Significant financing for Restoration St. Louis’ $36 million Blackhawk Hotel redevelopment project was jeopardized by scathing criticism of downtown Davenport’s investment climate that accompanied a commercial real estate appraisal of the nearly century-old building.
The appraisal — conducted by Mark Nelson of Roy R. Fisher Inc. — included a cover letter that warned against lending money for downtown projects, said Amy Gill, one of the Restoration St. Louis partners.
“When he wrote our appraisal, he wrote about how downtown Davenport will never be redeveloped, how our bank should not invest in Davenport and how awful the city government is,” Amy Gill said.
Gill and her husband, Amrit, were notified about the letter late last week but did not see a copy until they met on Monday with Royal Banks of Missouri officials.
In addition to being a senior commercial real estate appraiser for Roy R. Fisher, Nelson is spokesman of the political action committee Opt4Better. The group formed to oppose passage of the Davenport Promise program, which goes before voters today.
The Gills were attempting to complete $1.5 million in interim financing and a $12 million construction loan from Royal Banks to help pay for the ambitious renovation. A development agreement between the city and Restoration calls for the Missouri company to invest more than $21 million in the vacant hotel, as well as $8.5 million in state historic preservation tax credits.
“It was horrible, just horrible,” Amy Gill said, referring to the letter. “We had our financing lined up, and he basically screwed us.”
Amy Gill said she was confused by the actual appraisal number being in line with what was expected, but the accompanying remarks focused on alleged negatives about the city.
“We’ve never had an appraisal like that, that comes along with a letter that says how the city is,” she said.
A high-level Royal Banks of Missouri official said the content of the letter — which was received last week — was so negative the banks’ chief credit officer said they would probably be doing the Gills a favor by turning down the loan.
On Monday, Nelson would not comment about the appraisal.
“I can’t talk to you about any of that,” he said. “I’m obligated by contract, and I can’t acknowledge that I even did that appraisal.”
Kevin Pollard, president of Roy R. Fisher, confirmed that Nelson conducted the Blackhawk appraisal but said he had not seen it.
City officials became concerned enough about the prospect of the Blackhawk project being jeopardized by the appraisal that they informed some aldermen late last week.
“I was speaking with Rick Palmer (executive director of the River Center and Adler Theater) and he informed me of a conversation he had with Sam Estep of Restoration St. Louis,” Davenport Finance Director Alan Guard wrote to 6th Ward Alderman Jeff Justin in an e-mail sent last Thursday. “Sam told him that there was an appraiser doing an appraisal of the Blackhawk for one of RSL’s banks. The appraiser spoke negatively about downtown Davenport, the city and the Blackhawk project, in essence stating that anyone involved in this project was an idiot. The appraiser was Mark Nelson.”
Nelson’s negative comments about the state of Davenport were markedly different from statements he made during public appearances leading up to the Promise referendum. Last Tuesday in a forum, Nelson said Davenport is prospering.
“We’re doing pretty good,” he said. “At a time when other communities around us are struggling, we’re stable. This community has a very sustainable quality of life.”
Amrit Gill of Restoration St. Louis said the appraisal problem has delayed the renovation project but will not derail it.
“This is just a completely unnecessary bump in the road,” he said. “We are very bullish on Davenport, no matter what Mark Nelson says. We will bring (bankers) up and have them look downtown and see for themselves that it is not some abysmal downtown heading into the gutter, which is basically what he said.”
Amrit Gill added that a market study conducted by IDM Group, a hotel and hospitality consulting firm out of Wisconsin, said downtown Davenport is ripe for the type of project the Gills have proposed.
“A new boutique hotel unique to Davenport and offering unparalleled regional quality and focused service should be highly competitive in the region and successful long term,” IDM reported. “This hotel will be a great destination facility.”
In addition, Amrit Gill noted, overall occupancy of downtown apartments stands at 99.4 percent.
Nelson got the appraisal job after Chuck Ruhl Jr., of NAI Ruhl & Ruhl Commercial, submitted the names of three qualified appraisal firms to Royal Banks of Missouri at the request of the Gills.
Although he hadn’t seen the letter, Ruhl said he was concerned about any type of negative editorial content accompanying the appraisal.
“In all my 30-plus years of commercial real estate brokerage, I’ve never seen an appraiser come out with that kind of commentary,” he said. “I don’t think an editorial or political statement should ever accompany an appraisal. I would tell you that the Roy R. Fisher firm has been considered to be very well-qualified and professional. For this kind of editorial from Mark Nelson to come out is very inconsistent and confusing to me.”
Ruhl said there are successful projects all over the downtown and the city and business climate for development there is favorable.
“I have a strong interest in seeing the Blackhawk development going forward,” he said. “It’s very important to help generate hotel rooms and banquet space.”
Mitch Baden, chief operating officer for Royal Banks of Missouri, said the Gills’ reputation in business and political circles in St. Louis is impeccable. Restoration St. Louis has completed more than 100 redevelopment projects costing more than $300 million.
“I hope people (in Davenport) realize they are real players and have done a great job,” he said. “We’re a very conservative lending group, and the Gills are very highly regarded by our organization. They have been the pillar to redeveloping entire neighborhoods in St. Louis. These guys have worked on very difficult transactions in the past and have done a great job.”