to fully take in the towering husk of a building that has sat derelict for roughly 16 years.
"What an eyesore," a woman walking her dog past the skeleton of concrete and steel told them.
It’s a sentiment shared by many residents and visitors alike, and rooted in 16 years of legal and financial woes, abandoned plans and projects, and broken hearts and promises that have plagued the project. The planned hotel development has been known by many names since construction began in 2008 and was paused less than a year later — the Beacon, the Landmark, the Laramore, the Dewberry — but for many it is simply an eyesore.
Little did the dog-walker know this past September, but the two men she passed were Carter Gradwell, senior director of hospitality at Walker & Dunlop Capital Markets, and Ron Danko, executive vice president of CBRE Group. The pair has been tasked with selling the unfinished structure at the direction of its current owner Deerfield Square Associates II, an Atlanta-based limited liability corporation whose principal, football player-turned-developer John Dewberry, acquired the property for $6.25 million at public auction in 2012.
What many see as an incurable blight, Gradwell sees as "sound and salvageable."
Interest in the property is already high among "some of the industry’s premier developers," Gradwell told The Daily Progress, including Hilton and Marriott. Gradwell, who was also involved in the recent acquisitions of the nearby Doyle Hotel and Keswick Hall in Albemarle County, said he’s already given six tours to interested buyers in the past few weeks.
While the brokers would not disclose their asking price for the 201 E. Water St. property, city records show it was last assessed at $8.9 million.
“The expected pricing is feasible to complete the building,” Danko told The Daily Progress. “To buy the shell at where we think it trades, as well as to complete the property, it makes it feasible.”
The property could technically be rezoned and redeveloped for something other than a hotel, but both Gradwell and Danko said it is probably best suited for hospitality given the current design elements already in place, which bar it from residential use under the city’s zoning ordinances.
While structural engineering experts have approved the concrete foundation of the structure for continued development, according to CBRE, all of the mechanical, electrical and plumbing fixtures installed in 2008 will need to be replaced.
Still, a developer would have a head start with what’s already completed, said Gradwell — which shouldn’t be taken for granted give the high cost of constructing new projects nowadays.
“This is an opportunistic time to monetize an investment that never got completed all the way through a strong developer,” said Gradwell. “A great hotelier can come in here and deliver what the market needs, and that’s a fantastic, upscale, lifestyle product located on the Downtown Mall that can serve as a hospitality beacon for all of Charlottesville."
The structure is already designed to support two restaurants or bars, one of which had been planned for the rooftop offering unobstructed views of the city and far-off Blue Ridge Mountains.
When Charlottesville developer Lee Danielson first conceived the idea of a luxury hotel on the Downtown Mall after acquiring the site from Central Fidelity Bank in 2000, it was supposed to be the first of its kind in the area.
“I saw a real need for a high-end, boutique hotel that was within our community,” Danielson told The Daily Progress. “We thought we would fit a certain niche that would work very well downtown … a place that can tie the University of Virginia into the community.”
The local market now boasts significantly more high-end, boutique hotels than when Danielson and his business partner, local tech tycoon Halsey Minor, broke ground on what was to be the Landmark Hotel in 2008. That includes the Doyle and Keswick Hall, but also the recently opened 198-key, Kimpton-flagged Forum Hotel at UVa and the recently renovated 168-key, UVa-owned Boar’s Head Resort in Albemarle County and 204-key Omni Charlotteville Hotel.
At present, there are 988 hotel guest rooms in the Charlottesville area, according to CBRE.
But nearly 1,000 is not nearly enough to satisfy demand, said Danko.
Visitor spending in Charlottesville and surrounding Albemarle County has officially bounced back since the pandemic brought travel and tourism to a standstill, reaching nearly $1 billion last year. Tens of thousands of visitors flock to the area every year for weddings, wineries, concerts, hiking and horse racing. The city is home to both the Virginia Film Festival and the Virginia Festival of the Book and within a short drive of multiple presidential residences, including Thomas Jefferson’s Monticello, James Monroe’s Highland, James Madison’s Montpelier, Theodore Roosevelt’s Pine Knot, Woodrow Wilson’s birthplace in Staunton and Herbert Hoover’s Rapidan Camp in Shenandoah National Park.
