Nanaimo hotel developer close to missing key deadline

Nanaimo Mayor Leonard Krog said he is “worried” that construction has not yet started on a long-anticipated hotel considered vital to the city’s downtown’s economic health.

Utah-based PEG Properties is nearing a deadline established by city hall to start hotel construction on the Gordon Street lot it sold to the developer for $750,000.

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The developer was supposed to have completed $1 million in construction by Saturday. After that date, Nanaimo has the option of buying the site back for its sale price.

Construction has not started on the vacant site near the Vancouver Island Conference Centre. A PEG spokesperson said the company would provide an update today.

“I’m still relatively positive, but like all people, I really need to see a shovel in the dirt,” Krog said. “The Gordon Street hotel, along with the fast ferry, are the two projects that are really important to the city. We as a city, as a city council, are keenly interested in seeing both those projects proceed.”

A regular Nanaimo-Vancouver service has been proposed by Island Ferry Service, which announced in June that it needed more time to line up financing for the private venture. A spokesperson said then the earliest a ferry service could take place is 2020.

When it comes to the hotel, Nanaimo needs those rooms to attract conventions that will make the conference centre viable, Krog said.

Nanaimo has been trying to get a hotel built on Gordon Street to support the conference centre and increase vitality in the downtown for 15 years. Earlier proposals collapsed. The city chose PEG, which has built multiple hotels and commercial properties, after reviewing six proposals to develop the lot.

PEG’s proposal to the city is to build a nine-storey Courtyard by Marriott hotel with 170 rooms, a 1,000 square-foot meeting room and a pool, spa and fitness centre. The company has recently completed a Courtyard by Marriott hotel in Prince George.

PEG spent $157,479 on a Nanaimo building permit, which expires Dec. 31. When the company applied for a permit 18 months ago, PEG estimated construction costs at $22 million.

Tourism consultant Frank Bourree figures construction costs, which have risen in recent years, would likely be closer to more than $30 million.

Bourree said there’s a shortage of hotel rooms in Nanaimo. “The conference centre needs more rooms close in to attract more conferences. They are really squeezed,” Bourree said.

PEG announced this year it would be starting construction, but that did not happen.

Bill Corsan, Nanaimo’s director of community development, said a report will go to council in the new year with an update on the site. After Saturday, it will be at council’s discretion whether to buy the property back from the developer, he said.

“They don’t have to buy it back,” he said. “They could wait a year if they had to or they could never use that option if they chose. That’s kind of the big one because that gives council the ability to go a different route if they wish.”

There is no provision for an extension when the current building permit expires at month’s end. If the developer wishes to go ahead, a new building permit would be required, Corsan said.

Since the current permit was approved, the building code has changed, so any new application would have to be amended to reflect that, Corsan added.

As well, a new permit would now require PEG to pay development-cost charges. Those were not required for the downtown core at the time the current permit was granted. Corsan does not know what those charges would be, but expects they would be significant.

In conversations with PEG, he said the developer has indicated it will start construction before the end of 2019. If that happens, a new building permit won’t be needed.

The third key date is the timeline for city hall granting a 10-year tax exemption, which required the hotel to be finished by the end of 2020.

A PEG official earlier said that construction of the hotel would take 19 months.

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