Developer says 'no' to hotel project for Reynolds building [Winston-Salem Journal, N.C.]
(Winston-Salem Journal (NC) Via Acquire Media NewsEdge) Dec. 13--The thought of converting the historic R.J. Reynolds Tobacco Co. headquarters into a 22-story luxury hotel pulled on Dennis Quaintance's heartstrings.
However, the reality of spending tens of millions of dollars on buying and renovating the downtown Winston-Salem building in an economic downturn persuaded the Greensboro developer to pass on the ambitious project.
The building is valued at $12.3 million, according to Forsyth County tax records.
Quaintance-Weaver Restaurants and Hotels said Thursday the current room rates and demand were not strong enough to justify the investment for the hotel it envisioned.
Reynolds entered into an agreement in January that gave the developer this year to study the feasibility of renovating the building, which opened in 1929.
The goal was carving out 120 to 180 rooms, as well as a restaurant, bar and event space, in a building widely known as one of the nation's best examples of art deco skyscraper architecture. Its design inspired the Empire State Building in New York City.
"Nobody wanted this to become a reality more than me," said Quaintance, chief executive and chief design officer for Quaintance-Weaver. "I'm totally in love with that magnificent building."
However, the economics were just not ripe for such a project, he said.
"There is a rule of thumb that while emotion and enthusiasm can lead you to a project, the data has to be able to show it's warranted," Quaintance said.
"We measured very methodically how many people are coming to town, to downtown, and how much people are willing to pay to stay in a luxury hotel. We measured that for the next few years, which took a while to figure out.
"Ultimately, it came down to a cost-revenue measurement that just didn't work."
Daan Delen, president and chief executive of Reynolds American Inc., said the company is disappointed, particularly of the project's potential role in downtown revitalization.
"Moving forward, we will continue to explore our options with the building, taking into account not only its practical usage, but also its historic significance to the community and the role it might play in continued downtown development."
The majestic building closed more than three years ago, after Reynolds moved its downtown employees into the neighboring Plaza Building in 2009.
The hotel could have opened sometime between the fall of 2014 and the summer of 2015.
Mayor Allen Joines said the project fell victim in part to the overall rate structure of local hotels "being kept artificially low."
"Our challenge is to get those rates to a more competitive level," Joines said.
"I have talked to Mr. Quaintance, and I am hopeful that the market might improve in the future to allow him to move forward. He has a great vision for the reuse."
Richard Geiger, president of Visit Winston-Salem, said he was not surprised given the hotel dynamics in the city.
"We need to be focused on creating tourist and visitor demand for our hotels and not building more supply at this time," Geiger said.
Geiger and Gayle Anderson, president and chief executive of the Winston-Salem Chamber of Commerce, are vocal supporters of renovating Benton Convention Center, particularly its information-technology services, to attract more convention events.
The Forsyth County Tourism Development Authority and the city agreed in September to spend up to $40,000 each to hire Crossroads Consulting Services LLC of Tampa, Fla., to evaluate Benton. The goal is having a priority list and cost estimates for possible renovations by early next year.
"Investing in an improved Benton is a prudent move and could eventually play a role in making the Reynolds headquarters building more viable as a hotel," Geiger said.
Anderson said updating Benton is necessary "before we can attract the convention business that might pay significantly higher hotel rates at any property."
Quaintance downplayed the role of Benton's condition in his decision, also saying he didn't think the four-block distance from the Reynolds building would deter foot traffic.
He said he remains hopeful the city "will do the right thing" with Benton renovations.
Michael Clapp of Michael S. Clapp & Associates Inc., a real-estate appraisal company, said the cost of renovating older buildings likely played a role in Quaintance's decision.
Quaintance said his company came across "some issues that made us smile and made us frown."
"Those that made us frown were not obstacles that changed our projected budget dramatically," he said. "There would have been some structural renovations required for the proper emergency requirements.
"The building would have dressed out well in terms of room size and corridor space."
Quaintance still thinks the building "has such glorious potential."
"The elevator lobby is the centerpiece of the building, the image of upscale we are looking for," he said. "It has an authentic appeal to it that will attract visitors and locals for a stay."
Reynolds spokesman David Howard said the company continues to receive inquiries about the building with other uses in mind.
"It may be a cliche, but as one door closes, hopefully another door will open," Howard said. "We gained some excellent learnings about how to make the building work as a hotel that we can pass along to interested parties."
(c)2012 Winston-Salem Journal (Winston Salem, N.C.)
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