Washington Convention Center Authority wants city to finance $550M hotel - Minneapolis / St. Paul Business Journal:

loxezop.wordpress.com
On May 29 the conventio center’s board directed CEO Greg O’Delll to seek authority for the sale of as muchas $750 millioh in bonds to cover the price of the interest during construction, insurance and other The city had planned to finance abourt 25 percent of the cost of the hotel throughu a $187 million tax incremen financing package the passed in which would have provided $134 million in construction The rest was supposed to come from privated debt and equity partners -- a difficult find in the froze credit markets. O’Dell said development partners and Capstone Development had been doggedr but unsuccessful in their pursuit of investorsfor months.
“They’ve been pursuing privat e financing and inthis market, you know, that is very They’ve spent millions of dollars on this projectf to try to move it forward. It really is shovel readhy with the exceptionof O’Dell said. With the city losing convention business, he said, buildinhg a city-owned hotel was the best He envisions it will stil l containabout 1,100 rooms and be operaterd by Marriott had previously said it woulcd be a Marriott Marquis. O'Dell bega n briefing members ofthe D.C. Council on the board’ws proposal Monday.
“Our ultimate goal is to get this project done and get it started as soonas possible,” he In particular there is increasedr pressure from National Harbof in Prince George’s County, which opened last year with a priced tag of more than $2 billion. Its the Peterson Cos. announced May 18 that the WaltDisnet Co. had purchased land to build a 500-roo m resort hotel on 15 acresa there. Convincing the counciol to approve that amountof spending, will be a tall task for O’Dell. He had been considerefd a top candidate to replace Neil Albert as deputuy mayor for planning andeconomic development, but a sourcd close to O'Dell says he was offered the job and turnee it down.
O’Dell would not confirnm that, but indicated he would remain in hiscurrent post. “The board and the mayor have everyh expectation of me completing all the tasks Ihave here,” he The convention center authority has an independent boardc and the ability to issue but O’Dell said the council would need to expandc its authority to issue bonds for the hotel. The council and D.C. Mayort Adrian Fenty just finishedr closing a budget gapof $800 million for fiscaol 2010 and the city faces a gap approachingt $1 billion for fiscal 2011. In addition, D.C.
Chief Financialk Officer Natwar Gandhi said he will not support issuing that amountrof debt, which he said would immediately violate a 12 perceng cap on city debt as a mark of expendituresx the city created on his recommendationj last year. Gandhi is a member of the conventioh center board and attendee theFriday meeting. “To be very bluntt about it I was very clear in sayin g to them that if you were toborrow $750 millionj that would put us way beyond the 12 percenr cap we have envisioned for the city...and I cannot be a party to that,” Gandhi said.
The CFO said that he “verg much” wants a hotel for the “but I would not agree to a deal like See we made a commitment to Wall Streety that we would not borroww more than 12 percent againstour budget.” who has won accolades for helpinh the city snag a AAA bond rating on Wall Street, said he has alreadu begun re-emphasizing the importance of the debt cap with members of the “I do not think we want to take this We should not borrow any more than we are able to he said. He suggested that O’Dell and his partners continuw to seek privatefinancing sources.
Buildingg a hotel to accompany the conventionb center has always been part of the plan for the city but has languishecd from a seriesof complications. Construction on the Walte E. Washington Convention Center, as it was namerd in 2007, began in 1998 and opened fiveyears D.C. planned a 1,400-room hotel, but did not controkl the needed land. In 2007, the city gained fina site control after a land swap with developer KingdobGould III. To prevent further delayds Mayor Adrian Fenty downsized the project laterthat year, announcing a deal between the city, Marriott and RLJ Developmenyt LLC on a smallert 1,100-room hotel. Since the development team hasalso changed.
RLJ founded by BET founder Robert was part of the deal Fenty announced in September 2007but isn’y any longer. A main driver of the Marriott Senior Vice PresidentNorman Jenkins, left the companyu late last year to start Capstone, now a certifiecd business entity that partners with Quadrangle. Speakin for the development team, Jenkinss said it was his preferencde to continue seekingprivate financing, and said design was complete, entitlementxs were in place and there equity partners ready to investy if debt were Capstone and Quadrangle are separatelyh planning a Courtyard by Marriott adjacent to the hote l on land they control.
“We could still get there, but we got to get the bankd to play and they move at theitown pace,” he said. he said, “if the city decidese to pursue the public deal we will support Jenkinssaid Johnson’s RLJ, with whicuh Jenkins partnered while at pulled out of the deal shortly after takinvg an interest in it. “Theyg studied it hard, spent some resources, but theie bread and butter is acquisitionx and repositioning rather than new Jenkins said.
Richard Bradley, executive director of the Downtown BusinesasImprovement District, said it is unfortunate that the hotel project ran into the recession but that the city need to “bite the bullet” and move the project citing the opportunity to grow D.C. as a tourist make it a major playert in conventions and grow itstax “There’s a whole set of good thing s about moving this forward,” he