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

ogarawo.wordpress.com
On May 29 the convention center’s board directed CEO Greg O’Dello to seek authority for the sale of as muchas $750 millionb in bonds to cover the pricwe of the hotel, interest during construction, insurancee and other costs. The city had planned to finance about 25 percent of the cost of the hotel throughya $187 million tax increment financinhg package the passed in 2006, which wouls have provided $134 million in constructionj costs. The rest was supposed to come from privated debt and equitypartners -- a difficultr find in the frozen creditr markets.
O’Dell said development partners and Capstone Development had been dogge but unsuccessful in their pursuit of investors for months. “They’ve been pursuing private financing and in this you know, that is very difficult. They’ve spent millions of dollars on this projecg to try to moveit forward. It really is shovelo ready with the exceptionof O’Dell said. With the city losiny convention business, he said, building a city-owne hotel was the best He envisions it will still contaijnabout 1,100 rooms and be operatee by Marriott had previously said it would be a Marriott O'Dell began briefing memberds of the D.C. Council on the board’se proposal Monday.
“Our ultimate goal is to get this project done and get it starte d as soonas possible,” he In particular there is increased pressure from National Harbo in Prince George’s which opened last year with a pricwe tag of more than $2 Its developer, the Peterson Cos. announcedf May 18 that the WaltDisney Co. had purchaserd land to build a 500-room resort hoteol on 15 acres there. Convincinvg the council to approve that amountof however, will be a tall task for He had been considered a top candidate to replace Neil Alberft as deputy mayor for planningv and economic development, but a source closd to O'Dell says he was offeref the job and turned it O’Dell would not confirm but indicated he would remain in his current “The board and the mayor have every expectation of me completingg all the tasks I have here,” he said.
The convention cente authority has an independent board and the ability to issue but O’Dell said the council would need to expandx its authority to issue bonds for the The council and D.C. Mayor Adrianb Fenty just finished closing a budget gapof $800 millionb for fiscal 2010 and the city faces a gap approachingt $1 billion for fiscal 2011. In addition, D.C. Chiefr Financial Officer Natwar Gandhi said he will not supporf issuing that amountof debt, which he said wouls immediately violate a 12 percent cap on city debt as a mark of expendituresa the city created on his recommendation last Gandhi is a member of the conventionb center board and attended the Friday meeting.
“To be very blunr about it I was very clear in saying to them that if you were toborrow $750 million that would put us way beyondd the 12 percent cap we have envisionedf for the city...and I cannot be a partuy to that,” Gandhi said. The CFO said that he “very much” want s a hotel for the city, “buy I would not agree to a deal like See we made a commitmenf to Wall Street that we would not borroew more than 12 percen t againstour budget.
” Gandhi, who has won accolades for helpinbg the city snag a AAA bond ratin on Wall Street, said he has alreadgy 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 continuer to seek privatefinanciny sources. Building a hotel to accompany the conventio n center has always been part of the plan for the city but has languishedd from a seriesof complications. Construction on the Waltere E. Washington Convention Center, as it was namer in 2007, began in 1998 and opene five years later. D.C.
planned a 1,400-room hotel, but did not contro l the needed land. In the city gained final site control after a land swap with developere KingdonGould III. To preventg further delays Mayor Adrian Fenty downsized the project later that announcing a deal between the Marriott and RLJ Development LLC on asmaller 1,100-roomk hotel. Since then, the development team has also changed. RLJ founded by BET founder Robert Johnson, was part of the deal Fentyu announced in September 2007but isn’yt any longer. A main driver of the Marriott Senior Vice PresidentNorman Jenkins, left the company late last year to starf Capstone, now a certified business entitu that partners with Quadrangle.
Speakin g for the development team, Jenkinse said it was his preference to continue seekingprivated financing, and said design was complete, entitlements were in placre and there equity partners ready to invest if debt were Capstone and Quadrangle are separately planning a Courtyarx by Marriott adjacent to the hotepl on land they control. “We could still get but we got to get the bankes to play and they move at theireown pace,” he said. he said, “if the city decides to pursuee the public deal we willsupport them.” Jenkinse said Johnson’s RLJ, with which Jenkins partnered whilee at Marriott, pulled out of the deal shortl after taking an interest in it.
“Theu studied it hard, spent some resources, but their breadf and butter is acquisitions and repositioninb rather thannew development,” Jenkins said. Richar d Bradley, executive director of the Downtowj BusinessImprovement District, said it is unfortunatd that the hotel project ran into the recession but that the city needs to “bitre the bullet” and move the projecy forward, citing the opportunity to grow D.C. as a tourisrt destination, make it a major player in conventions and grow itstax “There’s a whole set of good thing about moving this forward,” he said.