Hearing spurs inquiry at Inlet Tower for possible loan violations
The operation of a restaurant and offerings of overnight room rentals at the Inlet Tower in Anchorage has sparked an inquiry into possible violation of terms of a loan with the Alaska Housing Finance Corp.
JUNEAU — A legislative hearing on a bill allowing the Alaska Housing Finance Corp. to start lending to developers of multi-unit housing projects that include commercial businesses prompted an investigation of the Inlet Tower apartments in Anchorage for what appear to be very public and advertised violations of two provisions of its loan agreement.
The House Labor and Commerce Committee’s Feb. 27 hearing on HB 50 also debated terms allowing restaurants that sell alcoholic beverages within housing developments but banning any tobacco sales. Other prohibited activities include adult entertainment, charitable gaming and substance abuse treatment.
No committee member opposed the exclusion of those businesses.
The AHFC Executive Loan Committee was scheduled to meet March 12 to “review circumstances we’ve been made aware of as of the hearing on HB 50,” said Eric Havelock, AHFC’s multi-family underwriting supervisor on March 7.
Despite the controversies, the bill was reported out of the Labor and Commerce Committee with bipartisan support. It was scheduled for a House Finance Committee hearing on March 14.
The “circumstances” that drew AFHC’s interest include the apparent continued operation of the Inlet Tower as short-term stay hotel and of its PubHouse restaurant as public restaurant rather than one restricted to residents.
Stacy Shubert, AHFC public affairs director, said at the hearing that it financed developer Bob Gross’ plans to turn the “former hotel into an apartment complex with a restaurant downstairs.”
Following the hearing, Havelock said a public restaurant and overnight room rentals would both be “inconsistent” with terms of Inlet Tower’s two-year-old, $9.2 million, 30-year AHFC loan.
The March 12 loan committee meeting was intended to determine the extent of the Inlet Tower violations and a course of action.
Options include accelerating the loan due to a technical default, closing the restaurant to the public, or “forbearance,” which Havelock described as the technical name for “the do-nothing option.”
If AHFC issues a “notice of noncompliance,” the borrower could request a change of loan terms, Havelock said.
Ironically, testimony from a neighboring group in support of the bill prompted AHFC’s investigation.
Frances Marin, testifying at the February hearing for the Park Place Condominium Association and in support of the bill, spilled the beans on Inlet Tower. Marin noted her association’s Dec. 19 resolution calling the Tower “a pleasant gathering place” and endorsed the “mixed use facilities offered at the Inlet Tower including the full-service restaurant with liquor license.”
The Inlet Tower’s website, as of March 11, describes it as a “hotel & suites” and the PubHouse as offering “the finest in Anchorage hotel dining.” The site was taking reservations for either, including one-night stays in the hotel.
Chief Operating Officer Jeff Cunningham declined to be interviewed directly. In response to questions submitted by email he wrote on March 8 that, “At the present time we are current with our commitments to AHFC.
“There currently is an onsite restaurant that is for use by the Residents; we find that this is a very valuable amenity that creates a sense of community,” Cunningham added, but would not confirm the evidence of his website or telephone calls to the PubHouse.
Overnight room reservations are also available on the bookings.com and hotelsone.com websites.
Despite the advertising, AHFC was not aware the Inlet Tower was continuing to operate as a hotel until Havelock was interviewed for this report.
“That means we potentially have another default situation,” Havelock said. “It’s our understanding they’re operating as corporate suites, affordable housing and market rate rentals.”
Corporate suites are rooms leased for long terms by businesses such as FedEx or UPS to provide housing for pilots and other transient employees, he explained.
Terms of the Inlet Tower loan allowed a year to convert its restaurant to a “congregate service,” Havelock said.
“From what you’re telling me it appears that that has not been done,” he said.
HB 50, which currently includes no retroactivity provisions, could legalize all of the Inlet Tower activities. AHFC is seeking passage of the bill as part of a national trend for multi-use developments that make them more useful to residents and help create a neighborhood atmosphere.
“The bill could strengthen AHFC’s toolbox,” said Stacy Shubert, its public affairs director, at the House hearing.
HB 50 sets no limit on the percent of a housing development that could be devoted to commercial space. Shubert said 50 percent, “may be a reasonable number,” but said AHFC wanted flexibility.
AHFC is “aware” of one project each, in Juneau and Anchorage, that “might like to proceed with residential housing and some component of commercial space,” Shubert said.
Anchorage Rep. Mia Costello introduced the bill at the request of AHFC but took little interest in the committee debate over restricted businesses. As the committee debated possible amendments to allow businesses that sell tobacco or totally restrict alcohol sales, Costello declined to express a preference.
Her bill sponsor statement said the restrictions are meant to “exclude businesses that are not child or family friendly.”
Rep. Charisse Millett, also an Anchorage Republican, was first to ask why the legislature was “going to pick and choose the vices that people use.”
“I’m not a big tobacco supporter but I am a big supporter of liberty and freedom,” Millett said.
Anchorage freshman Rep. Lora Reinbolt, vice chairwoman of the committee and chair for the hearing in the absence of Rep. Kurt Olson, said the different treatment of alcohol and tobacco sales businesses was “100 percent logical.”
Reinbolt said a smoker exposes others to the dangers of second hand smoke and creates a possible fire hazard.
“Drinking might affect you once you get in the car, but not right there,” she said.
Millett asked whether passage of HB 50 would begin a trend toward AHFC for smoke-free facilities.
Dan Fauske, CEO of AHFC, said his board has discussed the question of smoking prohibition on several occasions in the context of requirements tied to federal lending funds and a person’s right to pursue their own legal activities in the privacy of their home.
“It’s a murky area. It’s people’s rights versus the rights of others in the building,” Fauske said. He added that AHFC is “probably heading toward a nonsmoking policy in public housing units.”
Bob Tkacz is a correspondent for the Journal based in Juneau. He can be reached at email@example.com.