uncharted.ca

This upgrade of this aging City landmark will result in a type of property only found in large cosmopolitan cities.

This is a good reason why regulators should always keep an eye on renovation projects.

Council blinks while Mayor Di Ianni loses his voice
By Andrew Dreschel
The Hamilton Spectator
More articles by this columnist
(Apr 17, 2006)
Chalk one up for the conspiracy theorists.

Against a backdrop of anonymous allegations and innuendo against the local consortium restoring the Royal Connaught hotel, city council has postponed making a decision on the group's request for a city brownfield grant.

The group asked for $230,000 to help offset about $918,000 in unexpected costs for removing potentially hazardous asbestos and other contaminants from the downtown landmark.

But after a debate that was open and oblique, council voted 8-6 to refer the matter back to the planning and development committee for more information about the clean-up cost.

Mayor Larry Di Ianni, who voted for the delay, said in an interview council wants to be sure the group's paperwork substantiates its request -- this despite repeated staff assurances the grant money would not flow until appropriate invoices were produced.

Di Ianni insisted the delay has neither material nor symbolic significance.

He may be right about the former, but he's dead-wrong about the latter.

As Councillor Billy Kelly said in a losing cause, it's another case of the city spinning its economic development wheels and then wondering why nothing ever happens.

Di Ianni's own silence on the matter was symbolic of a missed leadership opportunity.

The same night he roared like a lion in support of raiding the city's Future Fund for $260,000 for the Art Gallery of Hamilton, he didn't so much as meow for the Connaught.

Perhaps it was politically prudent to ask for more information. But Di Ianni needed to forcefully remind councillors the Connaught is a linchpin for downtown revival and rather than sneer at or fear successful business people, council should be courting them.

After the debate, consortium spokesperson Tony Battaglia said he was surprised by Di Ianni's silence. "I think as the mayor of the city he should have stepped up a little more."

There were other recurring symbols in play that night.

There's little doubt the delay was partially fuelled by anonymous accusations, some received and quietly spread by at least one councillor and reputedly another. They included allegations of improper cleanup methods by the Connaught group.

For the record, after investigating five complaints in connection with asbestos removal at the site, the Ministry of Labour says it found the cleanup in compliance with procedures.

There's also a buzz the company doing the remediation work is actually owned by Battaglia. In other words, the ownership group is allegedly paying one of its own to do the work while at the same time trying to tap city funding.

For the record, Battaglia says he was involved in an environmental remediation company, but sold his interest years ago. That former company is not doing the asbestos work. Battaglia says the contract is being handled by D&M Environmental of Smithville, the subcontractor is Envirocorp Inc. and none of the consortium has an interest in either.

This stuff didn't directly hit the council floor of course, but it was circulating behind the scenes, feeding what Councillor Sam Merulla sees as this community's obsession with conspiracy theories.

There were other totems as well. The bias of Margaret McCarthy, who opined that the well-heeled players in the consortium -- Battaglia, Enrico Mancinelli, Ted Valeri, Mario Frankovich, and hoteliers Oscar Kichi and Mehran Koranki -- don't really need city money.

She said policies allowing investors like them to apply for funds are wrong "... because it just looks greedy."

The city has previously committed about $2.7 million in interest free loans and tax breaks to the project, which is turning the Connaught into a $40 million hotel and condo residence.

The group paid $4.5 million for the bankrupt hotel. They have yet to nail down final financing.

Finally, the vote was also symbolic of the general lack of giddy-up by any number of senior staffers.

Though Neil Everson, executive director of economic development, assured council the grant request meets brownfield pilot project criteria, he had no documentation on hand to explain or prove the escalating cleanup costs.

Then when the going got tough, Everson demonstrated a tendency to turtle. Not unlike Di Ianni himself.

Andrew Dreschel's commentary appears Monday, Wednesday and Friday.

adreschel@thespec.com or 905-526-3495.

Why didn't Connaught buyers foresee asbestos mess?
By Andrew Dreschel
The Hamilton Spectator
More articles by this columnist
(Apr 12, 2006)
The consortium that's restoring the Royal Connaught Hotel is looking for $230,000 from the city. It's to help defray $900,000 in unexpected costs for removing potentially dangerous asbestos from the downtown landmark.

