UNC Charlotte hotel plan panned by UNC System chair

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Phil DuboisUNC Charlotte

Phil Dubois

Chancellor Philip Dubois has raised UNC Charlotte’s profile during his 13-year tenure: Expanding enrollment by more than 7,000 students; $1 billion-plus expansion for classrooms, labs and a student center; adding new Ph.D. programs and, of course, a football team.

Now he wants to add an $84 million hotel and conference center on campus to attract more academic conventions and compete with similar facilities at major U.S. universities. It would have 226 rooms and 24,000 square feet of conference space, enough to handle 500 attendees.

He gathered key university supporters — Charlotte business leaders Gene Johnson, Fred Klein, Joe Price, among others — to analyze the project. Their conclusion: It’s a solid investment for the UNC Charlotte Foundation, a private nonprofit not subject to the rules and oversight of the UNC System. The plan calls for the foundation to borrow $45 million, raise $20 million privately and seek $8 million from Charlotte’s tourism authority. “The pro formas are staggeringly good,” Dubois says, with the project expected to remain solvent even if the Charlotte economy has a significant recession.

One person Dubois didn’t inform was Harry Smith, the new chairman of the UNC System Board of Governors. He learned of the project from press reports. The Greenville businessman, along with former N.C. Sen. Bob Rucho, former Raleigh Mayor Tom Fetzer and others on the 28-member board are pressing campuses to hold down tuition, cut costs, emphasize academic areas with bright job outlooks and help more students graduate within four or five years.

Harry SmithBryan Regan

Harry Smith

“UNCC needs to be in the business of educating kids and improving its graduation rate, not developing a hotel,” Smith says. About 40% of students entering UNC Charlotte do not earn a degree within five years, a middling performance among the 17-campus system, according to UNC System data.

While Charlotte’s plan may be feasible, Smith says he’d prefer the foundation seek bids from several private developers who would take most or all of the risk. He also questions how existing hotel owners view the project.

Charlotte’s hotel industry is studying it, says Mohammed Jenatian, president of the Greater Charlotte Hospitality & Tourism Alliance  “There needs to be a lot more put on the table as to whether it has any merits,” he says. “We have a lot of hotel investors in Charlotte, and they are investing in projects that would make economic sense.”

Because its private foundation is in charge, the university doesn’t need the Board of Governors’ or the UNC Charlotte Board of Trustees’ approval, Dubois says.

“This is not a state project. There is no risk held by the university.” He had notified and received a positive reply from Jonathan Pruitt, previously the system’s chief financial officer who is now UNC Chapel Hill’s vice chancellor of finance and operations, he adds.

The project highlights a continued debate over whether the UNC System board is micromanaging local campuses, which have traditionally operated fairly autonomously from Chapel Hill.

Smith says the statewide board needs to be involved in large capital projects and multimillion-dollar transactions because so much public money is involved and because of concerns that the individual campus boards have, at times, shown limited negotiating skills.

He cites the board’s role in the proposed combination of UNC Health Care and Charlotte-based Atrium Health, which was scuttled over deal terms and governance. He also points to the board’s work on the combination of East Carolina University’s physician practice with Vidant Health, which enabled the UNC System to receive millions of dollars more than the initial agreement.

In addition to borrowing $45 million, the university’s foundation would make a $9 million investment, including land. Another $20 million will be raised by the foundation through the sale of charitable gift annuities, Dubois says. The foundation’s most recent tax filing showed it had $162 million in assets and no long-term debt as of June 30, 2017.

The project will benefit the university area, which now has only one full-service hotel, Dubois says. He estimates that the hotel and conference center will produce $7 million in proceeds to the foundation in its initial five years, plus $9 million in local and state taxes in its first seven years.

Jenatian says he disagrees that the university area lacks top-notch hotels geared to conventioneers, citing a Hampton Inn and others. “Hotel space in that area isn’t an issue.”

The foundation’s project team includes London-based Balfour Beatty as general contractor, Atlanta-based Cooper Carry as the architect and Denver-based Sage Hospitality as the operator. Vendors were selected after the foundation discussed the project with at least three entities, Dubois says.

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