Editor's note: This story is part of Southwest Michigan Second Wave's On the Ground Battle Creek series.
Hotel owners typically want occupied rooms and public spaces filled with conversation and vibrancy.
But, the new owners of the McCamly Plaza Hotel want the opposite until major renovations are completed on the 239-room hotel that closed its door in November 2019. The new owner is 50 Capital Avenue Development Corp., the for-profit development arm of BCU created for the express purpose of serving as a holding and ownership entity for the hotel renovation project. They purchased the hotel in November 2020 for an undisclosed amount of money.
In preparation for the work to follow, on April 14, BCU and 50 Capital Avenue began a liquidation sale that is open to the public and expected to go on for four more weeks, says Bridgette Jones, BCU’s Vice President of Operations.
“We are putting new items on the floor every week,” Jones says. “So, if you come one week, you’re not going to see the same stuff that we may have had the previous week. There’s always going to be something different for sale.”
Everything from luggage carts to lamps and never-used mattresses to linens and silver is for sale during the liquidation event that will go from Wednesday, May 5, through Friday, May 7, from 10 a.m. to 5 p.m. and Saturday, May 8, from 10 a.m. to 3 p.m.
The goal of the sale is to clear everything out, including wallpaper and carpeting, right down to the studs to create a blank canvas for a total refresh of the hotel, which is expected to re-open by 2022, says Joe Sobieralski, President and CEO of BCU.
“We want it to be a national flagship hotel. We want it to be unique and we don’t want it to be a normal hotel,” he says.
The new hotel will incorporate upgrades including electric vehicle charging stations and an eclectic mix of on-site food service options that may provide opportunities to work with local eateries, especially those in the city’s downtown district. Sobieralski says the leadership of BCU and 50 Capital Avenue will be working in partnership with community members on a design charrette that will serve as a guide as work on the renovation of the hotel moves forward.
Joe Sobieralski, President and CEO of Battle Creek Unlimited, at left, and Sara Wallace, President and CEO of the Miller Foundation, take in the view from a room on the 16th floor of the hotel. Wallace was there in early April to retrieve a sign.
The hotel is expected to create 160 full-time and part-time jobs and internship opportunities for students attending Kellogg Community College, Grand Valley State University, and the Battle Creek Public Schools who are interested in pursuing careers in the hospitality industry. Sobieralski says there are ongoing conversations with these educational institutions about the hotel serving as a teaching hotel.
The cost of making all of this happen is expected to be “north of $25 million,” he says.
“We’re going to get a traditional loan and we’re also actively seeking out partners on the equity portion of the capital stack,” Sobieralski says. “We’ve already started the process. Conversations have been going on for months now and we’re close.”
For the purposes of commercial real estate, the capital stack is the different layers of financing sources that go into funding the purchase and improvement of a real estate project, according to this report
. The capital stack provides investors with valuable information about where they fall in the pecking order of cash flows, what that order means for risk of repayment, and, ultimately, whether the targeted return on investment is worth the assumed risk.
Once all of the necessary funding is secured the actual renovation work will begin. Sobieralski says this could happen as early as July.
“This has been a buildup and a culmination of learning from previous projects,” he says. “We’ve been working on this for 12 months. It’s been a real education process.”
The costly business of making it right
While the hotel remains closed, 50 Capital Avenue has been picking up the monthly electricity bill - $25,000 - and also the holding cost – between $30,000 and $40,000. It is a small price to pay for the opportunity to breathe new life and vibrancy into the building, Sobieralski says.
The decision to purchase the property comes after the former owner, Neil Freeman, chairman and CEO of Aries Capital LLC of Chicago, did not meet deadlines for rebranding the hotel into a Hilton DoubleTree. That rebranding was to have taken place in October 2018.
“It was disappointing and that’s when we realized that if we want this to be a well-run, unique facility that’s modern and updated, we were going to have to do it ourselves,” Sobieralski says.
“It was kind of a dance for several years,” Sobieralski said in an earlier story. “We don’t have the time nor the patience to just wait for others to come in and take care of these items. The Milton
was the first example of the community coming together to get a project done that we knew was possible to accomplish. We are taking the opportunities to become the developer to take care of some of these larger developments that we all know will contribute to the economic vitality of Battle Creek.”
Although BCU now owns the 15-story, 239-room hotel, Freeman retains ownership of McCamly Place, the mall portion of the complex. BCU loaned Freeman $3.5 million out of a Direct Investment Fund two years ago to complete the required upgrades to become a Hilton-owned property. The Direct Investment Fund is a revolving loan fund administered by Battle Creek Unlimited with monies from the City of Battle Creek's Economic Development Fund and the Downtown Development Authority's Revolving Loan Fund.
In January, BCU filed a lawsuit against Freeman and several limited liability corporations that also were involved in the hotel redevelopment project to recoup the loan and interest accrued.
Calling the property a “strategic asset,” Sobieralski says, “It’s extremely important for the business community we have here in Battle Creek to see this kind of business. To have an updated, branded hotel of that size driving business and disposable income into the community is extremely important.”
In addition to providing lodging, he says the renovated property will have the capacity to hold events that will further add to the economic vitality in the city’s downtown area.
“I don’t know of any other hotel in the area that has this same level of event space,” Sobieralski says.
The property originally opened in 1981 as the Stouffer Battle Creek Hotel. The building is adjacent to the Kellogg Arena, a 6,500-seat concert and event venue, and across the street from the world headquarters of the Kellogg Company.
“The one thing I’d like to hone in on is that this is going to be an asset for the community and when it generates revenue those revenues will be funneled back into our economic development work for Battle Creek and Calhoun County,” Sobieralski says.