City councillors are expected to deal with the request tonight.

Unless they've replaced their brains with refried beans, they'll surely give the green light to tapping the city's brownfield fund for the money, as recommended by staff.

It only makes sense. A rebuilt Connaught is a key piece of downtown revitalization. And the brownfield fund exists to help rid strategic commercial and industrial properties of environmental contamination. One plus one makes $230,000.

However, Councillor Brian McHattie -- who objects to chipping in to help a project that already enjoys publicly funded support -- does raise an interesting question.

Why didn't this consortium of savvy businessmen know about the asbestos problem before going in?

After all, we're talking about Tony Battaglia of Westpark Developments, a founder and chair of TradePort, which runs Munro airport; Enrico Mancinelli, retired LIUNA executive; Ted Valeri of T. Valeri Construction; Mario Frankovich, president of Burgeonvest Securities; Oscar Kichi, owner of the Ramada Plaza hotel; and hotelier Mehran Koranki (who joined later).

The well-heeled group, which bought the bankrupt Connaught last year for $4.5 million, is in the process of gutting and rebuilding it as a $40-million top-notch hotel and luxury condo residence.

McHattie figures since they've already put the bite on the city for about $2.7 million in help, it's excessive giving them another quarter-million when they should have done their environmental due diligence before finalizing the purchase.

Did some kind of mental fog roll in and obscure the group's decision-making prowess? Not according to Battaglia.

Prior to closing the deal, the group was working with an existing environmental audit prepared by the previous owners in April 2004 that identified some asbestos issues. Though the report didn't include remediation costs, the group's own guesstimate was about $50,000.

Battaglia says they didn't have time to do a full environmental report because of the deadline for submitting offers.

The group went ahead and bought the property and then proceeded with a more detailed environmental study which, among other things, identified higher levels of asbestos. That report suggested the cost could run as high as $500,000.

Battaglia says they didn't ask for city assistance then because they weren't aware they qualified under the brownfield pilot project.

The next step was to do a full hazardous material inventory. Consultants went through the Connaught stem to stern. Amid the lead paint and PCBs connected to fluorescent lighting, they discovered higher levels of asbestos in the stippled ceilings.

The buyers put out a removal contract. The lowest tender came in at about $918,000. That was around January. The cleanup, which is close to completion, began in early March.

Will the project rise or fall on whether the city contributes to the cost?

"Absolutely not," says Battaglia. "I don't want to say $230,000 is a drop in the bucket because it's significant -- every little bit helps."

But what the project will rise or fall on, he says, is securing final financing from lenders. That hasn't happened yet, though he's confident it will in the next few months.

How confident are they?

"We're obviously confident enough that we've invested a lot of our own money in this project and we are continuing to do so."

Battaglia, who hopes to see the hotel reopen in June 2007, declines to say exactly how much money without the approval of his partners. "It's in the millions."

He points out that despite what critics may say, the consortium hasn't been given $2.7 million or more from the city.

He says $1.6 million is a five year interest free loan under the city's residential conversion program. It applies to the condo part of the project, not the hotel.

The balance isn't an infusion of cash. It's a tax freeze for five years followed by a five-year phase-in of assessment increases -- 20 per cent per year.

Both those programs are intended to stimulate development, just like the brownfield fund.

"If that money is available to anybody else who's doing a strategic project, why shouldn't it be available to us?" asks Battaglia.

"If it wasn't made available to us because we're sort of successful business people, that would be discrimination, wouldn't it?"

I'm not sure about discrimination, but surely political delinquency.

Andrew Dreschel's commentary appears Monday, Wednesday and Friday.

adreschel@thespec.com or 905-526-3495.

Great Wolf Lodge
Canadian Parent: Jim Pattison Group
Industry: Resorts
Type: New Construction/Establishment Function: Entertainment
Country of Origin: Canada Value: $65,000,000.00
Investment
Location: Niagara Falls Project
Phase: Announced
Comments: The Great Lakes Companies has announced a $65M investment for the construction of an indoor water park and resort along the Niagara Parkway, in Niagara Falls. The Great Wolf Lodge will include 398 family sized suites, two restaurants, retail shops, amusement arcades and a 50 000-square-foot indoor water park. The number of jobs that should be created is not available.

