Construction has been halted on a planned $55 million renovation project at the Harbor View Hotel in Edgartown, at least until the fall.
And while the scenic hotel overlooking the outer Edgartown harbor remains open for business, the owner and his Vineyard attorney said this week that the decision was prompted by a combination of delays in local permitting and problems with the Wall Street bank that was providing financing for the project.
“While we had extremely productive and successful permitting meetings with the Martha’s Vineyard Commission and Edgartown’s zoning board of appeals and historic district commission, the process took a bit longer than we planned. Consequently, the amount of time we had to build over this winter was simply too tight,” said Alan Worden, a partner in Scout Real Estate Capital based on Nantucket, which owns the hotel.
But Sean Murphy, an Edgartown attorney who represents Mr. Worden, said another reason for the delay was the recent turmoil on Wall Street and the announcement on Sept. 15 that Lehman Brothers Holdings, which was providing much of the financing for the project, was filing for bankruptcy.
Mr. Murphy said there are other investors waiting to provide financing for the Harbor View Hotel renovations.
“But it’s still so chaotic . . . there are other sources ready to take over the financing, but when they call Lehman Brothers they can’t get anyone on the phone,” he said.
Mr. Worden confirmed that the Lehman Brothers bankruptcy played a role in the decision to delay the renovation project, but he called it a secondary issue.
“Even if Lehman was an ongoing concern, we would have likely delayed construction until next fall. Now we will simply work with whichever lender steps into their shoes,” he said.
He added: “We expect to continue with our plan. Obviously a world-wide Depression might influence that, but other than some major economic shock, we expect to continue.”
Mr. Worden bought the turn-of-the century hotel in November of 2006, along with the Kelley House, a former tavern in downtown Edgartown, for $45 million.
The large-scale renovation plan at the Harbor View calls for reconfiguring the function facilities on the first floor, nearly 20,000 square feet of additions, the demolition and replacement of the Mayhew building, a new swimming pool, a children’s reading room, a day spa for hotel guests and new landscaping. It also calls for the demolition and replacement of cottages and extensive work on the main hotel building.
The project has been approved by the Martha’s Vineyard Commission, with conditions, by the town historic district commission and the town zoning board of appeals, with conditions.
Mr. Worden noted that many major renovations have already been completed, including the new lobby, dining room, kitchen, improved water views and new landscaping.
“All of that is finished and our guests have been delighted. We also needed to offer our guests newer and larger accommodations. The renovated captain’s cottages will meet those needs for the time being. We expect to continue on with the construction to create more suites over the coming several years,” he said.
Mr. Worden said he did not expect the delays to add to the cost of the project because a variety of contingencies were built into the budget. In fact, he said, the delay might translate into savings in the long run.
“Given the limited amount of regional construction in the current environment; we believe labor, and certain materials, might actually drop is certain cases. Raw materials have gotten extremely expensive because of the world-wide construction boom. But as construction eases — which it has already — raw material prices should follow suit,” he said.
He said no contracts had been signed for the renovations planned for this winter. “Overall, we intend to use Island firms as much as possible and we will be staying in touch with the great contractors on Martha’s Vineyard over the winter so we can be ready for next fall,” he said.
The Harbor View project is structured as ownership hotel in which most of the units are sold to buyers who commit to staying in the hotel for intermittent periods of time over the course of a year. When the owners are not staying in their units, the rooms are available for transient and nightly rentals.
Mr. Murphy said the idea behind the arrangement was to generate revenue to pay for the renovations while also providing a boost to Edgartown’s year round economy by allowing the hotel to stay open year-round. Because the units are not designed for long-term occupancy — they do not have kitchens — they are still technically considered hotel rooms. One condition approved by the Martha’s Vineyard Commission is that no owner or guest can stay in a room for more than 90 consecutive days or reoccupy a unit within 30 days of a continuous 90-day stay. They also cannot stay for more than four months in a given calendar year.
Mr. Murphy said he did not expect the delay in renovations to scare off potential buyers.
“This is a way of paying for the renovations [to the hotel], but it’s also a way to keep the hotel open year-round and expand the ability to support things like corporate events and functions. Meanwhile this is a way to keep the hotel a hotel . . . if we can keep the hotel full in November or December — or even February or March — it’s a huge boost for the town. It benefits everyone,” he said.