David Rachie


MASON CITY | Gatehouse Capital has approved a pre-development agreement to build a hotel and connect it to The Music Man Square, City Administrator Brent Trout said Tuesday.

The City Council will act on the agreement following a public hearing Thursday night. The meeting begins at 7 p.m. in the Mason City Room of the public library.

Gatehouse is proposing to build the hotel in the south parking lot of Southbridge Mall and connect it via a skywalk to The Music Man Square. It intends to build a ballroom/conference center in The Music Man Square and relocate the museum. It is a $15 million project.

The project is included in the city's request for $10 million in state funds through the Iowa Reinvestment Act. It is part of a $36 million plan that includes an ice area/multipurpose center, music pavilion, parking ramp and possibly a mixed-use building.

The city received preliminary approval for $7.2 million for the state and upped its request to $10 million when more state money became available.

The hotel is a key component because the state requires $10 million in private investment which the hotel fulfills.

But there have been several changes since the city's pre-application for state funding was approved. Originally, G8 Development of San Diego was the proposed hotel developer but was eliminated when it failed secure financing in the required time last year.

The city put out a new request for proposals for a hotel. G8 and Gatehouse responded and the City Council chose to go with Gatehouse.

Last month, Trout met with state officials to update them on the changes in the proposal. He said he was told to stick with present developer and have the pieces of the plan finalized by the end of the year.

The proposal, signed by Gatehouse official David Rachie, authorizes Gatehouse Capital to build a 100-room hotel in the Southbridge lot, connect it to The Music Man Square and build a conference center with a 6,500-square foot  grand ballroom that could accommodate events with up to 600 attendees and a 1,500-square foot catering/kitchen area.

Gatehouse is requesting a $150,000 refundable payment from the city to pay for a pre-development plan that, in effect, is a feasibility study.

If the city decides to move forward within 90 days of completion of the pre-development plan, the $150,000 would be refundable within 45 days of project financing. 

The amended plan includes:

• Development and funding for the music pavilion.

• A $150,000 refundable payment to Gatehouse. 

• City funding for a "mezzanine loan," which fills the gap between the developer's equity and traditional financing. The loan would be made with general obligation bonds and would be an "interest forgivable" loan in which Gatehouse would repay the principal — estimated to be $3.5 to $4.3 million — over 20 years. The city would be responsible to pay the interest to retire the bonds.

• Renovations to The Music Man Square, museum and skywalk construction.

• A parking facility. Although the parking facility planned for the north portion of the City Hall parking lot is no longer anticipated as an Iowa Reinvestment Act project, staff is recommending keeping it and the mixed-use building in the urban renewal plan to serve possible future development.

• The new Downtown Revitalization Loan program.

• Allowing the city to enter into other development agreements consistent with the intent of the urban renewal plan. 

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