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Manteca must wisely forge financial waters in making Great Wolf deal
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Two of Great Wolf Resorts’ water parks are underwater.

They are located In Traverse City, Mich., and in Kansas City, Kan. The two resorts cost more than $100 million to build in 2003.

The Wall Street Journal on Nov. 10 reported the firm was trying to get a loan modification. If that wasn’t possible, Great Wolf indicated they may consider giving the resorts back to the lender.

The fact the company is willing to walk away from an obligation and not underwrite it using profits from their other 11 resorts that are doing well should make it clear to City of Manteca leaders that they need to be cautious with where they go with Great Wolf Resorts.

The publicly-traded company has since changed its expansion strategy to act more like hotels that have stock traded on exchanges. It includes teaming up with investment partners such as McWhinney for the capital intensive undertakings. The resort proposed for Manteca, as an example, has an estimated $200 million price tag. They also have switched their strategy from being located in cold-weather locales to one that relies on large population bases. The two underwater indoor water park resorts are located in colder climates with much smaller population bases than the 600-room hotel resorts proposed for both Garden Grove near Disneyland and Manteca. Great Wolf also had no investment partners in the two troubled resorts.

Great Wolf Resorts’ problems with their two underwater resorts shouldn’t scare Manteca away from considering the deal that could bring $4 million-plus annually into the city’s general fund via hotel room taxes plus create - according to Great Wolf - 500 permanent jobs.

Obviously there are negotiations going on and the public won’t be privy to any proposed exact financial details until such time as a deal is ready to be vetted in public at a City Council meeting for a yea or nay vote. It is extremely clear, though, that Manteca must structure a deal that protects the city.

After all, if the housing foreclosure crisis hasn’t taught us anything else it has underscored the moral bankruptcy that some have in walking away from loans they made in good faith when they have the wherewithal to still pay them but they instead opt to cut losses because their home is underwater.

In this case it wouldn’t just involve the bank but – depending upon how the deal is strictured – it could involve the City of Manteca as well.

It is highly doubtful with the financial acumen displayed so far by the city that they’d be careless enough to expose Manteca in such a manner.

That is why the deal really has to be super clean.

The best way to do that is limit Manteca’s involvement to the 30 acres and to infrastructure needed to extend sewer, water, storm drainage, and other utilities to the site as well as extend Daniels Street. It is exactly what they did to assist in the development of the neighboring Stadium Retail Center. Not a cent was spent on private property.

It would have the added bonus of opening up for development of 110 acres of city land across the street from the proposed Great Wolf site and immediately west of Big League Dreams. The cost of the initial Daniels Street extension including two sets of traffic signals was $10 million.

The land could be leased to Great Wolf Resorts for 30 years at $1 a year plus an option for a 30-year extension. Assuming the land is worth $5 per square foot, that is a $6,534,000 investment based on $43,500 square feet an acre.

That would mean the city’s “investment” would represent about $17 million or a little bit more depending upon actual infrastructure costs and the actual value of the land.

No RDA money would be directly invested in Great Wolf.

It would be a shrewd deal structured that way for several reasons since the Great Wolf Resort would greatly enhance the value of 140 acres including the 30 acres where it would be built. All of that land is now simply surplus land attached to the wastewater treatment plant.

If all other figures floated to date are taken on their most conservative end, there would be $4 million in general fund receipts from room taxes each year in additional to annual property taxes close to $2 million.

That makes a land and infrastructure approach a safe bet. Anything beyond that starts making Great Wolf look like a risky venture for Manteca.