Second of two parts
Room rates may be low at the Inlet Inn, a downtown crash pad for drug dealers, junkies and street alcoholics. But the place costs the public a lot of money.
Police visit the hotel once a day, on average. The fire department averages a visit every four days. If you take those emergency-service visits just to the hotel's address -- not the street corner outside or the alley out back -- and multiply them by $200 (a conservative per-call cost), the annual price tag for taxpayers approaches $100,000. Few commercial properties in the city get more attention from police and ambulances. It's a publicly-subsidized flophouse. (Read previous column)
Here's the surprising part: Prominent Alaska business people own it. The Inlet Inn building is the property of a limited liability company called Augustine Energy Center. The LLC purchased the hotel four years ago. Company records list three investors: Gerald Neeser, who heads a construction firm; Mark Pfeffer, a real estate developer; and NANA Development Corp.
NANA Development, a subsidiary of NANA Regional Corp., is an Alaska Native corporation with international interests that include hospitality, telecommunications, mining and oil. In recent years its revenues have topped $1 billion. Pfeffer and Neeser have been involved with dozens of high-profile projects, including the Linny Pacillo Parking Garage and the Dena'ina Civic and Convention Center. Pfeffer, Neeser and a few other partners own Anchorage City Hall. (The city leases the space).
Augustine leases the Inlet Inn to the hotel operator. The operator is a woman named Boo Lee, president of and majority owner of K& B Management. Lee hasn't responded to the Anchorage Police Department's requests to remedy problems at the Inn. Like any landlord with a bad tenant, the Augustine partners have the option to evict Lee's company if she violates her lease agreement, but so far the partners have only been passing police warnings on to her, according to police. Unless the building owners do something to change the situation, APD may move to seize it the same way it has seized crack houses.
Seizing the building, called abatement, is a long legal process. The public would be on the hook for those costs as well.
The Augustine partners didn't buy the property with the intention of being long-term landlords to a public nuisance, said Pfeffer, who spoke with me on behalf of the partners. It was supposed to have been torn down years ago, he said, but the economy got in the way.
Augustine Energy Center was planned as a 21-story, energy- efficient office building located on the half block along Sixth Avenue between G and H streets. It was supposed to be completed in 2010.
Pfeffer said Augustine first purchased the Alaska Experience Theater property, next door to Inlet Inn. The building was in poor condition with a lot of crime issues, he said. The company demolished it and turned the space into a parking lot. Then the opportunity came to buy the Inn. It had been a problem for the city for a long time, Pfeffer said. Augustine saw that it could incorporate the land into its project. Pfeffer saw that as a favor to the city.
"Everybody wants to fix the problem but somebody's got to step up to the plate and write a check. OK, we went ahead and said we're going to take that first step," he said. "We'll gain economic control of this thing so if a solution comes along and there is a way to fix it, we're ready to go. So I kind of look at myself as the white knight agreeing to take on a problem no one else is going to take on."
Pfeffer said he's been involved in a number of projects to redevelop blighted properties. He demolished the notorious Hub Bar, for example, and built the downtown fire station, he said. He redeveloped the Alaska Village Trailer Park in East Anchorage.
Augustine purchased the property with the agreement that the former owner, Lee's company, would continue to operate the business until it was torn down, Pfeffer said. The lease said Augustine had no direct responsibilities to manage or maintain the property, he said.
OWNING A NUISANCE
By 2008, the developers had already invested several million dollars in the Augustine project, he said. Then the economy began to stall. Oil-related companies, the tenants envisioned for Augustine Energy Center, began laying off workers.
"All of a sudden the demand wasn't there," Pfeffer said.
Four years passed. The developers are still looking for a way to build on the half-block. All the while, problems at the Inlet Inn have escalated.
"I know that they have had multiple contacts from the police department and when they have we have reinforced those contacts with our own notices that they need to comply," Pfeffer said
Augustine will push that process as far as it can, he said. In the end, if the hotel operator doesn't comply, the only option will be evict the business. Pfeffer wasn't ready to do that. Augustine isn't making a profit on the hotel and shutting it down would mean an even bigger loss, he said.
"If you buy it and you spend money on it, somehow you got to replace it with something else that justifies buying it," he said. "So when you're sitting in my shoes and you own the property next door and you've cleaned it up, you say, 'OK, do I want to put my hands on that tar baby or not?' "
I asked if he'd seen the inside of the hotel. He had.
"It's really bad," he said. "It's totally awful." The hotel has "a difficult clientele," he said. It's a question whether the manager has the skill set to deal with it, he said. But isn't it the landlord's problem if hotel manager isn't doing her job? His answer, each time I asked him that question, was that I needed to take the long view. The hotel would eventually be torn down
"There's a beginning to redevelopment and there's an end to redevelopment and in the middle, who pays for it?"
That's the question I should be asking, he said.
WHO PICKS UP THE TAB?
OK, so whose responsibility is it? His answer seemed to be somebody other than him and his partners.
But, the way I saw it, the investors took a risk buying the Inn. Their gamble didn't pan out. That happens in business. Why should the public be picking up the tab?
A couple weeks after our first conversation, I called Pfeffer back. I read through all the information I'd collected about police and fire calls. I asked him one more time whether the Augustine partners had a responsibility to deal with the Inn. His tone had shifted since our first conversation.
"There is a point at which the tenant's negligence becomes the owners' issue to deal with," he said.
Where was that point?
"It might be here today," he said.
He couldn't say any more, he said. The partners would need to talk about it.
The issues at the hotel aren't going to go away just by closing it down, he said. The tenants, and their problems, will move somewhere else.
"I'm doing my part and my part probably needs to get to be more robust," he said. "But no matter what we do at the Inlet Inn, the people at Inlet Inn are probably going to be the same people with the same problems."
And the city, he said, will still be paying for them.