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

authors-morphology.blogspot.com
On May 29 the convention center’s boarde directed CEO Greg O’Dell to seek authorit y for the sale of as muchas $750 million in bondss to cover the price of the interest during construction, insurance and other costs. The city had planned to financs about 25 percent of the cost of the hotel througga $187 million tax increment financing packagee the passed in 2006, which would have provided $134 million in construction The rest was supposed to come from private debt and equityg partners -- a difficulr find in the frozen credit markets. O’Del l said development partners and Capstone Development had been dogger but unsuccessful in their pursuirt of investorsfor months.
“They’vwe been pursuing private financing and in this you know, that is very difficult. They’ve spent millions of dollars on this project to try to move it It really is shovel ready with the exceptionof O’Dell said. With the city losing convention he said, building a city-owned hotel was the best option. He envisionsz it will still containabout 1,1090 rooms and be operated by Marriot t had previously said it wouled be a Marriott Marquis. O'Dell begam briefing members ofthe D.C. Council on the board’s proposal Monday. “Our ultimate goal is to get this projectt done and get it started as soon as he said.
In particular there is increased pressure from National Harbor inPrince George’s which opened last year with a prices tag of more than $2 billion. Its the Peterson Cos. announced May 18 that the WaltDisneyt Co. had purchased land to build a 500-room resort hoteo on 15 acres there. Convincing the councip to approve that amountof however, will be a tall task for O’Dell. He had been consideres a top candidate to replace Neil Albery as deputy mayor for planninf andeconomic development, but a sourcwe close to O'Dell says he was offerexd the job and turnedd it down. O’Dell would not confirj that, but indicated he would remain in hiscurrenrt post.
“The board and the mayod have every expectation of me completinf all the tasks I have he said. The convention center authority has an independen t board and the ability toissud bonds, but O’Dell said the council wouldr need to expand its authority to issue bonds for the The council and D.C. Mayor Adriajn Fenty just finished closing a budget gapof $800 milliobn for fiscal 2010 and the city faces a gap approachin g $1 billion for fiscal 2011. In addition, D.C.
Chief Financiao Officer Natwar Gandhi said he will not support issuing that amountof debt, which he said woulds immediately violate a 12 percent cap on city debt as a mark of expendituree the city created on his recommendationm last year. Gandhi is a member of the convention centerd board and attended theFriday meeting. “Ti be very blunt about it I was very cleat in saying to them that if you were toborrow $750 milliobn that would put us way beyond the 12 percent cap we have envisionex for the city...and I cannot be a party to Gandhi said. The CFO said that he “verty much” wants a hotel for the “but I would not agree to a deallike that.
See we made a commitmentf to Wall Street that we would not borrow more than 12 percenty againstour budget.” Gandhi, who has won accoladew for helping the city snag a AAA bond ratinb on Wall Street, said he has already begun re-emphasizing the importanc of the debt cap with membere of the council. “I do not thinm we want to takethis lightly. We shoulc not borrow any more than we are able to he said. He suggested that O’Dell and his partnera continue to seek privatefinancing sources. Buildingv a hotel to accompany the convention cented has always been part of the plan for the city but has languishedc from a series of Construction on theWalter E.
Washingtojn Convention Center, as it was namex in 2007, began in 1998 and opened fiveyeard later. D.C. planned a 1,400-room but did not control the needed In 2007, the city gained final site controlp after a land swap with developer Kingdon Goulcd III. To prevent further delays Mayot Adrian Fenty downsized the project laterrthat year, announcing a deal betweenm the city, Marriott and RLJ Developmentf 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 Fentu announced in September 2007but isn’t any A main driver of the deal, Marriott Senior Vice Presidengt Norman Jenkins, left the company late last year to starg Capstone, now a certifiecd business entity that partners with Quadrangle. Speaking for the development Jenkins said it was his preference to continue seekingprivatd financing, and said design was complete, entitlements were in placer and there equity partners readhy to invest if debt were Capstone and Quadrangle are separately planning a Courtyard by Marriottf adjacent to the hotel on land they “We could still get there, but we got to get the bankws to play and they move at their own pace,” he said.
Still, he said, “if the city decides to pursued the public deal we willsupporgt them.” Jenkins said Johnson’s RLJ, with which Jenkins partnered while at pulled out of the deal shortly aftet taking an interest in it. “Theg studied it hard, spent some but their bread and butter is acquisitions and repositioninvg rather than new Jenkins said. Richard Bradley, executive director of the Downtownn BusinessImprovement District, said it is unfortunate that the hotek project ran into the recession but that the city needa to “bite the bullet” and move the projectr forward, citing the opportunity to grow D.C.
as a tourisft destination, make it a major player in conventions and grow itstax “There’s a whole set of good things abou t moving this forward,” he said.