How far is Hamilton from Jimmy pattison's proposed mega developement? Is it possible these dudes were caught up in the mad mad world of speculation and couldn't find anything closer which came with a flexible city council and within their price range?

Connaught's surprise bill

Cathie Coward, the Hamilton Spectator
Workers remove asbestos from the Royal Connaught Hotel.

City may pay $229,000 to help clear asbestos
By John Burman
The Hamilton Spectator
(Apr 5, 2006)
Hamilton could put another $229,000 into restoration of the Royal Connaught Hotel to help the owners cope with an asbestos surprise.

If city council approves the planning and development committee's recommendation, Hamilton will have advanced a total of $3 million in loans and grants to help Grand Connaught Development Group Inc. rebuild the venerable hotel on King Street East.

Grand Connaught now estimates the renovation will cost a total of $40 million.

Company spokesperson Tony Battaglia told the committee yesterday more city money is needed to help defray an unexpected $900,000 bill for asbestos removal.

The bill was a surprise because a consultant's report indicated there was little asbestos in the structure. Staff recommended the city put 25 per cent or $229,000 toward the work.

Grand Connaught had asked the city for help under the brownfields Environmental Remediation and Site Enhancement (ERASE) program, but were told it did not fit the criteria.

However, it could be done under a pilot project that enables council to provide funding on strategic brownfield redevelopment projects that provide significant benefits to the municipality.

"This is for high-profile brownfields projects," said Neil Everson, executive director of economic development.

Lack of hotel rooms is an issue in Hamilton, Everson added.

Councillors Bill Kelly and Sam Merulla both hit the same chord, citing the financial payback to the city through taxes, economic spinoff and tourism benefits of reviving the hotel, which went into receivership late in 2004.

jburman@thespec.com

News Release
For immediate release
March 4, 2004

D & M ENVIRONMENTAL LIMITED FINED $1,750

ST. CATHARINES – D & M Environmental Limited has been fined $1,750, after pleading guilty to one count under the Environmental Protection Act (EPA).

D & M Environmental Limited, located in the Township of West Lincoln, processes and recovers brass and copper dross and skimmings, demolition and construction debris, and crushes barrels for recycling. These activities are authorized by a certificate of approval issued by the Ministry of the Environment (MOE) to the company. MOE’s SWAT team conducted an inspection of the D & M Environmental Limited site on December 11 and 12, 2001. The inspection revealed that the company did not have a contingency plan as required under its certificate of approval.

By failing to maintain a contingency plan, D & M Environmental Limited contravened Section 186(3) under the EPA and was fined $1,750.

Justice of the Peace Carollyn Straughan heard the case on February 20, 2004 in the Ontario Court of Justice in St. Catharines.

–30 –

Contact:
Mark Rabbior
Communications Branch
(416) 314-6084

Downtown's Heartbreak Hotel
Steve Buist
The Hamilton Spectator

The Sheraton Hotel is a case study in how urban renewal projects have evolved over the decades and how politicians and developers have affected downtown.

CORE CONFUSION -- The Sheraton Hotel has been plagued with financial problems and controversial changes in direction over the years. Taxpayers have a stake in its resurrection because they still own the land beneath it.

Sheraton Hotel will soon celebrate its Sweet Sixteen birthday. In many ways, the hotel is like a typical teenager. It's struggling to manage its own finances, it's no longer the centre of attention around the house, it's trying to fit in with its peers and it's worried about its appearance.

It's been an expensive child for Hamilton taxpayers, who've been nicked for hundreds of thousands of dollars along the way and who still own the land on which the hotel sits.

Over the years, the Sheraton has been hampered by an unfortunate family history -- everything from questionable political decisions to the chronic financial difficulties of the developers.

But the success of the hotel has also been hampered by an urban planning strategy born in the '60s that is now not only obsolete but counterproductive.

Throughout the hotel's life, there have been dire warnings of financial collapse,cries of poverty from the hotel's owners that have wrung concessions from the city and the persistent threat that a major chain would pull its name from the hotel.

As a result, the Sheraton is an interesting case study in how urban renewal strategies have evolved over the past four decades. It also gives us a peek at the complexities of the three-sided relationship between politicians, private enterprise and the downtown.

