Item 11: Letter Agreeing to Creation of New Restructured Company for Hotel and Conference Center

[COSM_Admin]

Consider approval of Resolution 2021-228R, approving a letter agreement with JDHQ Hotels LLC. granting the City’s consent to JDHQ’s creation of a new restructured company to be the lessee of the Embassy Suites Hotel and to the sublease of the hotel and conference center to an affiliated operating company without any change to the terms and conditions of the existing lease and agreements with the City; authorizing the City Manager, or his designee, to execute the letter agreement; and declaring an effective date.

 

[MBaker]

Given their need to restructure and go public to bring in new dollars, are we able to negotiate to require higher wages for their employees or more robust "Insurance on day one" type of benefits?

Will we have a say in who these potential public investors will be? Is there any data on similar attempts by other companies that resulted in failures? Also, I thought a while back we amended an agreement to get the repairs done on time, and now they're saying this action is required to get the repairs done on time? Why was the initial calculation insufficient, and why is making that more robust not a means to solving the issue?

 

[JHughson]

What are the improvements? Generally speaking.
Approximate cost?
How much of this project has already been completed?

 

[COSM_Admin]

The following response was provided by Kyle Bowman, Atrium, LLC:

Council Member Baker
Given their need to restructure and go public to bring in new dollars, are we able to negotiate to require higher wages for their employees or more robust "Insurance on day one" type of benefits? Regarding wages/insurance, these are operational issues. We are fully aware of the challenging labor market and our management company has created several wage/bonus plans to maintain and attract employees.

Will we have a say in who these potential public investors will be? Is there any data on similar attempts by other companies that resulted in failures? Since the new company will be public and traded on the New York Stock Exchange, investors will be public; however we won’t know the investors until they invest. Essentially it will be like buying any other stock on the exchange, such as Apple or IBM.

Also, I thought a while back we amended an agreement to get the repairs done on time, and now they're saying this action is required to get the repairs done on time? Why was the initial calculation insufficient, and why is making that more robust not a means to solving the issue? Regarding the Conference Center agreement, it was extended to allow for recovery from the COVID crises. The Conference Center improvements are still on-going and will be completed on-time. The consent request is not related to the Conference Center agreement or just for this hotel, but rather for the entire hotel portfolio, which we believe will benefit from the capital injection.

Mayor Hughson
What are the improvements? Generally speaking. Improvements to the Conference Center are new ballroom carpet, new podiums (with City of San Marcos logo), upgraded high-speed internet, digital reader boards, new banquet chairs and a new boardroom.

Approximate cost? The total estimated cost is $1.2M.

How much of this project has already been completed? Roughly 60% of the work is completed (carpet, podiums, high-speed internet and digital reader boards are currently being priced-out).