Northeast Tarrant

Mineral Wells’ Baker Hotel stuck in quagmire of bureaucratic red tape

The long-awaited plans to redevelop the historic Baker Hotel remain on hold.

The huge structure still towers over the Mineral Wells skyline, attracting curiosity seekers, history buffs and those who illegally try to sneak in.

Southlake-based developers want to restore the 86-year-old hotel, in part using money from foreign investors, but are still awaiting pre-approval from the Department of Homeland Security’s EB-5 Immigrant Investor program. The developers applied for the program last September but have no idea how long it will take to get pre-approval, called “exemplar status.”

“We’re just waiting,” said Chad Patton, one of the partners in the project. “It could take up to a year to get exemplar status. It potentially could be awhile.”

The EB-5 program allows wealthy international investors to obtain visas by placing at least $500,000 in a U.S. business that creates or preserves at least 10 full-time jobs. To go forward with redevelopment of the old hotel, Patton said they will need to raise $28 million from foreign investors.

About 80 percent of EB-5 investors come from China, according to Invest in the USA, an industry trade group.

Though it has been around for 25 years, the program is still relatively small and is capped at 10,000 visas annually.

The program has its critics, who say it essentially allows the U.S. to sell visas to foreign investors. The program was extended until Sept. 30 as part of Congress’ omnibus spending bill that passed in December.

But a variety of unresolved issues remain.

Just last week, the Senate Judiciary Committee had a hearing about overhauling the program.

Among the issues is the fact that most of the foreign investment is going to luxury hotels and condos in places like New York City and South Florida, rather than rural or economically distressed urban neighborhoods as originally intended. There were complaints about “gerrymandering” the program to qualify places like Manhattan and Beverly Hills for projects.

Foreign investors appear to be drawn more to projects in glitzy urban areas than small towns like Mineral Wells.

Program is ‘deeply flawed’

Sen. Charles Grassley, R-Iowa, chairman of the Senate Judiciary Committee, called the program “deeply flawed,” saying Midwestern states are at a disadvantage the way the program is being adminstered.

Last week, The Wall Street Journal quoted court documents in which an official from the Manhattan-based real estate banking firm The Carlton Group called EB-5 “legalized crack cocaine” in urging a client to take advantage of the program as a way to obtain a lower interest rate.

The hearing also outlined how the program was little-used until the 2008 real estate crash made financing difficult to obtain. The project has since exploded, and there now is a backlog of 22,000 foreign investors awaiting approval, said Peter Joseph, executive director of Invest in the USA, an EB-5 industry trade group.

“The annual visa backlog threatens the viability” of the program, Joseph testifed before Congress.

While the program has its critics, it has enjoyed support from both Republicans and Democrats.

The EB-5 program even became part of the presidential discussion last month when Bloomberg reported that Trump Bay Street, a luxury apartment tower under construction in Jersey City, N.J., was partially funded by Chinese investors.

Donald J. Healy, chief executive officer of Dallas-based Civitas Capital Group, which also manages the City of Dallas Regional Center, testified that any reform shouldn’t focus on a rural versus urban debate but should base its criteria more on areas that “are distressed and not distressed.”

Texas Sen. John Cornyn, R-Texas, also said during the hearing that he is “very aware that rural areas need help” but he also didn’t want to see it become an issue of rural versus urban projects.

The Baker developers were originally working with Civitas but switched last year to Florida-based Pathways, which also operates EB-5 regional centers around the country. Among the projects listed on its website are the $495 million Butler Brothers Building in Dallas and a $40 million multifamily project in Austin.

The developers of the Baker redevelopment turned to the EB-5 program “since traditional financing hasn’t really been interested in the project,” Patton said.

‘I do believe it will happen’

Since hosting its last guest in 1972, the Baker has slowly decayed, assisted by vandals who destroyed many of the old hotel’s fixtures and defaced the interior with graffiti. Mother Nature has also taken a toll — water damage is an issue in parts of the hotel.

