In June 2007, First Bristol Corp. founder and President James J. Karam announced the $17 million redevelopment of Providence’s St. Francis Chapel into a Hampton Inn & Suites. (READ MORE) He spoke with Providence Business News this week about the status of the project and the state of real estate industry in Rhode Island.
PBN: How’s the Hampton Inn & Suites project coming along? Is it still on track to open in December?
KARAM: This is a complicated project, marrying a new 11-story, small-footprint addition to a larger existing 80-year-old historic structure. Secondly, the tight site and narrow streets provide a difficult process in the coordination and sequencing of building trades, which is very important to get the job done in a reasonable time-frame. [Note: The project was on schedule as recently as this summer. (READ MORE)]
Unfortunately, the contractor has fallen behind and we cannot open the building until late December. That causes a second problem as Hilton Hotels will not open [any] hotel between Dec. 15 and the end of the year, as their opening teams are on the road 50 weeks per year and remain home for the last two weeks of the year due to the holidays.
Our schedule is to now open the hotel in the first week of January, although we expect to have the project completed sometime between Dec. 15 and Dec. 20.
PBN: The existing building formerly served as a chapel and a bank. How will the interior reflect its eclectic past?
KARAM: In terms of the interior design, I believe we were able to retain most of the historic architecture, moldings, ceiling and column treatments that existed in the chapel first floor, the former bank conference room and the penthouse meeting room. The areas formerly used as residences by the priests and the office space throughout the upper floors have been gutted and represent totally new construction.
The interesting features about the rooms is that they contain all of the amenities and components of a new hotel with … existing historic walls, which create interesting floor layouts, as opposed to the standard rectangular boxes found in new construction. The building also has many more windows than a typical hotel layout, which will greatly enhance the layout of the rooms, especially with the window treatments we have designed to accent the views up to the State House, … the Bay and, of course, the river. … The rooms are larger than the standard hotel rooms you typically find in new construction and, along with the added new components, will provide a great experience.
PBN: Will the location of the hotel, on Weybosset Street, allow you to be competitive in the Providence hotel market?
KARAM: We were of course immediately drawn to this site because of its location in the heart of the financial district. When you consider that we are adjacent to Textron, across the street from Bank of America and surrounded by most of the city’s major law firms, that higher education institutions are just across the street and up the hill on the East Side and that we are surrounded by several great restaurants, we think we are ideally situated. …
Our price is so reasonable [because we are] a limited-service hotel. We do not have the cost of full-service banquet or restaurant facilities, very often a loss leader in the hotel industry. As we lie within an area that has some of the greatest restaurants in Rhode Island within a two- or three-block radius, it would be crazy to try to compete with that quality.
Our sales staff loves to tell potential booking guests that they can take their room savings of $30, $50 or $60 per night that our hotel provides and they can eat at one of the fine restaurants next door.
PBN: The project benefited from the R.I. Historic Preservation Investment Tax Credit program – would it have been completed without that help and would you like to see that program resurrected in the future?
KARAM: In terms of the R.I. Historic Preservation Tax Credit, this added benefit to the hotel was an absolute deal maker. Without the tax credits, this project simply would not have been financially feasible. About 25 percent of project cost was funded by the tax-credit program and, secondly, our lender was able to obtain New Market Tax Credits by providing financing through this federal government program and therefore pass on their tax savings to us in terms of lower interest cost.
The overall benefits of the tax-credit financing – together with both the state and federal tax credits – have substantially lowered the cost of development of this project, which again lowers the room rates we need to charge guests.
The combination of the first-rate services with a mid-priced product in the Providence market – services comparable to suburban locations miles out of the city – will certainly enhance not only the business community, but potential convention business seeking Providence as a reasonably priced alternative to other major cities in the Northeast. We truly feel the Hampton Inn & Suites will be a great asset for the business and group travelers coming to Providence. You can now stay in the heart of Providence at a reasonable price.
PBN: How is First Bristol fairing in the current Rhode Island economy?
KARAM: Obviously, we are conservative in our outlook, as most are, however we do have a new programs on the drawing board that include a large retail facility. But it is safe to assume these projects are client-need driven and we are not building on speculation.
Our office buildings in Rhode Island – including the 60,000-square-foot Warwick Medical Building, the 100,000-square-foot Service Place building on Service Avenue in Warwick – remain well occupied even during this economic downturn.
Our company maintains a low debt-to-value structure and in anticipation of rising debt cost, over the last two years we locked in long-term debt structures, with rates from 5.25 percent to 6 percent that will serve us well over the next five to eight years. We believe the opportunity going forward will be focusing on acquiring existing assets, which will sell for lower than replacement costs.
We will continue to seek hotel opportunities based on sites that are reasonably priced [in] markets that are difficult to enter [and] have a mixed blend of leisure and business travelers. Building in a recession actually has some cost benefits, however you certainly hope the product is completed at or near the beginning of the next up cycle.
Most notably, our hotels in the Newport area –
the Residence Inn by Marriott and Hampton Inn & Suites – continue to perform extremely well. Newport has remained a strong driver as a tourist and business destination, especially as a result of the major growth the U.S. Navy has planned in creating a knowledge-based training center for the United States in Newport. (READ MORE)
We remain optimistic about other areas of Rhode Island, including Providence and Southern Rhode Island, which have great quality-of-life features and an educated population necessary to attract today’s knowledge-based economies.
First Bristol Corp. – a privately-held firm that traces its roots to the 1975 founding of J. Karam Management Inc. – has developed more than 3 million square feet of hotel, office, retail and residential space in Massachusetts, Rhode Island and New Hampshire. Additional information is available at www.FirstBristol.com.