Even if it were to perform well, the Miramar Hotel may not make financial sense, according to a recently completed third-party analysis of the project.
Keyser Marston Associates, an advisory group agreed to by both Miramar owner Rick Caruso and Santa Barbara County officials, analyzed a few different scenarios — including different occupancy levels and average daily room rates — and concluded the economic gap ranges from zero to $24 million, while the financing gap ranges from $22 million to $37 million. The proposed high-end hotel would include 186 rooms, a spa, beach club, banquet facility, and restaurant.
A new county bed tax rebate program — which would kick some cash that should be going to the county back to luxury hotel developers — would provide Caruso between $19.6 million and $21.6 million to offset that gap. But that still leaves some ground to make up.
Caruso spokesperson Matt Middlebrook said he wasn’t surprised by the report and that it only highlighted the need for the money from the rebate program. “I did not need a third-party analysis to tell us financing was going to be a challenge,” he said. Caruso always anticipated filling the feasibility gap with equity, Middlebrook explained, adding that the boost the tax rebate gives makes the project on South Jameson Lane more attractive to financiers.
The county has yet to approve Caruso’s application to the rebate program. As part of approving the application, the Board of Supervisors would have to find there is a public benefit, and the analysis could provide guidance along those lines. But they might not get there anytime soon. Last month, County CEO Chandra Wallar informed Caruso the county was suspending negotiations because an agreement on how to implement an incentive program for the Miramar Hotel wasn’t currently possible. The two sides disagree on how the funds under a rebate program should be appropriated over a 15-year program, and what happens should the county not give the money on an annual basis.
Meanwhile, as of Monday, county staff had approved non-expiring permits for the project, according to Dennis Bozanich, assistant to the County CEO. Caruso is only required to do two things to be entitled to the permits: demolish the property and pay $1.4 million, which he already has done. He has until March 2013, but can ask for extensions of his current permits until 2015. While originally he promised to demolish the buildings on the property when a bed tax rebate was in place, Caruso will “probably move forward with demolition” regardless, Middlebrook said. He said the citizens of Montecito deserve to get rid of the dilapidated buildings.
The move would be sound business as well, as the non-expiring entitlements make the property much more valuable.