Cobblestone Hotels pitches concept to city business owners

A new hotel potentially will be built in California; however, it would require investment from area residents beforehand.

On Thursday, Cobblestone Hotels Vice President of Development Chris Hart presented a proposal to members of the California Area Chamber of Commerce and other business owners at California City Hall.

Cobblestone Hotels is considering partnering with locals to build a $7 million hotel.

In the Cobblestone Hotels model, investors put up 30 percent (approximately $2.1 million) and local banks view the investment as collateral for the remaining costs (about $4.9 million). Only about 3 percent of these projects fail, according to Mayor Rich Green.

"Probably five months ago, the city was approached by the Cobblestone Hotel Group about whether we would have some interest in having a hotel put in California, Missouri," Green said. "Chris, at that time came up and we met. It's fairly obvious to me that hotels would be very advantageous to California if we can get a nice hotel in town."

The city paid for a pre-development study conducted by the GSG Hospitality Group. According to the mayor, the city sees a potential hotel as a plus for California as it would allow guests and business owners to stay in the area.

"We have a lot of funerals and weddings in town where people can't stay here. We have businesses in town where people don't stay here, they stay in Jeff City," Green said. "The idea was to attract those people to stay at a facility in California, Missouri, rather than going to Jefferson City. In some cases, the Tipton people typically go to Sedalia because they have the same issue that we do."

The study states the hotel would be built as a 45-room unit. Green said there are several sites scouted, "mostly along new Highway 50, the bypass on the south side of town, which would be a logical place for a hotel."

Hart explained Cobblestone Hotels is a privately owned hotel franchise based out of Neenah, Wisconsin which began in 2007. The business specializes in bringing hotels to rural areas and small towns. He said the chain does not have much of a presence in the state with only two hotels in Trenton and Maryville, Missouri, but is currently looking to expand.

"It would be like any other loan," Hart said. "And by going to 30 percent, our experience is that the bank's going to offer better terms when it comes to personal guarantees and that sort of thing. If you go under 30, usually, they start requiring more personal guarantees."

According to Green, the city's involvement in the issue is essentially done. Now, the decision for a hotel is up to business owners and residents to see if they would like to invest.

"What we do typically is we look through the local market to have groups of people own the hotels and our investor mixes are pretty eclectic," Hart said. "We've got a lot of farmers, we've got ranchers out west, we've got dentists and auto dealers, and architects and attorneys and equipment dealers, you name it. Whoever is successful in their local community tends to be on board."

He said most of these individuals never thought of owning a hotel. However, they became involved after seeing a hotel that would be beneficial to their community and a promising financial investment for themselves as well.

Hart said, for most, it would a passive investment. The local investors would hire a management company to run the hotel with their total involvement usually at a minimum. What Cobblestone does is set up an LLC with investors becoming members of it.

Decisions are spelled out within the LLC, which would dictate how further decisions are made and who has the authority to make them moving forward. He said the investor group decides how profits get distributed with each group setting its parameters on that upfront.

After a question and answer period between Hart and the guests, it was asked what the next step would be going forward. Although there was no decision made between Cobblestone and business owners at the meeting, those attending were curious as to where the conversation leads from here.

Guests said they would be interested in talking with other investors to see what their town's experience has been with Cobblestone Hotels. Hart then offered contact information to existing investors at other locations and links to the chain's Franchise Disclosure Document. He said he would be working directly with investors if the community decides to move forward with the construction of a hotel.

"I'm not expecting necessarily that we've got it all paid for just based on this meeting, but I am certainly hopeful some folks are coming away thinking, 'I'd like to look closer and would seriously consider being part of it,'" Hart said.

"But this is the hardest part of the whole project, finding the money. It always is...and there's no average amount of time that it takes. Sometimes they happen quickly and sometimes they don't happen for some years. Hopefully, we'll skew early."