Our View: City should focus on offsetting Iron Horse Inn debt
March 23, 2013
Steamboat Springs City Council member Cari Hermacinski hit the mark this week when she said that when it comes to selling the Iron Horse Inn, the city of Steamboat Springs' focus should be on offsetting as much of the original $5.19 million debt as possible.
We would go one step further and ask, "What's the big hurry?"
This City Council, which did not create the Iron Horse conundrum, weighed a tentative offer this week from a developer willing to pay $400,000 for the property in order to demolish the existing hotel buildings and redevelop affordable housing there.
We appreciate the proposal from Chicago-based developer Bob Helle if only because it restarts an important discussion. But his offer, though it might fit his own business pro forma, doesn't match up with either the real value of the property or the city's predicament.
"I'm hoping that asking for feedback (from City Council) might start the conversation of what we do with the Iron Horse," city Manager Deb Hinsvark told the Steamboat Today this week. "Council might be ready for a task force to be put together to decide where to go."
We suggest recruiting a couple of real estate investors to join that task force to help calculate the net present value of the Iron Horse. It's a business tool commonly used to gauge the value of a property in light of the revenues it could be expected to generate in the future. Or in the case of the Iron Horse, to estimate the value of the hotel property in light of opportunity cost to the city that is represented by its obligation to make annual debt payments of $475,000 until 2023.
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The hotel site, which fronts U.S. Highway 40 and has the advantage of the Yampa River Core Trail running behind it, is certainly worth more than $400,000, but the city might be able to justify taking far less than the $5.19 million it owes in order to free up the revenue stream it is forfeiting.
We also can infer from the inactivity on any number of prime development sites in downtown and at the base of Steamboat Ski Area that now is not the time to sell. The owners of the River Place and Thunderhead Lodge sites have run the numbers and are waiting for the market to rise.
And there's another advantage to City Council taking its time in arriving at a better price for the Iron Horse: The hotel already is providing 26 affordable and occupied housing units near the heart of downtown.
At this stage of the real estate recovery, we can guess only at how demand for affordable housing has changed in the past seven years and what the best means of meeting future demand will be.
It's one more reason for the city to explore how much interest the private sector has in the Iron Horse through an open bidding process. And council should be prepared to take a pass on all bids if they don't measure up.