NAPA, CA— The emerging downtown Napa market here has given rise to any number of trendy projects, not the least of which is the new-construction River Terrace Inn. Strategically positioned on 300 feet of Napa River frontage looking out to a wildlife sanctuary, the $16 million luxury boutique hotel was developed by Gustin Property Group LLC on 3.4 acres and is owned by Wine Country Hotels LLC, both of Albuquerque, NM. Florida-based Driftwood Hospitality Management LLC operates the 106-room Inn, which includes 33 suites; 1,500 square feet of meeting space; a spa; a café and a wine bar. A freestanding, fine-dining restaurant will open adjacent to the hotel later this year. “Napa traditionally has lagged behind the rest of the valley in terms of economic and tourist development,” said Bob Gustin, development principal and managing member. However, “Napa Valley still draws about five million tourists a year, although many of them are daytrippers from San Francisco who don’t spend the night. If you do want to be in the valley you’re almost forced to look at the city of Napa. We felt due to the high barriers to entry if we were able to get a project completed we’d be fairly well ahead of the competition,” he said. Napa Valley, known for its wineries, historically has been a very strong market in good and bad economic times, bolstered by foreign visitors and drive-to traffic, respectively, Gustin said. “We felt we’d be fairly well insulated from the swings.” The area is considered one undergoing transformation. It was only about 15 years ago the owner of the site now occupied by the River Terrace Inn decided the best use for the land at the time would have been to put warehouses on the parcel. “They got it entitled and subdivided but they never pursued it very vigorously,” said Gustin. “The site just kind of sat there for a number of years.” Gustin was introduced to the owner via a real estate broker four years ago, about the same time as the area started a slow turn around. COPIA: The American Center for Wine, Food & the Arts had been funded and began construction; the Napa Valley Opera House, built in 1880, was undergoing restoration, and new restaurants started to pop up. The Napa River Project also had received funding to widen the river and alleviate flooding issues, an ongoing issue for the area. “There were a lot of dynamics that made sense for us to look at putting an hotel there on the site— 300 feet of riverfront is a nice amenity for guests,” said Gustin. The area had already set out to reinvent how it was perceived, dubbing itself the Oxbow District to reflect the shape of the bend in the river in an effort to “upscale” its formerly industrial image. As the district began its climb toward greater sophistication, the need for more lodging became apparent to area officials. Still, it took close to 20 months for Gustin to go through the entitlement process once agreed on the use, examined by the city’s design review board and the city council. “It was scrutinized by the city, since it was a kind of sensitive area, being on the river,” he said. The city did not provide any tax increment financing for the project. “Napa, to the best of my knowledge, has never assisted in any financing of any impact fees. We spent about $1.5 million just on sewer hookups, sanitation, street fees, and school fees. We put a stoplight in. And we had to pay that in cash; there’s no financing mechanism in place by the city, either,” Gustin said. However, he said that might change now, with the city reportedly giving bond financing to help developers pay those fees. In addition to wrestling through the city processes, Gustin watched his nearly completed financing with local lenders evaporate following the dotcom crash and 9/11. “Prior to Sept. 11 we were fairly close to getting the deal done with some local Bay-area banks. They backed off from our financing— the San Francisco hotel market was in the tank and everybody kind of associate
