Episode 41: The Long and Winding Road: How an $87.5 Million Hotel Gets Built in Rockford, IllinoisApril 23, 2018
Back in 2012, Larry Morrissey, the now-retired Mayor of Rockford, Illinois and Gary Gorman, Chairman of the development company, Gorman and Company, sat at a hotel bar in Shanghai, China over a glass of scotch. It was the beginning of a six-year project that is that has led to the construction of a $87.5 million Embassy Suites Hotel and conference center in downtown Rockford, Illinois.
Now this is not any simple hotel. This is the renovation of a hulking, 13-story manufacturing plant that was formerly owned by a company called Amerock. It has been empty for 25-plus years and has served as a massive eyesore in Downtown, Rockford.
It’s been a long road with lots of detours and barriers. But after years of political battles (including a 7 to 6 City Council vote to approve the project) and financial challenges (the project has $30 million in EB-5 funding from international investors), the transformational project is now under construction.
Andy Levine (DCI): If today’s story was a movie, it might be called “Larry and Gary’s Excellent Adventure.” Back in 2012, Larry Morrissey, the now-retired mayor of Rockford, Illinois, and Gary Gorman, chairman of the development company, Gorman & Company, teamed up to successfully launch the construction of a new Embassy Suites hotel in downtown Rockford, Illinois.
Patience Fairbrother (DCI): It’s been a long road with lots of detours and barriers, but after six years of pursuit, the project is finally under construction.
Andy: Now, this is not any simple hotel. This was the renovation of a hulking 13-story manufacturing plant that formerly was owned by a company called Amerock. So, it’s apt that it had been named the Amerock project. It’s been empty for 25-plus years and has served as a massive eyesore in downtown Rockford.
Patience: So, welcome to Episode 41 of The Project: Inside Corporate Location Decisions. I’m Patience Fairbrother of Development Counsellors International.
Andy: And I’m Andy Levine, also with DCI and Patience’s co-host of The Project.
Today’s story is different than our normal site selection profiles. It’s not about a company trying to figure out the best possible location to put a new facility, and it’s not about different communities competing to bring a new corporation to their community or the next win in terms of a major expansion project.
Patience: Today’s story is about a mayor, a developer, and many others in a single community, working together to redevelop an empty and dilapidated building at the heart of the city’s downtown. It took them six years of hard work and persistence, and a good deal of perspiration, too.
Andy: And it all started when the two men sat down for a drink in a hotel bar in Shanghai, China, back in 2012. We’ll let Gary Gorman, chairman of Gorman & Company, get the story started. The two men were part of a marketing mission to China for the State of Illinois.
Gary Gorman (Gorman & Company): So, we were sitting up late one night in a bar, in a hotel in Shanghai, and I know we were drinking scotch because we were talking about different scotches. And I said, I said, “Larry, if you could do one thing in your city, what would it be?” And he said, “I want to have a downtown hotel.” He said, “I’m personally embarrassed that we don’t have a marquis downtown hotel where I can have meetings and be proud to invite people.” That started the conversation.
Andy: I asked Rockford mayor, Larry Morrissey, about that conversation.
Larry Morrissey (Rockford Mayor): I remember that conversation vividly, and it’s a true story. We sat in the top of a hotel bar, and we were talking about real estate. And I’d gotten to know Gary through some of the other projects he had been doing in our community in affordable housing. So, as we were thinking about the future, one of the things that was a glaring hole in our central city and impacted our entire attractiveness as a community was the lack of a downtown hotel and conference center. So, that really got our wheels starting to spin and, you know, dreaming about what we might be able to do, and ultimately, that led to the Amerock as a project.
Patience: Gary Gorman’s first reaction to the idea wasn’t terribly positive.
Gary: My immediate reaction is, “How do I avoid doing this without offending the mayor?” Because, it wasn’t something that was high on my list. Larry is incredibly persistent. He is a visionary, but there are a lot of visionaries that don’t follow through. He’s a visionary that does follow through, so he was relentless. And, you know, he would call me, and he’d say, “All right, you know, how’s our hotel doing, deal doing?” And I’d say, “Well, you know, Mayor, you know, I don’t know. It seems like a very difficult thing to do.”
Andy: So, this is in a former manufacturing plant. Can you tell me about the first time you visited the actual building?
Gary: I mean, it was scary. You know, it’s a 13-story building that had been empty for, oh, almost 30 years, and, you know, lead paint all over the place and water standing on the floors. And, you know, it was a mess. So, it wasn’t like I stood there and said, “Boy, I can picture this to be, you know, a special hotel.”
Patience: So, the building was a mess, but it was also right in the middle of Rockford’s downtown. Here’s Mayor Morrissey.
