By Paula C. Squires
Rendering courtesy of Baskervill
Work should begin shortly on a $30 million hotel project in downtown Richmond that an Apple REIT executive said Wednesday is one of the most difficult, and yet personally satisfying projects, that his company has taken on.
Justin Knight, president of Richmond-based Apple REIT Cos., told a meeting of the Richmond chapter of Commercial Real Estate Women that the real estate investment trust company is awaiting final permits so it can begin construction on two hotels, a Courtyard by Marriott and a Marriott Residence Inn that would add more than 200 rooms to downtown Richmond’s hotel market. “We hope to open in late 2014,” he said.
The project, known as First Freedom Center, would be located on what is now a surface parking lot at 14th and Cary Streets in Shockoe Slip. It is designed to complement the historical significance of the site where political leaders signed the Virginia Statute for Religious Freedom. The statute was adopted in 1786 by the Virginia General Assembly, which was working at that time from temporary quarters in a warehouse (which no longer exists) near the corner of 14th and Cary Streets. Knight said that statute was later used as a federal model for religious freedom.
Knight noted his father, Glade M. Knight, a Mormon and Apple REIT’s founder and CEO, has served on the board of the First Freedom Center, which currently has exhibition and office space at 1321 E. Main St., around the corner from the hotel site. The center’s web site says its mission “is to advance the fundamental human rights of freedom of religion and freedom of conscience.“
Knight said the nonprofit center’s offices would remain there, but some exhibits would be moved to the new project, which would offer classroom and meeting space as well. It would represent the final phase of the center’s development with a building in a prominent downtown location.
According to him, the project has been heavily supported by local businesses. “It will help bring foot traffic to the area and will help local businesses,” he said. As for parking, Knight said he has been in negotiations with a parking deck at the corner of 14th and Cary to see if hotel patrons could park there.
The project has been in the works in one form or another since 2008, Knight said, and “there have been plenty of reasons for us to give up,” he told the CREW group which met at the SunTrust Bank building. “I believe in this project and want Richmond to continue with this redevelopment, which seems to be surging now,” he said. “This is a cause that my family believes in and our corporation believes in.”
Asked if an ongoing investigation by the U.S. Securities and Exchange Commission into four of Apple REITS’s nontraded funds would have any impact on the project moving forward, Knight said no in an interview with Virginia Business. “We don’t see it as a major problem. The investigation has been going on for several years,” he said.
According to the company’s recent public filings, the SEC is probing the adequacy of disclosures made by four of the firm’s non-listed, public, real estate investment trusts: Apple REIT Six Inc., Apple REIT Seven Inc., Apple REIT Eight Inc. and Apple REIT Nine Inc. The investigation doesn’t include Apple REIT Ten, the newest of the company’s funds. It’s open to new investors and already has raised $750,000, Knight told the CREW group. A typical investor puts $20,000 to $40,000 into the fund, he added.
According to the company’s filings, the four funds involved in the SEC investigation spent $7.3 million in legal costs in 2012 and anticipate additional legal costs through the first half of this year.
Apple REITS Cos. uses their funds to acquire high-quality, income-producing hotels, almost always with cash, Knight said. Currently, the four funds own 291 mostly Marriott and Hilton-branded hotels (including downtown Richmond’s Marriott on Broad Street). According to Knight, these properties offer nearly 36,000 rooms in 36 states.
Asked by a member of the audience if another possible hotel project – the renovation of the 700 East Main office building by Shamin Hotels – was giving him concerns about the success of First Freedom Center, Knight responded, “Quite frankly, this is a very soft hotel market,” he said of downtown Richmond. However, “Our view is that the city is becoming a better place and that in the long run demand will grow.”
Knight said his understanding is that if Shamin moves forward – it currently has the 700 E. Main St. building under contract — it would be working with Hampton Inn, a well respected Hilton brand. A spokeswoman for Shamin Hotels said she could not confirm that information.
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