Plan for Cedar Rapids Convention Complex management falls apart

It was just a month ago that the City Council was expressing jubilation about its decision to hire a North Liberty firm and an Ames firm to join forces to manage the city's new convention center, set for construction, and its U.S. Cellular Center arena and Five Seasons Hotel, both preparing for renovation.

However, city officials now are recommending to the City Council that the city end negotiations with the two Iowa firms - Kinseth Hospitality Cos. of North Liberty and VenuWorks of Ames, which have formed Cedar Rapids Management Associates LLC - and pursue an "alternative manager" as the city continues to pursue a name brand for the hotel.

Frew Nations Group, the city's project manager for the convention center construction and the arena and hotel renovations, has been negotiating for the city with Kinseth and VenuWorks, but "both sides were unable to reach an agreement" on a management contract in the last month, according a memorandum to the City Council from the city manager's office.

Bruce Kinseth, executive vice president of his family's North Liberty business, on Monday said Kinseth Hospitality has not agreed to drop out of consideration for the Cedar Rapids contract and, in fact, is still waiting to sit down and talk with city officials and the City Council about the contract.

"We really never commenced negotiations at this point," Kinseth said.

Kinseth said he received a two-minute phone call on Friday from city consultant John Frew, a principle at Frew Nations Group, informing him that the city officials would be recommending to the City Council on Tuesday that negotiations with Kinseth and VenuWorks come to an end.

Cedar Rapids City Manager Jeff Pomeranz on Monday said Frew's recommendation to the city to end negotiations was based on a central item: " ... (T)hey could not meet our requirements."

"The project continues to move forward and a new request for proposals will be released shortly," Pomeranz said.

Kinseth said that he and Steve Peters, president of VenuWorks, have written a letter to each of the city's nine council members seeking to sit down with each of them to discuss the management contract for the Convention Complex, which will consist of a new convention center and a renovated U.S. Cellular Center, and the city-owned Five Seasons Hotel.

"We think this warrants further discussion," Kinseth said on Monday.

He said his firm has submitted a proposed management agreement, operating agreement, budget and marketing plan to Frew, which have generated some questions from the city, he acknowledged. He thought one question centered on the corporate governance of the Kinseth-VenuWorks entity, Cedar Rapids Management Associates LLC, but he did not believe, for instance, that revenue had anything to with the city's questions.

At the same time, he noted that the City Council enthusiastically chose Kinseth and VenuWorks a month ago and felt then that the two Iowa firms had the people to deliver what the city needed. "All of a sudden, it's just gone," he added. " … So we're just beyond disappointed."

Kinseth said his firm "jumped on this thing" immediately upon being selected by the City Council at its April 12 meeting. Two of the hotel brands in which the city has said it is interested - Sheraton and Doubletree - have both expressed support for Kinseth Hospitality Cos., Kinseth said.

The Five Seasons Hotel had carried the Crowne Plaza flag in recent years, but that name came down in March as the city purchased the hotel from its creditors. The city has now shuttered the hotel until the fall of 2012 for renovation.

Kinseth Hospitality operates more than 45 hotels and 10 chain-affiliated restaurants in Iowa and nine other states. The firm, though, does not operate an "upscale, full-service hotel" like the Five Seasons Hotel, Frew noted back in April.

"This will be feather in their cap," City Council member Monica Vernon said then.

VenuWorks is well known to the city. The Ames firm has managed the U.S. Cellular Center arena for years, though that contract was slated to end as the new contract on the Convention Complex and hotel was slated to be signed. VenuWorks continues to manage the city's Paramount Theatre and Ice Arena.

Stanwood Hotels and Resorts, White Plains, N.Y., which calls itself "one of the world's largest hotel and leisure companies," interviewed for the Cedar Rapids management contract but lost out to the Kinseth and VenuWorks proposal.