Skip to main content
You are the owner of this article.
You have permission to edit this article.
Edit
alert top story

Latest iteration of downtown Mason City hotel plan hangs on David Rachie

If you Google Gatehouse Capital LLC, the first result you get is the website for a Texas-based company with a history of successful hospitality developments in its home state, Florida and California.

You may also have thought that Gatehouse Capital LLC is the company behind the hotel and convention center project that has been ongoing in Mason City for over two years.

Mason City officials tour future hotel site

Mason City Mayor Bill Schickel, right, gives a statement after he and other city officials toured the future hotel site in the Southbridge Mall parking lot in July 2019. David Rachie is shown in the middle of the photograph.

You'd be wrong.

Documents reviewed by the Globe Gazette show the original development agreement for the then-$24 million project was between the city and an LLC registered in Iowa in April 2017 called Gatehouse Mason City LLC. The sole managing member of Gatehouse Mason City LLC was David Rachie.

At one point, the Texas-based hotel developer was interested in a hotel and convention center project in Mason City, and it listed David Rachie on its website as one of its principals. 

But that is no longer the case, and despite it not being entirely clear when or how those ties were severed, city officials say it won't affect the bottom line – the project is still humming along with David Rachie at the helm. 

GATEHOUSE CAPITAL HISTORY

Gatehouse Capital first approached the city about a hotel and convention center development – using Rachie as its chief representative – more than four years ago.

Ultimately, after a several-month courtship with Gatehouse Capital that included two successful bonding referendums, the city went with another developer, G8, in early 2018. In October that year, the city severed its relationship with G8 when the developer failed to meet deadlines dictated in its agreement.

In a memo to the mayor and city council in November 2018, City Administrator Aaron Burnett suggested the city approve a pre-development agreement with Gatehouse Mason City LLC for the hotel.

After the city terminated its contract with G8 Development in late October, Gatehouse “expressed interest in returning to this project," Burnett wrote in the memo.

Burnett said Gatehouse is the city’s recommendation for the project, as it has “familiarity with the project and partners, their history of completing projects of similar scope and their ability to start quickly” on the project.

“While the City could consider more time-consuming approaches such as a Request for Qualifications or Proposals and potentially have more options, it is doubtful that any such proposals would be substantially different with respect to incentives requested and would certainly carry longer time frames,” Burnett’s memo said.

Hollywoodland-Mason City/Southbridge

A rendering of the Hollywoodland-Mason City concept, provided by David Rachie. The new family entertainment center will feature a bowling alley, a brewery, go-karts, golf of some kind, a movie theater, a pizzeria and a new sports bar.

But it wasn't the Texas-based firm to which Burnett referred. He meant David Rachie's LLC, Gatehouse Mason City. In an email in response to the Globe's questions this week about the Texas company's exit from the project, he wrote that Rachie "has always been the managing partner with whom the city worked," and that any relationship the city had with Gatehouse Capital was indirect and through Rachie.

PARTING OF THE WAYS

In a separate memo Rachie wrote to the city that November of 2018, he said, “I believe that this is a truly unique opportunity to work together and develop something extremely valuable and game-changing for Mason City.” He signed it as Gatehouse Capital managing member David-Elias Rachie.

At that point, Rachie was still affiliated with the Texas company as a development consultant, which he was until at least September 2019, according to an examination of the principals page of the Gatehouse Capital website by Wayback Machine. 

In a phone conversation with the Globe this week, however, Colin McDonald, vice president of development for Gatehouse Capital, said Rachie has not been affiliated with his firm for "some time and is developing the Mason City project on his own." Follow-up questions to McDonald about the timeline went unanswered.

This is the original, June 2019 development agreement the city signed with David Rachie's Gatehouse Mason City LLC.

Administrator Burnett referred the Globe's questions about Gatehouse Mason City LLC's relationship to Gatehouse Capital to Rachie, noting again that the city has worked with Rachie and his LLC, not Gatehouse Capital, throughout the project.

The development agreement approved by the city council in July 2019 lists Gatehouse Mason City LLC as the developer. That changed in April of this year, when the city council approved an amended development agreement that changed the name of the LLC from Gatehouse Mason City to MCCCH LLC. That change was also registered on the Iowa Secretary of State's website, along with the fact that the new LLC was now registered in Minnesota and not Iowa. It still lists David Rachie as the sole member/manager and his home in Minneapolis as the company's address.

NAMING CONFUSION

As recently as December 2020, other entities involved with the hotel project have referred to Rachie as representing Gatehouse Capital, the Texas company.

As Mason City continues to move through the development process for a downtown hotel, it has a possible company lined up. But the proposal still needs to go through formal approval.

Rachie has appeared several times with city officials before the Iowa Economic Development Authority Board, which has pledged more than $9 million to the city for reinvestment in the downtown, and which the city has promised to commit to the hotel project once financing is secured. Each time, he has been listed as being affiliated with Gatehouse Capital.

In an email sent Friday, IEDA communications team leader Kanan Kappelman said that through IEDA’s weekly communication with the city, it knew the "developer had some changes with his business structure. None of these changes impact the Reinvestment District. Our award and contract are with the City of Mason City." Kappelman also noted the IEDA continues to work with the city through the delays on the project.

In an Oct. 11, 2019, letter to Mayor Bill Schickel, Hyatt Director of Development Christina Wells writes the hotelier was "excited" about the proposed franchise for a Hyatt Place between her company and "Gatehouse Capital LLC." Wells ends the letter by writing, "We look forward to building upon our strong development experience with Gatehouse Capital and working in tandem with the City of Mason City."

Gatehouse Capital has completed a Hyatt resort property in San Diego, California. However, Rachie's LLC doesn't have any record of a completed hospitality project with the Hyatt flag. 

Wells did not return an email asking for comment on this story.

INVESTORS AND FINANCING

The IEDA and Hyatt are not the only ones that may have confused the two Gatehouse LLCs. At least two city councilors said this week they were not aware or did not recall that Gatehouse Capital was no longer affiliated with the project.

Councilor Tom Thoma said he remembered voting for the name change in the amended development agreement in April.

"I, and others, I assume, trust and rely on staff recommendations a lot," Thoma said in an email. "The name change obviously didn't raise any red flags or I and others would have dug into it. And it isn't raising any red flags now since Rachie has always been the main man."

In August, Rachie told the city council financing for the hotel project would be wrapped up by the end of September. This week, Burnett acknowledged the city had not received proof of finalized financing from him yet, but said he spoke with the investors on the project and they told him that "significant progress" is being made with the banks interested in financing the deal.

"I have confidence in the efforts of David and the investor group to secure the debt needed to construct the hotel and conference center," Burnett wrote. To date, the identities of Rachie's investor group has not been disclosed.

On Tuesday, the Middletown, Ohio, city council will vote on whether to award $7.5 million of its American Rescue Plan Act money to the Main Street Community Capital LLC, which proposed to build an 11-acre $1.3 billion entertainment venue called "Hollywoodland."

The Main Street Community Capital LLC, with its own website (https://msccap.com/), is registered in Minnesota to David Rachie at his home address in Minneapolis, just like Mason City's MCCCH LLC. Trademark applications for both Hollywoodland Hotel and Hollywoodland Resorts, made in July 2020, were requested by another LLC, OZ Hotels and Resorts, with the same Minneapolis address but this time listing the legal entity's state as the Virgin Islands.

0
1
2
0
6

Get local news delivered to your inbox!

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Related to this story

Get up-to-the-minute news sent straight to your device.

Topics

News Alerts

Breaking News