BY EMILY BATTLE
Kalahari Resorts will have to move quickly to take advantage of $25 million in tax-exempt financing its Fredericksburg water-park hotel could receive from the state.
The bonds, part of a federal stimulus program, must be issued by March 31, and construction has to begin no later than June 30, according to the application Fredericksburg officials filed with the state.
Kalahari President Todd Nelson said in a prepared statement released yesterday that the Recovery Zone Facility Bonds, which Fredericksburg officials learned late Friday had been allocated, will be an "integral part" of shoring up financing for the $250 million to $260 million project.
"This is a significant demonstration of the state's participation in helping develop this project and is a victory considering these tough times to secure financing," Nelson said in the statement.
The Recovery Zone Facility Bonds that Kalahari was awarded are intended for private projects in areas of economic distress.
On Dec. 8, Fredericksburg's City Council approved a resolution declaring Fredericksburg a recovery zone. The resolution cited Fredericksburg's 9.8 percent unemployment rate as of September and the 6.5 percent decline in sales tax revenue the city saw in the last fiscal year.
City officials first learned in November that Recovery Zone Facility Bonds would be made available through a competitive process. They spent nearly two months working with Kalahari and the Silver Cos. to put together an application that was due to the state Jan. 5--just 10 days before outgoing Gov. Tim Kaine's staff made its decision public.
Many details of the structure of the financing and the costs for the Kalahari project, along with an indication of what its timeline will look like if it is able to take advantage of the bonds, emerge in the application the city submitted to the state.
Among them:
The application estimates a 21-month construction period, meaning the hotel, conference center and water park would be complete by March 2012.
In order to meet this schedule, Kalahari will need to raise about $80 million from outside investors. The company believes that equity, combined with $30 million of its own money and a $10 million grant from
The final project, as proposed to the state in the bond application, will include a 12-story, 832-room hotel with four restaurants, 100,000 square feet of new convention space added to the existing 92,000-square-foot Fredericksburg Expo and Conference Center, a 200,000-square-foot indoor water park and a 100,000-square-foot indoor theme park like the one Kalahari recently built at its Wisconsin property. Future phases call for an outdoor water park and additional hotel rooms.
Some of the estimated project costs given in the breakdown are: $16.3 million for the 49-acre site in Celebrate Virginia, now owned by the Silver Cos.; $132 million for construction of the hotel and convention center; $55 million to build the water park and slides; and $4 million to construct the indoor theme park. The $260 million construction budget also includes a $7.5 million contingency as well as other costs.
Construction of the resort is expected to create 1,230 jobs, and once it opens, Kalahari's performance agreement with the city requires it to maintain 800 full-time and part-time jobs.
Kalahari has already spent $4 million in development costs related to the project over the past two years.
The resort's existing properties in Wisconsin and Ohio have performed well in the recession. The bond application states that for the first seven months of 2009, Kalahari's revenues were up 5.3 percent, and its earnings were up 27.8 percent over the same period in 2008.
Staff writer Bill Freehling contributed to this report.
Emily Battle: 540/374-5413
Email: ebattle@freelancestar.com