More delays on rezoning request for 330 Rehoboth Ave.

Belhaven owners suggest they’re done waiting for the city to make a decision
October 12, 2021

Story Location:
Rehoboth Grand
330 Rehoboth Avenue
Rehoboth Beach, DE 19971
United States

Citing concerns that a proposed restrictive covenant isn’t restrictive enough, the Rehoboth Beach Planning Commission again delayed a decision on a request to rezone a portion of 330 Rehoboth Ave. from residential to commercial.

Under the business name 330 Hospitality Group LLC, Bette Gallo, founder and president of Gallo Realty, and Don Lockwood, owner of Milton-based Lockwood Design and Construction, are looking to build a hotel on a lot located at the corner of State Road and Rehoboth Avenue. The two purchased the property earlier this year for $4.2 million. 

The 42,500-square-foot lot is split zoned, with 23,067 square feet of C-1 commercial along Rehoboth Avenue and 19,425 square feet of R-1 residential along State Road. Gallo and Lockwood are seeking a rezoning of the residential to commercial to facilitate the development of a hotel on the property.

It’s a perfect property for a nice hotel, said Gallo, during a planning commission meeting Oct. 8.

The rezoning request has come before the planning commission twice before. Attorney David Hutt made the initial request in August 2019 on behalf of Lockwood; Gallo was not a part of the development team at that point. At the time, the planning commission delayed action until a lawsuit between property owner J.J. Stein III Inc. and Lockwood was settled, which happened when 330 Hospitality purchased the property.

The second time the request went before the planning commission was in June. During that meeting, planning commissioners said they were concerned over all the potential uses in the C-1 zone and told the applicants to come back with a list of self-imposed development restrictions that would limit the commercial development of that portion of the property. City Solicitor Glenn Mandalas advised the planning commission that the restrictions had to be self-imposed because the planning commission couldn’t conditionally approve the rezoning.

With proposed restrictive covenants in hand, Hutt, now representing 330 Hospitality, went back before the commission Oct. 8. As proposed, the document would be good for 30 years; the minimum rear-yard setback would be doubled from five feet to 10 feet; and any amendment of the covenants would require the written consent of 330 Hospitality and a list of 20 neighbors created by Hutt. The document also included a list of prohibited uses for the portion of the property that’s now residential – billiards, pool or bowling; telephone central office; electric or gas utility building; laboratories; laundromat; club or lounge; public or commercial garages; or funeral home.

The goal is to repurpose the property in a way that reflects the comprehensive development plan’s call for revitalization of the city’s commercial district and gateways, said Hutt.

Commissioner Julie Davis said she thought the document should include language about paying for the attorney’s fees associated with a lawsuit from the residential neighbors. The document does include language about legal action being paid for by the non-prevailing party, but she said without language protecting the neighbors, the developer could just outlast legal action because their pockets are deeper.

Commissioner Steve Kauffman said he thought the proposed covenants were a good start, but didn’t go far enough.

Ultimately, after an hour of discussion, the planning commission offered the 330 Hospitality group the opportunity to revise the proposed restrictive covenants; the offer was accepted. Hutt said he would get the document revised in time for the planning commission’s meeting Friday, Nov. 12.

Belhaven concept review also delayed

Representatives from the proposed Belhaven Hotel also went before the planning commission to undertake a concept review of the hotel.

Attorney Hal Dukes said his clients, John and Alex Papajohn, were looking for a letter of recommendation from the planning commission in advance of a board of adjustment hearing Monday, Oct. 25. The project is slated to go before the board to ask for a variance from the city’s floor-to-area ratio, which is 2. As proposed, the Belhaven would have a FAR of 3.

John Papajohn said he didn’t know how much longer he and his son Alex would pursue the project, first proposed in April 2019, because investment companies continue to approach them about buying the property. 

The time for waiting has come to a close, because these investment firms are throwing around money like it’s confetti, and when it’s gone, it’s gone, said John. There’s a sentimental element to the project, but there’s also the aspect of doing what’s right for the family, he said.

The primary reason for the planning commission’s delay was time. The meeting began at 2 p.m., and Commission Chair Michael Bryan said it needed to be done by 4:30 p.m. to accommodate city staff. He said it wouldn’t be fair for the planning commission to make a recommendation without hearing the members of the public who had signed up to speak on the subject. The other commissioners agreed and decided to reconvene the review at a later date.

Prior to the meeting being adjourned, Commissioner Michael Strange, the one commissioner still on the board from when the hotel project was first introduced, said he thought it was too large.

Subscribe to the Daily Newsletter