A Virginia hotel project that was subject of a recent Iron Range Today investigation received more than $4.2 million in state grants and loans between 2021 and 2023 as part of a planned public financing package that approached $9.5 million.
The public investment was designed to jump-start what city officials described as a critical redevelopment project next to the Iron Trail Motors Event Center. Instead, the hotel has failed to break ground, leaving taxpayers with millions committed to a project that has seen only minimal work.
In the five years since Apurva G. Patel and Virginia Hospitality were selected by the city to develop the property, only a chainlink fence has been installed.
Meanwhile, the city of Virginia sold land to the business for $1, without an automatic claw back option. The property valuation was $685,000 at the time.
A review of state agency funding showed the project was awarded $750,000 through the Department of Employment and Economic Development (DEED) Main Street Economic Revitalization Program in 2021. Grants funds were distributed generally for commercial building construction.
The Department of Iron Range Resources and Rehabilitation (DIRR) approved $1.5 million in development infrastructure grants, noting the project would create 19 permanent jobs and 195 construction jobs. Funds were directed toward infrastructure, site work and structural reinforcement, according to the state.
Legislators on the agency advisory board discussed the project briefly. Former Sen. Tom Bakk questioned the number of jobs and whether the city considered working with a tax abatement versus a tax-incremented finance (TIF) district.
Staff said 19 was the minimum amount needed — 40 staff would be ideal, they said — and deferred to the city’s consultants on the tax deal.
“Abatement is a very powerful tool given by the Legislature,” Bakk said. “People want development but they don’t want to pay for it. I wouldn’t mind seeing the county having some participation in this.”
Agency staff at the time said hotels prospecting sites in other cities indicated a demand for more rooms, and felt the Virginia hotel would spur more business in the city.
“Our meetings with the city, there’s a lot of indication that both the convention center and now this hotel is going to be driving a lot of initial investment,” said former Commissioner Mark Phillips at the time. “There’s been a lot of property along that 8 ½ Street corridor in Virginia that people have options on.”
Project financing also contemplated a $2 million loan backed through DEED’s loan guarantee program. The loan was ultimately made by the Northland Foundation.
Virginia also approved the TIF district for the project in 2021 that would pour another $4.7 million into the hotel.
As the years drew on, however, it appears the state spigot was turned off. City officials approved an application for more DIRR funding for the hotel in February 2024, but it was not selected that year by the agency and Commissioner Ida Rukavina. No other state funding mechanisms were immediately recognized by Iron Range Today.
The $9.5 million in public funding came as the project’s budget outlined another $635,000 from the city. It was unclear if Virginia’s contribution included the sale of the development property at the discounted amount.
Records on Virginia Hospitality through the Minnesota Secretary of State show the limited liability company formed in May 2021, mere months before the city selected Patel as the hotel developer.
A purchase agreement for the city land was signed months later, and the first development agreement was signed in May 2022. The city awarded the land deed to the company in 2023 after $10 million in loans were secured, including the DEED loan.
Virginia signed an amended agreement with Patel in February this year, and business filing records show Virginia Hospitality became administratively inactive in January this year.
The business was also marked inactive by the state for a stretch between February 2023 and June 2023, during which time another Patel company Development Services Group purchased the old armory site. They recorded the new deed days after Virginia Hospitality reinstated itself.
The inactive status doesn’t mean the business was unable to sign contracts, as it most likely means a renewal form was not submitted to the state. As of publication, the company remained inactive, according to the Minnesota Secretary of State.
About the investigation
This story is part of Iron Range Today’s ongoing investigation into Virginia’s proposed hotel development next to the Iron Trail Motors Event Center. The reporting is based on hundreds of pages of court filings, development agreements, mortgage records, business filings, and other public records spanning more than two decades.
Read the previous installments:
