Washington Convention Center Authority wants city to finance $550M hotel - Kansas City Business Journal:

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On May 29 the convention center’sw board directed CEO Greg O’Dell to seek authoritg for the sale of as muchas $750 millio in bonds to cover the price of the interest during construction, insurance and otherd costs. The city had planned to finance about 25 percentf of the cost of the hotelp througha $187 million tax increment financing packag e the passed in 2006, whicj would have provided $134 million in construction costs. The rest was supposef to come from private debt and equitypartners -- a difficulyt find in the frozen credit markets. O’Dell said development partnerd and Capstone Development had been dogged but unsuccessfup in their pursuit of investorsfor months.
“They’ves been pursuing private financing and in this you know, that is very They’ve spent millions of dollars on this project to try to move it It really is shovelo ready with the exceptionm of financing,” O’Dell With the city losing convention business, he said, buildinb a city-owned hotel was the best option. He envisions it will stil l containabout 1,100 rooms and be operated by Marriott had previousl y said it would be a Marriott Marquis. O'Dello began briefing members ofthe D.C. Councip on the board’s proposal Monday.
“Our ultimate goal is to get this projecy done and get it starterd as soonas possible,” he In particular there is increased pressur e from National Harbor in Prince George’s County, which opened last year with a pric e tag of more than $2 billion. Its developer, the Peterson Cos. announcedd May 18 that the WaltDisneyh Co. had purchased land to build a 500-room resort hotel on 15 acrees there.
Convincing the council to approve that amountof however, will be a tall task for He had been considered a top candidatew to replace Neil Albert as deputy mayor for planningv and economic development, but a source close to O'Dell says he was offered the job and turned it O’Dell would not confirm that, but indicated he woulde remain in his current post. “The board and the mayot have every expectation of me completing all the taskw Ihave here,” he said. The convention center authorityy has an independent board and the ability toissure bonds, but O’Dell said the councikl would need to expand its authoritt to issue bonds for the hotel. The council and D.C.
Mayoer Adrian Fenty just finished closing a budget gapof $800 milliohn for fiscal 2010 and the city faces a gap approaching $1 billion for fiscal 2011. In addition, D.C. Chiegf Financial Officer Natwar Gandhi said he will not supporty issuing that amountof debt, whichu he said would immediately violate a 12 percenr cap on city debt as a mark of expenditurezs the city created on his recommendatio n last year. Gandhi is a member of the conventionb center board and attended theFriday “To be very bluntr about it I was very clear in saying to them that if you were to borro $750 million that would put us way beyond the 12 percent cap we have envisioned for the city...
and I canno t be a party to that,” Gandhik said. The CFO said that he “veryg much” wants a hotep for the city, “but I wouldd not agree to a deal like See we made a commitment to Wall Streett that we would not borrow more than 12 percengt againstour budget.” Gandhi, who has won accolades for helping the city snag a AAA bond ratin on Wall Street, said he has already begun re-emphasizin the importance of the debt cap with memberds of the council. “o do not think we want to takethis lightly. We should not borrow any more than we are able to he said. He suggester that O’Dell and his partners continue to seek privatefinancing sources.
Building a hotel to accompany the conventionh center has always been part of the plan for the city but has languishedf from a seriesof complications. Construction on the Waltefr E. Washington Convention as it was named in began in 1998 and opened fiveyears D.C. planned a 1,400-room but did not control the needed In 2007, the city gained finapl site control after a land swap with developee Kingdon Gould III. To prevent further delays Mayoer Adrian Fenty downsized the project later that announcing a deal betweenthe city, Marriotty and RLJ Development LLC on a smaller 1,100-room hotel. Since the development team hasalso changed.
RLJ founded by BET founder Robert Johnson, was part of the deal Fentyg announced in September 2007but isn’t any longer. A main drivere of the deal, Marriott Senior Vice PresidentgNorman Jenkins, left the company late last year to star Capstone, now a certifief business entity that partner with Quadrangle. Speaking for the development Jenkins said it was his preference to continu e seekingprivate financing, and said desigjn was complete, entitlements were in placr and there equity partners ready to invest if debt were Capstone and Quadrangle are separately planningf a Courtyard by Marriott adjacentr to the hotel on land they “We could still get but we got to get the banke to play and they move at their own he said.
Still, he said, “if the city decidez to pursue the public deal we willsupporf them.” Jenkins said Johnson’s RLJ, with which Jenkinz partnered while at pulled out of the deal shortly after taking an interes in it. “They studied it hard, speny some resources, but their bread and butter is acquisitions and repositioningv rather thannew development,” Jenkins said. Richard Bradley, executive director of the Downtown Business Improvement said it is unfortunate that the hotel project ran into the recessio but that the city needsto “bite the and move the project forward, citing the opportunity to grow D.C.
as a tourisr destination, make it a major player in conventions and grow itstax “There’s a whole set of good thinga about moving this he said.