Old DHS building may become 100-room hotel

A struggling area on the west edge of downtown Colorado Springs could get a big lift with plans to turn a vacant office building into a 100-room hotel that would be affiliated with either the Hilton or Holiday Inn chain.

The owners of the nearby Clarion Hotel plan to spend $4 million gutting the run-down 40-year-old office building, which housed the El Paso County Department of Human Services, and turning it into a hotel that would open next spring, said Ted Jarosz Jr. He is managing partner of the Jarosz Family Limited Partnership, which has agreed to buy the building at 105 N. Spruce St. from the county for $2.4 million.

“This will bring economic vitality to a section of downtown that doesn’t have any. This hotel will be adjacent to the Bijou Street interchange (of Interstate 25) that is the gateway to downtown,” said Sam Eppley, owner of Sparrow Hawk Cookware and president of the Downtown Partnership, a downtown advocacy group. “Colorado Springs and downtown are a great destination for business and tourism, and more hotel rooms will add to that.”

Jarosz said he hopes to complete the purchase by June and gut the 64,640-square-foot building so it can be converted into between 90 and 100 hotel rooms. He said the hotel would include about 2,000 square feet of meeting rooms, but the partnership hasn’t decided whether it would include a restaurant. The hotel is scheduled to open in spring 2013.

The same partnership owns the 202-room Clarion Hotel, 314 W. Bijou St., which it acquired for $5.65 million in 2004 and then spent $2 million renovating.

“We approached the county last spring but the negotiations fell apart during the summer. We got back together in the fall and got the deal done,” Jarosz said. “We are really excited about this project. I am bullish on downtown. While it has been affected by the economy, downtown will recover when the rest of the economy recovers. The Clarion is out here by ourselves, and having another property nearby will attract more people. It will be an improvement for the neighborhood as well.”

Jarosz said the partnership will decide on a brand for the hotel in the next month, which would be more “upscale” than the Clarion but still targeted at the mid-market type of traveler. Under the partnership’s contract with the county, the hotel must be affiliated with either the Hilton or Intercontinental (Holiday Inn) chain of hotels. He said he is still lining up financing for the project, but has had what he calls “promising” talks with potential lenders.

Doug Price, CEO of the Colorado Springs Convention and Visitors Bureau, said the planned new hotel “has a place in our market,” but wouldn’t generate much additional room demand for the city because it won’t have much meeting space.

El Paso County commissioners approved a resolution Tuesday to sell the building to the partnership. The deal is about $400,000 less than an appraisal from April, but County Attorney Bill Louis said county staff did a cost-benefit analysis after the buyer promised to quickly put the property back into use.

“We believe there’s a very positive impact,” County Budget Officer Nicola Sapp told commissioners.

Sapp and Louis said the deal would put the property back on the tax rolls, create about 100 construction jobs and 30 to 40 hotel jobs, and generate lodging taxes. The staff determined the community would see at least a $5.6 million benefit in 10 years.

The county would also use the proceeds to eliminate $2.35 million in debt on another former DHS building at 17 N. Spruce St.

Louis said the contract includes a number of safeguards to ensure the 105 N. Spruce building quickly becomes operational.

“It is designed so someone cannot buy the property in a down economy and hold it for speculation purposes,” he said.