That’s to say nothing of the prospective students and parents visiting UVa, and the crowds that attend Cavalier basketball and football games.
“The level of fluency and the attraction and the desirement of a true leisure destination, Charlottesville has only gotten stronger,” said Danko. “It’s not slowing down, which is just incredible.”
Danko and Gradwell said they believe a 98-key hotel operating on the Downtown Mall could charge room rates between $600 and $800 during peak demand, which is not far off from what hotels already charge during the busy festival and wedding season.
Charlottesville officials welcomed the news that the property could soon be put to some use.
“The most important thing for [the city] is that that building be put to some use, not continue to sit there as the steel-and-concrete hulk that it is,” City Councilor Lloyd Snook told The Daily Progress. “If people are staying on the Mall, they’re going to patronize the restaurants, they’re going to shop in the local shops, they’re going to contribute to the local economy in a lot of good ways.”
Unlike Danko, Snook was more reserved in his confidence that the local market could support another upscale, boutique hotel. There are already multiple luxury hotels in the works, including the 225-key, UVa-owned Virginia Guesthouse under construction on Ivy Road and a 160-key, Marriott-flagged AC Hotel planned for the Downtown Mall.
Getting shovels in the ground for any of these projects comes with a hefty price tag, so Snook said the city is seriously considering temporary tax abatements to entice developers — though no formal proposal has come before Council.
There was a deal on the table, back in 2017, which offered Dewberry some financial concessions for a couple years while he worked to realize his vision of the 201 E. Water St. project. The package, which placed several stipulations on the developer, also included an item that many in Charlottesville might consider more valuable than tax breaks: parking. According to the resolution, Council pledged to lease 75 parking spots at a discounted rate in the city-owned Water Street Parking Garage adjacent to the planned hotel.
Initially expected to sail through, the deal failed in a 3-2 vote on Dec. 18, 2017. The deal’s collapse was overshadowed at the time by the resignation of Charlottesville Police Chief Al Thomas amid backlash over his slow response to the fatal Unite the Right White supremacist rally-turned-riot earlier that year.
Three councilors — Wes Bellamy, Kristin Szakos and Bob Fenwick — voted down the Dewberry deal, even though Bellamy and Fenwick previously affirmed it in principle.
In the wake of the Unite the Right riot and amid a nationwide racial reckoning, the trio, and others in the community — including current Councilor Michael Payne — disagreed with granting wealthy developers tax breaks. A candidate for Council at the time, Paul Long, even led a rally, albeit sparsely attended, to protest the proposal.
As an organizer for a branch of the Democratic Socialists of America at the time, Payne called on the city to take over the site and turn it into affordable housing. The proposal has been floated time and time again, Snook said, but such an effort would cost upwards of $30 million, money the city does not have lying around.
“We were hoping that something might have happened back in 2017, but that fell apart at the last minute,” Snook said. “So, from my perspective, the fact that they listed it for sale, the fact that they’ve got somebody actively working trying to sell it, I think that’s a good thing.”
A deal similar to what was heard in 2017 has not been reintroduced, but that is the path forward as far as Gradwell and Danko are concerned — and it’s how they’ve been marketing the property to prospective buyers. The parking component is essential to the success of the entire undertaking, as Danielson, the original developer, knows all too well.
“The minute you blow off parking, you blow off the project,” he said.
Danielson hasn’t been involved with the hotel project since he was fired by Minor in December 2008. Minor declared bankruptcy not long after.
Since Dewberry’s Deerfield Square Associates II purchased the property at auction, the developer has submitted various tweaks and changes to the original plan. First, the plan was to expand the hotel to 112 guest rooms, then to restructure the building as luxury apartments. For seven years, plans were drawn up and scratched, concepts were considered and dropped, contributing to a deep-seated distrust in the community for anything connected to the Dewberry — or the Landmark or the Laramore.
“John Dewberry and his investment arm have owned a building for 12 years now, nothing has happened,” said Snook. “Dewberry has a reputation of being somebody who buys property and then maybe gets around to building on it eventually, on his own sweet time schedule.”
This time, there is a schedule. Jan. 9 has been established as the call for offers date, according to Gradwell and Danko, meaning all bids to purchase the property must be submitted by that day.
Source: www.dailyprogress.com