A prominent hotel developer has canceled plans to build a Holiday Inn Express in southern Federal Way.

The four-story, 91-unit hotel was slated for an empty lot at South 348th Street and Pacific Highway South, next to the Days Inn.

However, the project was mired in complications from the start, ranging from permits to financing.

Faruq Ramzanalli, a partner in Hotel Concepts, said his company spent more than $100,000 on the abandoned project. The costs included a geotechnical evaluation, grading and utility plans, permits, franchise fees and an environmental study.

Once the developer secured the funding, its latest six-month permit extension with Federal Way had expired.

“Trying to build a hotel in the past few years has been very challenging without bank financing. Sometimes the banks are hot, sometimes they are cold,” Ramzanalli told The Mirror.

The hotel was proposed under 2006 building codes. The city issued a building permit in 2009, and the developer received five extensions. The permit expired in December 2012, roughly a month before the developer requested another extension for a now-invalid permit.

Ramzanalli said Federal Way is a tough market for hotels, especially with major brands like the Courtyard by Marriott, Hampton Inn and Suites, and Best Western Evergreen Inn and Suites. Hampton opened its 142-room hotel in the midst of Hotel Concepts’ struggle to find money to build the Holiday Inn Express. Coupled with the recession, this scenario further stacked the deck against a new hotel succeeding in the southern part of Federal Way.

“It had all of the complications that one can expect,” he said of the project. “Finally when we were ready to go, unfortunately the permit had expired.”

KPR Hospitality Investments LP, a subsidiary of Hotel Concepts, still owns the 2.5-acre property in Federal Way. No plans have been determined for an alternative development on the site, which borders wetlands.

Hotel Concepts develops and manages hotels all over the region. The company is currently building a Holiday Inn Express in Tacoma along with a Hampton Inn in Everett. The company is no stranger in Federal Way, having built the Days Inn (formerly known as Holiday Inn Express) and the Comfort Inn located farther north on Pacific Highway.

Performing arts and conference center

Hotel Concepts may still have a foot in the Federal Way market.

Seattle-based developer Lorax Partners is moving forward with schematic drawings for a performing arts and conference center (PACC) in downtown Federal Way. The initial PACC proposal, slated for a vacant lot on 20th Avenue South, calls for a 700-seat performance hall along with a 120-unit hotel.

Ramzanalli said his company has been approached by Lorax about possibly building a hotel similar to Holiday Inn Express.

“We just kind of looked at the schematic drawings,” Ramzanalli told The Mirror, adding that no deals or decisions have been made yet. “It’s too early.”

Healthy competition?

Days Inn co-owner Rachna Sachnar saw the proposed Holiday Inn Express not as a competitor, but as an asset. She said the Holiday Inn would have been a magnet for potential customers.

“It would have upgraded our business,” she told The Mirror. “There would have been more pros than cons, so we had no problem if they were building it here.”

The vacant lot behind Days Inn has attracted trouble over the years, namely homeless people and graffiti. Upon learning that the Holiday Inn proposal died, Sachnar was interested in contacting the developer about renting the lot for semi-truck parking. Advertising such an amenity, she said, would boost business and lure away some of the nearby Super 8 Hotel’s trucking customers.

Sachnar and partner Ashoo Ohri bought the Days Inn about four years ago, and the 54-room hotel has struggled to stay open. The bank reduced the mortgage “so we could survive,” she said. The business partners are also involved in a legal dispute with the previous owners regarding the validity of reported sales figures when they bought the hotel.

“If someone wants to buy us out, we’re ready to sell,” she said, noting that the hotel pays roughly $50,000 in taxes a year. “It’s killing our business.”