As costs rise, Elm Court hotel project buys a little time
LENOX — The Zoning Board of Appeals has given developers of the historic Elm Court property breathing room to begin construction of their 112-room hotel, restaurant and spa.
The board voted 5-0 on Wednesday night to grant a one-year special permit extension to Front Yard Hospitality LLC, the developer of the Travaasa Experiential Resort project, through Nov. 10, 2020, "for good cause."
The money isn't in place.
Local attorney Nick Arienti detailed financing challenges the developer encountered, after delays caused by litigation brought by neighbors opposed to the project. The lawsuit was settled in November 2017 at the state Court of Appeals, two-and-a-half years after it was filed at Land Court. The original permit was granted by the Lenox ZBA four years ago, allowing access to the property.
Arienti indicated that when financing is lined up to complete the resort, construction would begin in 2020. Pre-construction work has gone on, including the hiring of a general contractor, the Allegrone Cos., and a project management company.
Extended permits were needed in Lenox and Stockbridge. While 87 acres of the 90-acre site at 310 Old Stockbridge Road are in Stockbridge, the road frontage and entrances are in Lenox. Stockbridge approved a one-year extension three weeks ago.
"The economic climate did change substantially due to the passage of time," Arienti told the zoning board, since the inception of the project in 2013 and 2014.
The original $50 million investment estimate — it included nearly $10 million to purchase Elm Court from the Berle family seven years ago and up to $3 million on legal, design and management fees, as well as on-site employees — has soared to nearly $75 million, he said, because of "exponential increases" in construction costs, notably for steel.
With many resort developers competing for money, debt financing from capital markets, common in the hospitality world, has been "reaching a fever pitch," Arienti said. Front Yard/Travaasa has met with more than 30 investors from private capital and venture capital firms, he added.
"The ability to source financing to fund construction has become more scarce during this period of time," the attorney said. He noted that Front Yard/Travaasa is "reluctant" to begin work "on this very substantial project without the knowledge, 100 percent, that they can finish the project in a compact schedule as was proposed both in Stockbridge and Lenox."
"In order to deliver what they promised, they need full financing," Arienti said. The project involves not only renovation of a 50,000-square foot mansion and a similar-size build-out of new construction, but required public works improvements to water and sewer lines along Old Stockbridge Road in Lenox that are expected to cost several million dollars.
"The intent is to begin within the next 12 months," Arienti stated.
Responding to a question from ZBA member Robert Fuster Jr. about what happens in a year if financing is not completed, the attorney declined to speculate but said, "Ultimately, there's a point in time where, if they don't realize sufficient funding and the interest wanes, then they'll either come back for a further extension or they can decide not to pursue the project. Certainly, that's not what they intend to do."
He described Elm Court as the company's "primary goal" and the only hospitality project Front Yard/Travaasa has on its radar, "so all the focus is getting this done. They feel fairly confident they'll be able to achieve, if not 100 percent but substantial financing in order to commence construction within a year from now. The intent is, it's not going to be an issue."
Arienti contrasted the Cranwell revamp by Hyatt Hotels, which can finance projects out of its own pocket, with Travaasa, "a small boutique real estate investment company, relatively speaking."
"They're sticking with their original plans, and they intend to deliver," the attorney said.
"I'm delighted that Front Yard is coming back and asking for more time to complete this very important project to Lenox," ZBA member Albert Harper said.
Member Shawn Leary Considine said the developer has demonstrated a "good faith need" for "a very reasonable extension and not asking for more than you need."
Though he backed the extension request, Fuster cautioned that "if it's a year from now and they still don't have the financing, I may not be as in favor of it as I am now."
"You're entitled to all the time we can legitimately give you," said ZBA Chairman Robert Fuster Sr. "You've given us very, very substantial and compelling reasons why the actual work could not have begun within a two-year period."
Clarence Fanto can be reached at email@example.com, on Twitter @BE_cfanto or at 413-637-2551.
TALK TO US
If you'd like to leave a comment (or a tip or a question) about this story with the editors, please email us. We also welcome letters to the editor for publication; you can do that by filling out our letters form and submitting it to the newsroom.