The Sheraton wasn't conceived at the best of times.

In the early '80s the country was struggling through a recession, interest rates had soared into the stratosphere, and the downtown had begun a slide that was making politicians and business people nervous.

Almost from the moment of its birth, the Sheraton was a sickly baby. In fact, it wasn't even intended to be a Sheraton. The hotel was supposed to begin life as a Hilton, but that changed to the Sheraton chain in 1983, two years before the doors opened.

Right from the start, it was plagued with financing problems and controversial changes in direction.

The developer of the hotel was Winnipeg-based Lakeview Development Ltd. In the two years leading up to the hotel's opening, there were four management changes.

And the project seemed to be perpetually short of cash. In August 1983, the city and Lakeview agreed to extend a deadline a mere 65 minutes before the whole project was set to collapse.

Just one month later, there were fears the developers were already short more than $7 million for the hotel, which ultimately cost about $30 million to build.

By March 1984, the city was forced to co-sign a $14-million loan extended to Lakeview by New York-based Citibank.

Lakeview also tried to raise money by selling limited partnerships to the public for $12,500 each. It raised about $9 million that way, meaning the limited partners owned 33 per cent of the hotel project. But when the hotel was eventually sold in 1989 to the Japanese company GGS Company Ltd., the shareholders had to accept $8,000 for each unit, a loss of $4,500.

Meanwhile, the urban planning initiative that had sparked the expropriation of a huge chunk of downtown land in the 1960s meant there was a city-owned site for the hotel to lease.

City council also agreed to contribute $3 million in the form of an underground parking garage, the hotel's overhead pedestrian walkway that crosses King Street. Included in that total was a $1.6-million loan for sub-basement construction that the city is still trying to recover.

In exchange for providing the parking spaces, the city was supposed to operate the lot, earning about $26,000 a year in parking revenue.

In reality, the parking garage was a fiasco for the city. The lot didn't generate anywhere near $26,000 a year.

Worse, over the first four years, the city didn't receive a dime of the meagre parking revenue that was generated because a sublease agreement had never been finalized with Lakeview.

The city spent $783,000 to build the parking spaces but, when the hotel was sold to GGS in 1989, council settled on a lump sum of $400,000 and abandoned its stake in the garage.

By 1997, the Sheraton owed about $1.7 million in back rent to the city, on top of the $1.6-million loan.

Although the original terms of the loan agreement stipulated the hotel was to repay $20,000 a month, that was lowered to just $2,000 a month in 1994 because the hotel claimed its finances were in perilous shape. The city got the monthly payments increased to $3,000 a month in April 1997.

As for the mounting arrears, the Sheraton's owners went to the Ontario Municipal Board to try to get the hotel's assessment lowered so the property tax portion of the Sheraton's rent would drop.

The hotel privately hoped the OMB would order a retroactive property tax reduction big enough to wipe out the arrears. Instead, the owners received only minimal relief.

About a year ago, there was more turmoil for the hotel. GGS had gone belly up and the property was being held by a Japanese government agency.

Two buyers stepped forward, then stepped back. Once again, the long-overdue loan was up for discussion and, once again, council was warned the hotel risked losing the Sheraton name if the city didn't capitulate on a new repayment schedule.

All those headlines sound so familiar, don't they?

If it wasn't for the city's stake in this tangled affair, this would be just a mildly interesting tale of the troubles faced by a local business.

So, naturally, the question you're likely asking yourself is this: Why do I, a taxpayer, own the land under the Sheraton Hotel?

To fully understand the reasons, we must step back into the 1960s and recall what was happening to a typical North American city.

As automobiles became more affordable, their popularity increased. Growth spread farther from the centre of the city and a dominant core became less important.

In Hamilton, there is an additional geographic peculiarity -- the Mountain. Almost half of Hamilton's population now lives on top of the hill, with no particular emotional or physical attachment to the downtown.

"Back then, everybody shopped downtown," said Professor William Code, an urban development specialist at the University of Western Ontario. "There was no alternative.

"Now, you've got a very small proportion shopping downtown."

Besides, most downtowns are remnants of the late 19th century -- tightly packed blocks and narrow streets that reflect a much earlier time when the car wasn't king.

