FAIRHOPE, Ala. - Five years ago, Mike Bernhardt moved to Fairhope, which he visited while growing up and where his great-great-grandfather, Lawrence Bernhardt, was the gas lamp lighter in the early days of the town.

“I moved back solely with the intent of doing this,” Bernhardt said, of his plans to build a mixed-use residential, business and hotel development in the downtown area.

Four townhomes were built as the first phase of the Founders Square project and are located on Section Street across from Greer’s Fairhope Market. Three are occupied and a fourth serves as a model.

The second phase of the development will be a small hotel that will hearken back to the town’s early days, Bernhardt said.

“The design will reflect that of early Fairhope, board and batten with no brick or stucco,” he said. “It will be exceptional and will be a tribute to the founders of Fairhope – a spectacular asset for the city.”

Construction on The Inn at Founders Square is expected to start within the next three to six months and be completed by December 2011, he said.

The $5 million, three-story, 16-room luxury hotel, with for-sale retail space on the first floor, will connect to the existing townhomes and match its design. There will also be luxury penthouse units with a pool and a deck on the third floor.

Bernhardt expects hotel rooms on the second floor to cost $160-$239. The four commercial spaces will start in the low $200,000s.

Bernhardt described the niche the hotel fills and the plans for it while sitting in the high-end model townhome at Founders Square, which carries a current price tag of $719,000. The other three townhomes were sold during one of the toughest real estate markets in recent history.

“In the old days downtown, Fairhope had several nice hotels, but over the years those all disappeared,” he said. “All the town was left with were either franchises for $100 a night, or $300 a night for a luxury hotel such as the Grand Hotel. There were no luxury accommodations in the middle for around $160 to $200 a night. So we’re actually filling a void in the marketplace. This offers tourists and visitors a third choice.”

While visiting Fairhope on vacations, Bernhardt grew up in Houston and took to business quickly.

“I went to work for a bank when I was 18 and owned one when I was 29,” he said. “I then formed an employee benefit consulting company. I sold those and moved to Key West in 1995. That’s where I got active in real estate and became a successful investor and developer of real estate.”

It was during a visit to Fairhope while living in Key West that Bernhardt’s plan for the Founders Square development began.

“I didn’t have the opportunity to grow up in Fairhope, but we came here on vacation every year,” he said. “I was lucky in my career and successful and had the opportunity to move back to Fairhope. I found this piece of land downtown and studied it and bought it and knew that it would accomodate a small inn and townhomes at the time I purchased it. I knew that it would become a nice mixed-used development.”

The location for the hotel on Section Street is now occupied by a unique “sculpture garden” of found-art sculptures by local artist Bruce Larsen. Plans are being made to relocate the sculptures, Bernhardt said.

Plans are also in the works for Mary Ann’s Deli, which Bernhardt called “a local icon,” to locate in one of the larger retail spaces at the new hotel development. It will continue to have a location at the Windmill Market, where it moved earlier this year from its long-standing site on Church Street. The owners of the popular deli could not be reached for comment by press time.

As for parking, Bernhardt said he has a contract with the grocery store across the street for 12 spaces and the hotel has four of its own. The townhomes have two-car garages.

The final phase of the Founders Square development will include three more residential units and three to four commercial spaces, which should begin construction next year, Bernhardt said.

“This is an exciting event for the city of Fairhope,” he said of the project. “We think this will become the focal point of all downtown.”