Mayor Morrissey: You know, the building is so…it’s important for a lot of reasons, but it’s right smack-dab in the middle of our central city. You can’t not see it, coming into our community, into our downtown. It is a backdrop right near our festival park. And so, it’s been a hulking sort of mess and a symbol of failure for literally decades.
Andy: Like many community challenges, there were two major barriers to success: politics and money. So, let’s start with the money.
Mayor Morrissey: On the money side, it was very complicated because, you know, frankly, there weren’t a lot of national investors that had Rockford, Illinois, on the top of their list to place money. So, we had to look at non-traditional capital sources.
Andy: So, to break this down to the simplest components, there were two non-traditional sources. Historic tax credits from both the state and federal government were an important element, and that’s why it was so important for Rockford to work with the existing building rather than knocking it down and starting over.
Patience: But what was even more interesting to us was the decision to pursue EB-5 money to fund the project.
Andy: EB-5 is a federal program, established in 1990, to encourage foreigners to invest in the United States. Investors provide at least half a million dollars for U.S. projects employing 10 or more employees.
Gary: It was quite an adventure and a lot of fun, definitely not a junket. We put a lot of miles on us, not just getting there, but once we were within China. It’s a huge country. So, we were traveling to multiple cities throughout the country in order to meet with potential investors.
Andy: And what were those meetings like?
Gary: Really varied. You know, what struck me at times, when people would be in a room and I’m getting ready to make a presentation, is that, literally, many of the people who are walking around, millionaires, look like they just came off, you know, the line for free food at the homeless shelter. They’re hard-working folks that have made money, many of them in real estate, for example, but they save their money. They don’t splurge unnecessarily, and for many of them, this investment in the United States is a vehicle towards a long-term financial sustainability and opportunities for their children. So, it was really a humbling and powerful experience for me, just to realize just how hungry Chinese citizens were to have an economic future.
Patience: Mayor Morrissey made 4 separate trips to China to pitch the Amerock project, but Gary Gorman made a total of 20 trips, yes, 20 trips at his own expense to Asia.
Gary: So, we raised $30 million to help finance this project through the EB-5 visa program from China, India, and Vietnam.
Andy: How many participants would you have from those three countries?
Gary: Sixty, because, yeah, the minimum investment to qualify for the green card is $500,000. So, we had 60 investors from those three countries, and what they’re after, the reason they put in their money, is not so much to get a significant return on their money. They do want their money back, so we do have to pay them back. They get a minimal interest rate on it, but they get a green card for themselves and their family, and their primary motivation is to get their children into U.S. schools.
Patience: So, that provides some insight into the money side of the equation. Let’s switch gears to the politics.
Andy: While Gary Gorman took the lead on the financing of the project, which, by the way, made my head spin as he described the various complexities, Mayor Morrissey managed the political side of things.
Mayor Morrissey: So, you know, there’s a number of twists and turns over the life of a project. One of the biggest things that occurred over the course of trying to get this deal done was the simple fact that the banking world that was bringing in the traditional money was requiring a greater percentage of equity into the deal. The other element was that we were planning a train station to connect Rockford to Chicago. It would have been a great component to the project, but the winds changed in our state capital. The deal that we had gotten financing for to bring the train station and bring the rail service to Rockford collapsed.
Andy: So, the city switched gears to use public funds from the train station project to a convention visitors center adjacent to the new hotel. Total price tag to the city was $12.5 million, and not everyone liked this idea.
Mayor Morrissey: What we ultimately came up with as a plan was the city shifting its equity contribution from the parking deck and train station, which was no longer going to be happening, into owning the conference center, which, if you do the research, you know, nationally, it’s very common for a public body to own a conference center in a central city.
Patience: And here’s where the politics got tricky. The mayor had to go back to the city council for approval of this deal change in the middle of an election year.
Andy: So, on April 10, 2017, it all came down to a final vote before the city council. Gary Gorman told us about that meeting.
Gary: I don’t get nervous about many things. That was a white-knuckle ride that night because the first three alders just blasted the project and blasted me personally, and I thought, “All this time, all this work…” We had had way over a million dollars of our own money out in studies, I had bought the building by that time, and I’m sitting there, thinking, “All of this is going down.” And then, it just turned, and we got seven votes. So, it was seven to six and we won, and, you know, the mayor cast his vote. So, yeah, I guess, technically, it was eight to six, but in terms of the council itself, we won by one vote. So, it was literally months of preparation for that meeting where we had to convince our city council. We literally built a broad-based coalition of community supporters representing all walks of life from different parts of the community to get behind the project and to eke out what ultimately was a very narrow victory that night.