Large shopping malls with plenty of free parking began to sprout up on the periphery. People no longer needed to travel downtown to shop.

"The reaction was that this is abnormal, we have to do something to revitalize the core to make it what it traditionally was," Code said.

So the idea developed to take what was happening in the suburbs and plunk it down in the middle of the downtown.

"Lots of money was invested in an attempt to recreate the past," Code said. "It didn't work. It worked almost nowhere.

"The only place it will work," he added, "is in places like Toronto, New York (and) London, England, which have a financial community -- the kinds of activities that require a lot of face-to-face contact."

At the time, though, there was plenty of government money for urban renewal -- the federal government contributed 50 per cent, the province and the municipality each 25 per cent.

In Hamilton, urban renewal projects helped redevelop York Boulevard, the superblock where Jackson Square now sits, and part of the north end.

But for urban renewal to work, it meant the city had to use its powers of expropriation to assemble the large chunks of land that would be needed.

During the '60s and early '70s, the cost of land in the downtown was near its peak. For any large development, land would have been a prohibitive chunk of the cost of a project.

The solution? Have the city acquire and own the land, then lease it back to a developer on a long-term basis.

By 1965, the city had begun expropriating land within the block bounded by King Street, James Street, Bay Street and York Boulevard for what was supposed to be a massive civic centre.

Getting the project started proved more difficult than expected. Former mayor Vic Copps had to travel far and wide seeking a developer before Jackson Square was eventually built.

Today, the city still owns the land under Jackson Square and the Sheraton Hotel. The long-term lease for both properties expires in 2069.

Expropriation for downtown development and 99-year land leases are rarely used any more, primarily because the value of downtown land has been sinking for years. The benefit of hindsight also shows us that suburban-style shopping malls have failed in downtowns all across North America.

"The concept of government providing money to do that sort of thing isn't bad," said Bob Charters, a former Hamilton alderman and chair of the city's finance committee.

"The problem is that the plan they followed was the wrong plan. We jumped in on a trend -- creating these downtown urban malls back when that was the thing to do."

In Boca Raton, Florida, the city recently blew up its downtown mall and started over.

London's Galleria has lost both anchor stores and is effectively dead. Guelph's downtown Eaton Centre is a virtual ghost town.

Here, Jackson Square and the former Eaton Centre have struggled for years to attract tenants.

"Typically, they were built totally improperly," said Code, "in the sense that they present dead frontage on the traditional streets. Big blank walls and parking lot entrances and nobody would walk along the streets. So any retailing on those streets largely died.

"Now (the downtown malls) die after they've killed everything else," Code added, "and so you're effectively left with a terrible situation."

Which brings us to the Sheraton Hotel sitting on land owned by you, the taxpayer. Like it or not, you are indirectly part of the hotel business in this community, because every time there's a transaction, the city has a stake in it.

"Every time they change ownership, every time they want to get a different operator in there or change mortgage companies, they've got to come back to the city for approval because the city owns the land," said Dan Vyce, the city's former property manager, now retired.

As past history shows, the Sheraton had a chronic problem with unpaid arrears and an unpaid loan. As the landowner, the city has always held the trump card. Ultimately, it would own the hotel in the event of a default or if the operator decided to just walk away.

There's not much financial risk to the taxpayer, though. The city stands ahead of any mortgage holders, so it wouldn't be stuck making any of the payments. All that might be in jeopardy are payments on the outstanding loan and the cost of searching for a new hotel operator. And the city would possess the hotel's assets.

Yet Hamilton politicians have always been reluctant to play that trump card.

The city doesn't really want to be in the hotel business and, realistically, the hotel isn't likely to walk away from a building in which it has invested millions of dollars.

So the two just keep circling each other like a pair of cautious boxers.

The outstanding loan, which had passed $2 million after more than a decade of neglect, was restructured into a new long-term repayment schedule hammered out last year when Starwood Hotels and Resorts Worldwide bought the hotel.

That exercise alone sums up the previous two decades perfectly.

Faced with another threat the Sheraton name would be pulled from the hotel, Hamilton politicians were pressured to accept a lump-sum payment for a fraction of the loan's value. This time, they stood their ground and, instead, the city will recoup all the principal plus a small amount of interest -- but only because it agreed to spread the payments over 25 years.

