The $30 million Jonesboro Hyatt Place Hotel & Convention Center might not open next spring as planned.
The project, one of two convention centers being built in a city of about 70,000, is facing contractors’ liens totaling nearly $900,000, which have raised “some serious red flags” with city officials.
“It’s on hold, and we have not been involved in any of it,” said architect Jim Little of Little & Associates of Jonesboro, who was to oversee the day-to-day project operations, including the site inspections.
Little told Arkansas Business last week that he had no more information about the project, which broke ground only eight months ago.
The developer of the project, Chris Keller, CEO of Northern Arkansas Hotel & Convention Center LLC, did not respond to emails or a voice message left on his cellphone. Keller is part of the Keller Family Hyatt Group of Effingham, Illinois, which has developed other hotel projects.
But in an April 5 email to the chairman of Jonesboro’s Advertising & Promotion Commission, Keller said he was moving forward with the project despite the subcontractors sounding an alarm.
The A&P Commission has pledged $300,000 in tax revenue for the Hyatt development. “As many of you are aware, our private equity partner has experienced a delay in providing the funds for which we have contracted,” Keller wrote in the email to Chairman Jerry Morgan. The email didn’t identify the financial backer. “We continue to work to bring construction back up to speed so that we can deliver the highest quality facility to the community of Jonesboro, as promised.”
The news of the project’s problems didn’t surprise Mike Buettner, an alderman for the city of Belleville, Illinois.
Buettner said the Keller Group is developing a Hofbräuhaus restaurant and a Hyatt Place Hotel and convention center in Belleville, and it could receive up to $38 million in tax incentives.
Announced in 2015, the project isn’t completed. The city spent $2 million to extend a sewer line to the development.
The Hofbräuhaus is expected to open in late summer, a year later than anticipated. The Hyatt project is penciled in to break ground later this spring or early summer.
“This is a big debacle — it really is,” said Buettner, who voted against the tax incentives. “It’s all kinds of delays. It seems to be dead in the water here, so I don’t know what’s going on.”
Buettner referred questions to the city’s mayor, Mark Eckert, who didn’t return a call for comment.
A spokesman for the Keller family, Ron O’Connor, told Arkansas Business last week that the Hyatt project in Belleville had never been delayed, but the Hofbräuhaus project was delayed twice. The setback on it was caused by a “longer than expected wait for all the approvals from the state of Illinois.”
Other delays were tied to health issues of Chuck Keller Sr. and a change in the plans that the Hofbräuhaus requested, O’Connor said.
Meanwhile, in Jonesboro O’Connor said he didn’t know any details about the project in Jonesboro, where the A&P Commission is getting antsy.
Morgan, who recently began serving as chairman of the commission, said during an April 5 meeting that the project had raised “some serious red flags.” The email Morgan received from Keller before the meeting didn’t satisfy commissioners, who agreed to send a letter demanding Keller answer several questions about the project and asking to see a commitment letter from Hyatt.
If Keller doesn’t answer the commission’s letter in a reasonable time, the commission will rescind its funding agreement, Morgan said during the meeting. Morgan told Arkansas Business that the letter was being drafted last week and should have been sent by Friday.
Several spokesmen for Hyatt didn’t respond to emails or phone messages.
Earlier this year, the commission gave $75,000 to the Hyatt project, a small portion of which has already been spent. But during the April 5 meeting, commissioners unanimously agreed to ask Keller to put the remainder of that award, about $70,000, in escrow until “this issue is resolved,” Morgan said. The official request was also expected to have been sent late last week.
Keller has provided the commission with proof that the money was in an account and the commission anticipates he will put the funds in escrow.
Competing Centers
Jonesboro had been trying to bring a convention center to its city for years. In 2006, city officials asked voters to approve a sales tax to support one. It failed.
But efforts continued, and by 2016, two convention centers were in the works.
O’Reilly Hospitality Management of Springfield, Missouri, has plans to build a $50 million Embassy Suites Hotel, convention center and restaurant on the Arkansas State University campus.
In February 2016, Northern Arkansas Hotel & Convention bought 13 acres at Brown’s Access Lane near Interstate 555 for $3.25 million from Centerline LLC of Jonesboro, led by Carroll Caldwell.
Both groups had asked for support from the A&P Commission, which collects a 3 percent tax from hotel guests.
In March 2016, the A&P Commission sided with the Keller’s Hyatt project, agreeing to provide $300,000 over a three-year period for advertising and promotion. The group also would receive a hotel tax abatement of up to $200,000 per year during the same period.
The A&P Commission said it could support only one convention center and gave nothing to the O’Reilly project. It, however, received a $400,000 grant from the Delta Regional Authority for site preparation and improvements.
“It is unfortunate both that there appears to be a political competition of sorts regarding our project and another convention center project that has been attempted for many years, and that there is definitely not a market or opportunity to succeed for two convention centers in Jonesboro,” Tim O’Reilly, CEO of O’Reilly Hospitality Management, said in a news release in March 2016.
(Related: ASU Convention Center Project Also Delayed)
‘A Dream Come True’
On Aug. 17, the Keller Family Hyatt Group met on a rainy day at the Allen Park Community Center in Jonesboro for a groundbreaking ceremony. Developers said that the project could create 500 construction jobs and 250 permanent jobs over the next two years.
Based on the company’s projections, the company could qualify for up to $7.5 million in tax credits from the Arkansas Economic Development Commission. AEDC spokesman Scott Hardin said the project qualified for the Arkansas Tourism Development Incentive late last year. But, he said, the company won’t receive the tax credits until the work has been done and audited by the Arkansas Department of Finance & Administration.
At the celebration, Chris Keller said, “We couldn’t be more excited to be here or more impressed with the hospitality of the community. It really is a dream come true after everyone has worked so hard. We’ve felt welcome in Jonesboro since day one.”
It wouldn’t take long, though, before problems surfaced.
Construction work at the site appeared to have stopped in February, said Junius Bracy Cross Jr., a Little Rock attorney representing a subcontractor on the project, Naylor Concrete & Steel Erectors LLC of Mount Vernon (Faulkner County).
The first public sign of trouble came on Feb. 13, when subcontractor KEG Construction LLC of Paragould filed a lien in Craighead County Circuit Court. The filing said KEG was owed $413,175 for site work done on the project.
On March 23, Naylor Concrete recorded its lien against the property, alleging it was owed $458,698 for work done.
On April 5, KEG — still unpaid — sued the general contractor, Construction Network Inc. of Jonesboro, and the Keller family’s Northern Arkansas Hotel & Convention Center. KEG is seeking the money it is owed, attorneys’ fees, interest and other unspecified damages. Construction Network didn’t return a call for comment.
The Hyatt project was on the agenda for discussion by the A&P Commission the same day KEG filed its lawsuit. Joe Hafner, who began serving on the commission this year, also was concerned about the delays in the project.
When KEG’s lien was filed in February, Keller told a reporter that “his primary investor is five months overdue with his second draw on the project,” but the issue would be resolved in two weeks, Hafter said at the meeting.
Discusstion of the Hyatt's construction begins at the 15-minute mark in the video below:
“So that was about six weeks ago, and it doesn’t really sound like we’re any further along than we were,” Hafter said.
Keller, who was invited to the meeting, said in the email to Chairman Morgan that he couldn’t make it because of a prior meeting that couldn’t be canceled.
“Our team, as I write this is not resting and is working diligently behind the scenes to update our facility making it as environmentally friendly as possible and improve the quality of our design,” Keller said in the email to Morgan. “We appreciate the community’s excitement and patience in our project and looking forward to the delivery of a development for which everyone in Jonesboro will be proud.”