The Des Moines City Council has approved a preliminary development agreement with Nelson Construction & Development for a $27 million hotel and retail project in a parking lot formerly owned by Drake University at 26th Street and University Avenue.

Drake had previously chosen Nelson as the preferred developer for the property. Under the development agreement, Nelson would receive an estimated $3 million from tax increment finance revenues generated by the improvement to the property.

Nelson plans a five-story, 124-room hotel that would carry the Home2 Suites flag. Home2 Suites is the extended-stay brand of Hilton Worldwide.

The development includes 11,000 square feet of retail/restaurant space facing University Avenue on the ground floor.

Nelson has agreed to exceed energy code requirements by 10 percent.

Construction is expected to start in the spring.

According to a staff report to the City Council, the hotel will generate an estimated $5.9 million in hotel tax revenue to the city over the life of the development agreement and $10.7 million in gross property tax revenues over 20 years.