Patience: So, with the blessing of the city council and the funding in place, the City of Rockford and developer Gorman & Company moved forward on the development of a four-star Embassy Suites hotel and convention center one year later, on April 10th of 2018.
Andy: We asked both Larry and Gary what advice they would give to others hoping to pave the way for this sort of a transformational community project. They used different words, but their answers were surprisingly similar. We’ll start with Mayor Morrissey.
Mayor Morrissey: When the obstacles come up, as the key political leadership, you’ve got to be willing to fight through it. I’ve said many times, the job of my role in the works is not always the most complex. Gary had to do a lot more complex stuff than I did. But, my role, in terms of beating down the barriers and showing the support for the project, any mayor who’s got to do a project like this, they have to know that’s their job. You can’t waver, you have to be strong, and that the rest of your leadership, if you’re doing that, will get behind you. I boxed a little bit when I was in college. I wasn’t very good at it, so I took a lot of beatings. The good news is, you learn how to take a beating, right, and you keep standing. And if you can keep standing, even after you take a beating, that’s part of the test.
Patience: Gary used a different analogy to describe his ability to take a punch.
Gary: Yeah, I felt like I was the Fred Flintstone doll, you know, with the sand at the bottom, where you just keep getting punched and you flip back up.
Andy: For a final perspective on the impact of this project on the community, we turned to John Groh, who is the president of the Rockford Area Convention & Visitors Bureau.
John Groh (Rockford Area Convention & Visitors Bureau): You know, the new Hilton Embassy Suites project, I think, is transformational in many ways. You know, first, it’s going to be a marquis hotel in our downtown on our riverfront end. That is something that we have lacked for decades in terms of, you know, a quality downtown hotel project. I think it really is a transformational tipping point in our downtown revitalization.
Patience: What an amazing six-year journey. Andy, you did the interviews with Larry, Gary, and John on this one.
Andy: Larry, Gary, and John, that’s kind of interesting. Yes, I’ve become very familiar with Rockford, Illinois. It’s a really interesting place, and very progressive in a bunch of other areas beyond this real estate project.
Patience: So, what were some of those key takeaways from this episode, from your perspective?
Andy: Well, I have to start with kind of the persistence. So, both of these guys, in particular the mayor, as well as Gary Gorman, really just wouldn’t let go of this project. And I love the analogy that Gary used of the Fred Flintstone punching bag. You know, “You can punch me, and I’m going to jump right back up.” And I love the analogy of the mayor, talking about, you know, “I know how to take a punch, and you’re not going to knock me down.” That was, to me, kind of one of the most interesting sides of this. You know, six years, and they just kept going and going on this whole thing.
Patience: And Gary went back to Asia 20 times on his own, and on his own time.
Andy: Twenty times to get, and to get a total of 60 investors. And that was probably the other area of this, which is completely different than the other ones that we’ve profiled here, was the EB-5 program. So, you know, in order to raise $87 million, they had to turn to an unusual source, the EB-5 program. This made up $30 million of it, and they had to go overseas, 20 different trips for Gary Gorman, 4 trips for Larry Morrissey, and they had to convince a total of 60 people to invest half a million dollars each, and they did it.
Patience: So, that is a wrap on Episode 41 of The Project: Inside Corporate Location Decisions.
Andy: We want to thank Larry Morrissey and Gary Gorman for taking the time to share the story of their six-year journey. I’m hoping I get a chance to see this amazing new hotel when it’s finally completed in 2020. We also want to thank John Groh of the Rockford Area Convention & Visitors Bureau for helping to facilitate these interviews with Larry and Gary.
Patience: The Project is sponsored by DCI. We are the leader in marketing places and have served over 450 cities, states, regions, and countries. You can learn more about us at aboutdci.com.
Andy: Now, we’ve received a lot of very favorable feedback on our last episode that we recorded at the Site Selectors Guild in Cincinnati. So, we just wanted to say, if there are other conferences that you think we should attend and send either Patience or myself there, please let us know.
Patience: And just a tip, if any of them are in Paris or Hawaii, or someplace great like that, that would be great.
Andy: Maybe we can convince the Site Selectors Guild to hold their next meeting in Paris. Do you think that’s a possibility?
Patience: I think that’s our best bet, actually.
So, now, here’s a little treat for you. Given all of Larry and Gary’s references to boxing at the end of this episode, we’re going to end today’s show with a song. Yes, it’s the well-known theme song, “Gonna Fly Now,” which was in the original “Rocky” movie and four of the sequels. It earned composer Bill Conti an Academy Award for Best Original Score.
Andy: Wow, and Patience is like dancing around the studio here. She’s shadow-boxing. It’s incredible, folks.
We hope you’ll keep listening. There are many more projects to come.