With the Hotel Pattee up for sale and its future uncertain, the community of investors who helped Jay and Denise Hartz buy the hotel in 2013 have met to consider a form of collective ownership that would secure the landmark as the sustainable center of the downtown cultural and commercial life.
The Hartzes first broke the news to their employees July 26 of the hotel’s going on the market. They also met with some of the local people who pooled their cash in the historical landmark.
“We have made a decision as a couple to put the hotel up for sale,” Jay Hartz told the investors, speaking until his voice broke with emotion. “It’s not an easy decision for us, but we’re real tired. We have a few health issues as well that we really don’t want to talk about. But first of all, we wouldn’t be here if it wasn’t for you folks, so we want to say thank you. . .”
Denise Hartz stepped in and described the process of putting the property on the market. She said an East Coast appraiser named Tim spent a couple of days at the hotel earlier this year and looked through the business’ books and records.
The Hartzes chose to list the property with Inn Partners out of Brattleboro, Vt., for $2.5 million.
“We feel like all you guys are our family,” Denise said. “We came here knowing no one, and you guys were here for us, so we don’t want this to go to just anyone. To me and to Jay, this is our fifth child. We want this place to succeed. This is the heart of the town, so we’re going to be really picky about who we sell this to, as much as we can.”
Jay Hartz reported “some inquiries already” by July 26, when he and Denise met with their investors and shareholers. “We realize this may take some time, and we are prepared” to stay on, he said.
The Hartzes said they consulted with Angela Harrington of Grinnell, owner and operator of the recently renovated Hotel Grinnell, a boutique hotel not unlike the Hotel Pattee.
“We know Angela, and she’s a go-getter,” Denise said. “She turned Grinnell around. She got all their shops full of people. She’s just a wonderful go-getter.”
Harrington joined the Hartzes at the investors’ meeting and discussed methods of placing the hotel into a non-profit trust.
“Things like this, as in Grinnell, just don’t pencil out on their own,” Harrington said. “This market is too small to support an operation like this on its own. You couldn’t do it.”
She outlined the success of Wright on the Park Inc., a non-profit corporation formed in Mason City in 2005 to restore and own the Historic Park Inn, built by famed American architect Frank Lloyd Wright.
“We think the Mason City model is how it has to happen in Perry,” Harrington said. “The art in the Hotel Pattee is in a trust, and that’s what needs to happen for the entire building. That’s what they did in Mason City. It’s like the whole hotel is a piece of art, and it is.”
She predicted the Hartzes could easily sell the hotel for their asking price, “but if you want it to be preserved as your town’s landmark, then you’ve got to protect it in a different way. It’s usually what happens eventually. You have to preserve it. You have to protect it, and you have to get funding mechanisms that protect it over time.”
Jay Hartz described one form such financing could take, which would see a non-profit trust own 100 percent of the hotel, with its funding coming from member donations and the hotel’s profits, with possible assistance from the city.
“A management company — selected by the board of trustees — would oversee the day-to-day operations,” he said. A typical management contract lasts three to five years and gives the management company a 5 percent cut of the profits.
“There are ways to piece together a financial package,” according to Bill Menner, a retired rural community development specialist with the U.S. Department of Agriculture who now runs the Bill Menner Group consultancy in Grinnell.
Menner spoke to about 30 investors and others at a second meeting Aug. 9. He noted it can take nine to 12 months for a group to attain non-profit, tax-exempt status from the U.S. Internal Revenue Service.
“But they’re trying to sell the hotel today,” Menner said, “so now there’s an element of speed that has to come into consideration.” He discussed the possibility of a more rapidly formed for-profit corporation to take on ownership of the hotel.
“Could an LLC be an option?” he said. “I would call it a benevolent for-profit. ‘We hope to make money, but it would be okay if we didn’t,’ which is sort of like what all of you who are investors did that first time.” The Hartzes raised about $700,000 from Perry investors in order to buy the closed hotel in 2013.
Jay Hartz shared the results of an anonymous survey of investors he conducted after the July meeting. Of about 60 original investors, 21 responded to the survey, with 56 percent of respondents saying placing the hotel in a non-profit trust would be the best way forward.
About 25 percent said they would need more information before deciding the best course of action, and 19 percent said the hotel would be best left in private hands.
About 56 percent of the respondents said they would roll over their original investment into a non-profit trust, and 28 percent would at least consider rolling over into a trust. Seven percent said they would cash out their original stake.
“I think the important thing is that local-owenership piece,” Menner said. “If you have a group of investors who are committed to the future of the hotel as local owners, whether it’s non-profit or for-profit, backing it up with local ownership is the big deal.”
After leading two meetings of the hotel’s investors, Jay Hartz said it was time for him and Denise to leave the direction of proceedings to the local stakeholders.
“After tonight,” Hartz said, “we need to step aside from that discussion. This is not my decision. I’m just presenting some options for further conversation.”
At the same time, Hartz took pains to make the situation with the Hotel Pattee clear to the his investors and the public.
“The hotel is not closing,” he said. “It’s a thriving business that’s now for sale. We want the public here, the community in Perry outside of this room, to understand the facts and what’s happening. The facts are we’re financially stable, knock on wood. We have no legal things that we’re facing either personally or professionally.”
With the ownership possibilitites before them, including a private-public partnership, the hotel investors went about forming a committee for further inquiry.
ThePerryNews.com will update this story as information becomes available.