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Copyright © 2020 Albuquerque Journal
To convert a dilapidated Route 66 hotel into an upscale Downtown attraction, developers are seeking funding from an unlikely source: local investors.
ARRIVE Hotels & Restaurants, a Los Angeles-based hotel and entertainment company, announced plans last year to redevelop The Hotel Blue, 717 Central NW. The approximately $24.9 million renovation will update and refresh each room, add new food and drink offerings, and change the hotel’s name to ARRIVE Albuquerque.
To fund the ambitious urban renewal project, ARRIVE struck a partnership with the investment platform NextSeed and is hoping to raise $6 million to renovate the midcentury hotel, about one-fourth of the project’s estimated price tag.
The approach to funding is common in the technology world but relatively unproved in the world of Albuquerque real estate. Still, Youngro Lee, CEO of NextSeed, said the funding gives local investors an opportunity to invest in developments that are closer to home than most tech startups.
“We found that a lot of people … would rather invest in something in their own backyard,” Lee said.
Lee added that he sees ARRIVE’s renovation as a way to establish NextSeed’s presence in Albuquerque, and he could see the funding platform expanding to work with other small businesses in the city.
“This is our anchor project in Albuquerque,” he said.
Slow funding start
The campaign has raised just $280,000 toward its $6 million goal as of last Thursday. However, Ryan McCulloch, development manager for Neighborhood Establishment and one of the partners on the redevelopment project, said the developers aren’t worried about raising all the money at this point.
“I think it’s an opportunity to show we’re committed to the city and the area we’re invested in,” McCulloch said.
Jennifer Esquivel, marketing and communications manager for city of Albuqerque’s economic development department, said the department wasn’t familiar with the partnership between ARRIVE and NextSeed, but isn’t concerned about the project’s use of investment dollars. Esquivel said the arrangement doesn’t preclude the developers from seeking additional funding through city programs.
“As far as the city is concerned, we have no problem with the way they are raising the funding,” she said.
Decades of history
The Hotel Blue, at Central and Eighth NW, near Robinson Park, was originally built in the mid-1960s as the Downtowner Motor Inn, part of a national chain of midcentury downtown hotels. Like many midcentury hotels along Route 66, the property suffered when the highway was decommissioned in the 1980s. In 2018, the six-story hotel was put up for sale, at an asking price of $6.8 million.
In August, ARRIVE announced plans to purchase and renovate the property. McCulloch said the scope of work, which is scheduled to begin in March, includes completely renovating each of the approximately 135 rooms in the hotel and adding more modern furniture and other upscale amenities. An outdoor courtyard will feature space for a bocce ball court and a pool.
The ground floor of the hotel will be redeveloped with a more open floor plan, featuring space for a new bar and a coffee shop. McCulloch said the goal is to engage pedestrians along that stretch of Central, converting it into a destination that will attract locals as well as hotel guests.
Local officials are hopeful the renovation will bring more high-end hotel rooms to an area of town where they’re scarce. Since 2013, the Albuquerque Convention Center has been eliminated from consideration from at least three dozen meetings due to shortage of hotel rooms in the area, according to Visit Albuquerque.
“This area of Downtown could use a boost,” McCulloch added.
McCulloch said Albuquerque hotels can’t support the same nightly room rates as cities like Phoenix and Austin, where ARRIVE is also developing boutique hotels.
The development team is seeking industrial revenue bonds from the city and has applied for a tax credit for historic properties. Still, the developers are looking for other areas to make up the cost of the project. While neither ARRIVE nor Neighborhood Establishment has worked directly with the funding platform before, McCulloch said, the company was the right fit to partner on the project.
“The people that came together to form NextSeed are aligned with our vision,” he said.
Although plenty of online platforms connect potential investors with investment opportunities, Lee said, many of them skew toward technology companies. NextSeed, on the other hand, was founded in Houston in 2015 to focus on retail offerings and other brick-and-mortar businesses.
“It’s where the community feels like they know exactly what they’re getting,” he said.
Lee said only about 3% of businesses that apply for funding campaigns through the NextSeed platform are accepted. Investors create accounts on the website, and browse projects to invest in.
“We basically curate the deal,” Lee said.
Equity, promised return
In this case, Lee said the campaign is open only to investors who meet the Securities and Exchange Commission’s criteria for accreditation. Investors receive equity in the project, and can eventually expect a return on their investment. In the case of the hotel, distributions are made to investors first, before the fund manager receives disbursements.
While Downtown has struggled with crime and homelessness in recent years, Lee said he doesn’t see the hotel’s location as a liability. Instead, Lee said the growing Downtown core was a big factor in why the project was selected.
He said he was impressed with Downtown Albuquerque’s focus on local businesses during a recent visit, describing it as the center of an “up-and-coming, exciting city.”
If the renovation project goes well, Lee said he’s hopeful that it can not only bring more activity Downtown, but also can encourage other businesses in the area to follow suit and work with the funding platform.
“It’s meant to become a meeting place and gathering place in Downtown Albuquerque,” Lee said.