There may now be renewed cause for optimism on all sides.

Since Starwood bought the property a year ago, the hotel is up to date on all its payments. The owners have also invested about $600,000 in the past year to upgrade the Sheraton, with plans to spend more than $2 million more.

And finally, to bring the story full circle, the ultimate irony:

When the hotel was up for sale a year ago, guess one of the reasons put forward to explain the difficulty in attracting a buyer? That's right -- the fact the land under the hotel is owned by the city.

Connaught going upscale

Tory Zimmerman, the Hamilton Spectator
The former Royal Connaught will be redeveloped and upgraded as a Marriott Renaissance Hotel.


Downtown hotel to become Marriott, condos
By Lisa Grace Marr
The Hamilton Spectator
(Sep 13, 2006)
The Royal Connaught is about to be transformed into a luxury Marriott Renaissance Hotel, boasting about 180 rooms, a pool and a new adjacent condo tower.

Tony Battaglia, of Grand Connaught Development Group, said yesterday his company had a conditional agreement with Marriott to develop the Royal Connaught under the Renaissance brand.

The hotel and condo project is expected to cost $65 million.

"We have an agreement that will serve the city well," he said, adding that Grand Connaught will be required to complete interior finishes and meet design specifications outlined by Marriott as part of the deal.

Grand Connaught bought the Royal Connaught in January 2005 for $4.5 million.

Battaglia said the condominium complex on the lot at the corner of Catharine and Main streets will have 120 to 140 units, plus space for offices and commercial businesses.

The Grand Connaught group is controlled by a number of local developers, including Ted Valeri of T. Valeri Construction, and Oscar Kichi, owner of the Ramada Plaza Hotel.

Grand Connaught's original plan to build 40 condos as part of the hotel had been approved for a $1.6-million loan under the city's downtown residential loan program.

Tonight, council will receive a recommendation to cancel the loan because the plan has changed, said Battaglia.

"We needed to increase the size of the hotel to 184 rooms so it didn't make the condos worth doing," he said.

"It's going to be a little bit different but it will be more upscale and the condo will be affiliated with the hotel.

"The project is bigger and better than it was on Day One."

Battaglia said he wasn't sure if the company would apply for a city loan for the new condo project.

The hotel will have three top floors of office space and some commercial space on the ground floor for shops and a chain restaurant.

"We wouldn't be making this huge investment if we didn't have the confidence in the downtown," said Battaglia.

Mayor Larry Di Ianni was thrilled by the news.

"For so many years we've said we need two things in the downtown: residential development so people can live downtown and economic development. When the Connaught shut its doors, it set us back."

The Connaught went into receivership and closed its doors in November 2004.

Earlier this year, council handed over about $230,000 from a brownfield fund to help offset about $900,000 in unexpected costs to remove asbestos from the hotel.

"All in all, such moves are spurring good economic development," said Di Ianni.

"Our tourism folks tell us (hotel space) is what's missing when trying to attract conventions," he said.

"A third or even a fourth (hotel) would be tremendously helpful."

Battaglia said the demolition of the interior of the Connaught is complete and the company has started on conceptual drawings of the condo tower.

He hopes the hotel and condo tower will open by mid-2008.

Why is D&M subcontracting? Shouldn't Vanbots, the general contractor be the one to subcontract?

Meanwhile, Paul Volpe's execution had other consequences as things started to fall apart for some of Volpe's rivals. Within three weeks of the murder of Volpe, a Hamilton mob faction run by Hamilton bakery Store owner Domenic Musitano, who is allied to Volpe's old friends the Luppinos, decided to take out Domenic Racco, who was moving in on their drug trade.
Domenic Musitano, with the assistance of his nephew Giuseppe Avignone, owned and operated D&M Scrapyard on Beach Road at Woodward in Hamilton. Anthony Musitano, Domenic Musitano's brother, who was serving a life term in the Millhaven in the Millhaven maximum-security prison for conspiracy to possess explosive substances, continued to offer advice and counsel to the group on mob business. In fact, it was on the premises of the Millhaven Penitentiary in Bath, Ont., that the conspiracy to murder Domenic Racco began to unfold.