Two years ago, the $56 million project got overwhelming support when nearly 96 percent of Mineral Wells’ voters approved reallocating an eighth of a cent of the city’s sales tax to it. In final totals, 1,558 voted in favor and 65 voted against.

Mineral Wells Mayor Mike Allen, who is seeking re-election in May, has heard complaints about other civic issues but said most residents continue to support the project.

“I don’t have any concerns,” Allen said. “I do believe it will happen.”

Part of the reason Allen remains confident is the time and money invested by Patton, his partner, Laird Fairchild, and the others who have become part of the Baker team. These include Dallas businessman Brint Ryan, who brought the shuttered Settles Hotel in Big Spring back to life; and Jeffrey Trigger of Austin-based La Corsha Hospitality Group, who once oversaw Dallas’ Mansion on Turtle Creek and Austin’s Driskoll Hotel.

“When a group puts in as much money as they have, they can’t get their money back unless it goes forward,” Allen said. “We all feel good that they can get the financing.”

Last month, Patton and Fairchild traveled to Shanghai, China, where they attended the 2016 Invest in America Summit.

“The Chinese trip — I would call it a successful one,” Patton said. “We got to meet some of the folks raising capital — they’re called migration agents. Now, we’re just in the process of fostering those relationships and waiting on the exemplar status.”

They also developed a video to attract foreign investment.

A number of cities, such as Dallas and Las Vegas, have used EB-5 to finance new projects, including hotels and casinos. A 2012 study by Invest in the USA, which represents 260 EB-5 regional centers nationwide, said the program added about $6.1 million to the Texas tax rolls.

‘Rival anything in Las Vegas’

The Baker could again make Mineral Wells a tourist destination.

In its early days, tourists flocked to the city to partake of the spring waters that supposedly cured a variety of ailments.

By 1920, the city had 400 mineral wells and was known as “the South’s greatest health resort,” according to the Handbook of Texas.

The 200-room Crazy Water Hotel opened in 1927, followed by the Baker on Nov. 9, 1929, just two weeks after the stock market crash.

The hotel included mineral baths, an Olympic-size swimming pool and a rooftop nightclub known as the Cloud Room, where old-timers could recall hearing tunes drifting through the air at night.

“Back in those days, the Baker would probably rival anything in Las Vegas today,” former assistant manager Roy D. Walker said in a 1993 Star-Telegram article. “Big-name stars like Lawrence Welk, Sophie Tucker, the Dorsey Brothers. You couldn’t find a parking place for blocks.”

Mineral Wells, home to Fort Wolters, became a military town by World War II, and that continued through the Vietnam War.

As the military’s presence declined, so did the Baker. The hotel shut down in 1963 but reopened two years later, only to have its final paying guest in 1972. Fort Wolters closed three years later, in 1975.

In recent years, the Baker has become an online attraction as websites, Facebook pages and YouTube videos have been devoted to the hotel. Many contend it’s haunted.

This report contains information from the Star-Telegram archives

Bill Hanna: 817-390-7698, @fwhanna

All about EB-5

▪ Roughly half the funding for renovating the Baker Hotel is expected to come from the EB-5 visa program, one of five employment-based programs administered by the Homeland Security Department's U.S. Citizenship and Immigration Services.

▪ In the EB-5 program, international investors can get visas by investing at least $500,000 in a U.S. business that creates or preserves at least 10 full-time jobs in a rural or high-unemployment area. The investor is not required to work for the business.

▪ A 2012 study commissioned by Invest in the USA, a trade association that backs the program, said Texas EB-5 projects have supported 1,467 jobs, contributed more than $109 million to the gross domestic product and brought $6.1 million in tax revenue to the state.

▪ One local project that used EB-5 funding for part of its financing has received accolades. The NYLO Dallas South Side hotel won the Dallas Business Journal's Most Creative Financing Deal of the Year in 2013.

Related stories from Fort Worth Star Telegram