The North Loop’s West Hotel development has been sitting, shuttered, since last summer when challenges with a lender brought the project to a halt. Despite rampant rumormongering in the development community that the project was collapsing, its principals — doing business as Commutator Partners — have arranged alternate financing and are preparing to resume construction on the multi-building historic rehabilitation on North 2nd Street.

In an exclusive interview with TCB last week, co-partners John Gross and David Wilson explained the series of construction and financing mishaps that put the development on its heels. Once known as the Commutator project—for the historic Commutator foundry building at the development’s heart—the 123-room hotel, with food venues supervised by chef Tim McKee, was to be complete last year. But construction bogged down as the complexities of historic renovation reared their head.

“There was a 10-month delay during foundation work,” says Wilson. Much more rock needed to be drilled out than expected. The foundry foundation was shallow and crumbled. A specialist firm from Indiana, which had moved another building on the site, returned, lifted the building, and poured a new foundation. The neighboring Jetset building at 115 N. 2nd St. had a foundation that encroached on the development, but due to the building’s age, its foundation could not be altered. The principals eventually acquired the building to eventually use as event space for the hotel. All told, it was nearly a year of delays and seven-figure cost overruns on the $62 million project.

Commutator held an 18-month mortgage note with Broadmark Capital, a publicly traded real estate investment trust (REIT) in Seattle. Though the note had an extension clause which Commutator wanted to activate, the lender was being acquired and did not extend their note, which was due in April. Broadmark’s purchaser, Ready Capital of New York, did not feel the project was right for it and told Commutator to find a new lender. This occurred as Silicon Valley Bank was collapsing, interest rates were unstable, and lenders were “spooked” about downtown mortgage defaults.

Ready Capital proceed to file a foreclosure complaint in summer, which generated negative publicity for the project. But behind the scenes, says Wilson, Ready suspended action on the foreclosure to let the principals secure new financing, which happened in mid-December, when Onward Investors of Edina bought Ready’s note. The new debt carries different interest rates, due to market conditions. “They are high but doable with our pro formas,” says Gross.

Onward is comfortable with the project because most of the downside construction risk is past and it’s one of the last developable sites in the North Loop. “We stepped in to give them an opportunity to move forward,” says partner Jon Lanners. “We’re an opportunistic commercial real estate investment firm, so this checked a lot of boxes for us.”

The project is 65% built but has a year of construction ahead of it: brickwork, windows, sheetrock, interiors. But all heavy or underground work is complete. Onward is not financing remaining construction, so Gross and Wilson are in the market for a construction loan which they hope to secure by spring, which will allow Commutator to resume work by summer, with a planned opening in mid-2025.

“What keeps us very bullish is [the new] Four Seasons [hotel] changed the ecosystem for rates,” says Wilson, driving way up what high-end travelers are willing to pay for a five-star experience. “It’s substantially improved our pro-formas,” adds Wilson, who notes that still-moribund downtown business travel was never in Commutator’s business plan. “Our numbers look as good or better than they did two years ago.”