NORTHERN HOTEL

Northern Hotel remodeling to resume soon

2010-12-15T00:00:00Z 2010-12-15T08:55:14Z Northern Hotel remodeling to resume soonBy JAN FALSTAD Of The Gazette Staff The Billings Gazette
December 15, 2010 12:00 am  • 

The long-awaited, often-sidetracked restoration of the Northern Hotel in downtown Billings will soon be back on track again, according to co-owner Mike Nelson.

Two Billings banks, which he wouldn't name yet, are close to lending Mike and his brother, Chris Nelson, $14 million to finish the down-to-the-studs remodeling project and reopen the historic landmark by Christmas 2011.

Nearly two years ago, the Nelsons paid $2.47 million, plus $262,604 in back taxes, through their company, Zoot Hospitality LLC, for the empty Northern at a foreclosure sale. Since then, they have invested nearly $5 million more removing asbestos, upgrading the heating and cooling system and myriad other basic fixes on the 70-year-old structure. Getting the Northern ready for guests again will swallow another $14 million, for a total of $20 million.

"We're feeling very excited to be doing business with two first-class banks here in Billings," Mike Nelson said. "They'll make a lot of money on this deal, but I'm grateful to them."

Before closing dates can be scheduled on the loans, the brothers must tweak their budget for remodeling and furnishing the 160-bed hotel at the corner of First Avenue North and North Broadway.

One bank will make a conventional loan to finish the remodeling. The second lender will finance the furniture, fixtures and equipment, which will cost at least $4.25 million.

At the peak of construction this year, 40 workers were working full time on the hotel. But in September, bridge financing and the Nelsons' personal funds were so stressed that they cut back to a handful of workers.

"We were going gangbusters, full speed, to be ready to open by mid-year," Nelson said. "But we were outpacing the number of personal funds we had to put in."

Four employees who work for Zoot Construction, Chris Nelson's company in Bozeman, are framing rooms, and the framing is about 65 percent complete.

Construction should gear up again in 30 to 40 days, Mike Nelson said, and he'll need about 100 workers to make up for lost time.

"We're trying to arrange it so we now can be open for the Christmas season of next year. We've pushed it back that far, about six to eight months," he said.

In an effort to get the Northern running and the property taxes rolling in again, the Billings City Council allowed the Nelsons to tap into $20 million in tax-free bonds, backed by federal stimulus money. This is the kind of financing the city has used on some of its projects.

But given the record-low interest rates on conventional loans, those bonds never worked out. The Northern's bonding authority expires Dec. 31.

"There was really no advantage to them, and it is a lot less of a hassle to get private funding," said Pat Weber, finance director for the city of Billings.

While grateful for the opportunity, Mike Nelson said pursuing the bonds cost time and money and never attracted serious investor interest.

"We realized we had to slow down and wait until the conventional financing came through," Mike Nelson said.

The original Northern Hotel, built in 1892, was destroyed by fire in 1940 and rebuilt.

Robert and Susan Van Riper bought the Northern in 2002. After they declared personal bankruptcy, a court-appointed trustee locked the doors in 2006 and the couple lost the hotel in a foreclosure sale in February 2007.

In May 2007, San Francisco developer Hassan Kangarloo bought the Northern and announced grand plans to restore the hotel. Instead, he did nothing and lost the property in a second foreclosure sale to the Nelsons in 2009.

If the two bank loans are completed and the Northern is finally restored, the hotel will feature a large second-floor ballroom with movable walls, a modern restaurant and a café.

"We're still really proud to say that 99 percent of the Northern money has been spent on Billings contractors and Billings taxes and things like that," Mike Nelson said.

Contact Jan Falstad at jfalstad@billingsgazette.com of 406-657-1306.

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