FAYETTEVILLE (AP) — A new era for an iconic Fayetteville property began after the last of the weekend guests checked out of the Cosmopolitan Hotel on Nov. 13. Their exit allowed work to begin on a massive makeover of the 15-story project at 70 N. East Ave. With a $7.1 million building permit in hand, new owners are transforming the 30-year-old high-rise into The Chancellor. 

"I’m real excited about that," said Fayetteville Mayor Lionel Jordan. "They came in here a couple months ago and talked about their plans to completely remodel the hotel, inside and out. It will be one of the top hotels in the region and is a much-needed development in the downtown area."

Local boosters hope the new effort by Southwind Hospitality Holdings LLC, a partnership led by Mississippian Ike Thrash and Sam Alley of Little Rock, will overcome the financial failings of past owners, which include two foreclosures and unfulfilled promises to update the landmark building and restore its first-class luster.

The Chancellor renaming is a nod to the project’s symbiotic relationship with the University of Arkansas. Originally opened as a Hilton Inn in 1981, the hotel was developed in conjunction with a neighboring project launched by the city in partnership with the university.

The property adjoins the conference facilities of the University of Arkansas Global Campus, School of Continuing Education and Academic Outreach Center, and the two buildings share a second-floor access.

Marilyn Heifner, executive director of the Fayetteville Advertising & Promotion Commission, said the Southwind renovation promises to restore the faded glory of the city’s only full-service hotel.

"It was the go-to place back in the day," Heifner said. "It was the premier place to stay with its proximity to the downtown square and Dickson Street."

The Southwind investors plan to reopen the reconfigured and renovated hotel in time to book rooms for the first Razorbacks football weekend in September 2012.

The lobby at The Chancellor will be opened to accommodate a restaurant and bar. With a redesigned lobby as a focal point on the ground floor, suites will be built on the top two floors. In between, the new room count will be 210 with more meeting space added. Valet parking will be supported by 170 slots leased on the first and third levels of the city’s parking deck.

"The next thing people want, including me, is to see it open," said Thrash, president of Dawn Properties Inc. of Hattiesburg, Miss.

The property will be refurbished from top to bottom, but it won’t be reflagged as a Hilton or Radisson, names from its past, or affiliated with another national hotel chain.

The downside of franchise entanglements affecting the project financially and operationally was deemed to outweigh the benefits of name recognition and the tie-in with a national reservation service.

Thrash’s Dawn Properties, known mainly for building, buying and selling apartment projects, also has ventured into office and retail purchase/renovation deals and is no stranger to upscale hotel projects.

The company helped develop the Sheraton Four Points in Biloxi, Miss., a 195-room project touted as the city’s largest non-gaming hotel. Ike Thrash and his wife, Dawn, are familiar faces in thoroughbred circles. They own Line of David, the 2010 Arkansas Derby winner who crossed the finish line at 17-1 odds.

The Chancellor represents their biggest Arkansas deal to date. Years ago, Dawn Properties owned Willow Creek Apartments, a 133-unit project in Little Rock.

Alley is best known as chairman and CEO of VCC, the largest general contracting firm in Arkansas. His involvement with The Chancellor is through Bedrock Commercial Partners of Irving, Texas, a real estate operating and investment firm.

After pursuing their own separate deals earlier this year, Thrash and Alley joined forces to put the property under contract in September, culminating in a $3.8 million purchase from ANB Venture LLC on Oct. 31.

"They’re in the hotel business, and we’re a local player with our relationships in the state and with the university," Alley said. "Both of us bring something to the table."

The downtown Fayetteville project proved a daunting fiscal challenge, one that was deemed insurmountable by most prospective buyers. The hotel was put under contract by two other groups in deals that fizzled, and letters of intent were presented by two more would-be buyers in other dead-end deals.

Still others toured the property, put a pencil to it and said no way. At first glance, Ike Thrash wasn’t sure if he wanted to take it on either.

"We look at a whole lot of deals, and my son, Joseph, came across this one and said: "Doesn’t this look interesting?" he said. "I said, ‘It looks hard.’ But when we went and looked at the property, we decided to move on it."

Backed by a complicated funding arrangement mixing  conventional debt with tax credits, Southwind Hospitality was able to structure a $15.8 million financial package to make the numbers work.

A key component was New Market Tax Credits, issued by the U.S. Treasury through the Heartland Renaissance Fund, an affiliate of Little Rock’s Arkansas Capital Corp.

"We’re here for the long haul," Thrash said. "What is it the old savings and loan commercial use to say? There are substantial penalties for early withdrawal. The terms of the financing make it economically punitive for us to sell the property."

Only 91 of the original 235 rooms were habitable, with the balance in various stages of demolition/remodeling except for one prototype room, dubbed the $6 million room.

The figure reflects how much money that Richard Alexander and John Nock borrowed and supposedly spent to renovate the hotel before they lost it last year to ANB Venture through foreclosure.

While inspecting the property, Thrash couldn’t figure out where the $6 million went into the building. Possible high-ticket items, such as a new heating and cooling system or elevators, remained unchanged.

"They didn’t do any of those. At the end of the day, it is what it is. There’s no way you can make enough excuses for that."

Southwind intends to complete in one year what Alexander and Nock couldn’t after four years of ownership.

Alexander and Nock blamed the demise of their financier, ANB Financial, for derailing the Cosmopolitan, one of a string of failed developments highlighted by their Renaissance Tower project.

The nearby site of the proposed 16-story, 144-room hotel with condominiums on the top three floors and a $25 million price tag is now only a parking lot.

With the bubble burst on that dream development, The Chancellor redevelopment has become the biggest deal going in downtown Fayetteville.