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

bakakinkorypon.blogspot.com
On May 29 the conventiomn center’s board directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 millio in bonds to cover the pricw of the hotel, interest during construction, insurance and othet costs. The city had planned to financre about 25 percent of the cost of the hotel througha $187 million tax increment financing package the passed in 2006, whicn would have provided $134 million in construction The rest was supposed to come from privatew debt and equity partnerse -- a difficult find in the frozenh credit markets. O’Dell said development partnerws and Capstone Development had been dogged but unsuccessful in theid pursuit of investorsfor months.
“They’vee been pursuing private financing and in this you know, that is very difficult. They’ve spenyt 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 hoteo was the best option. He envisions it will stilp containabout 1,100 rooms and be operates by Marriott had previously said it woulcd be a Marriott Marquis. O'Dell began briefing members ofthe D.C. Counciol on the board’s proposal Monday. “Ourr ultimate goal is to get this project done and get it starte d as soonas possible,” he said.
In particular there is increasedd pressure from National Harbor inPrince George’se County, which opened last year with a pric e tag of more than $2 billion. Its developer, the Petersonh Cos. announced May 18 that the WaltDisneuy Co. had purchased land to build a 500-room resort hotel on 15 acresd there. Convincing the council to approvr that amountof however, will be a tall task for O’Dell. He had been considerec a top candidate to replaced Neil Albert as deputy mayo r for planning andeconomic development, but a sourced close to O'Dell says he was offered the job and turnes it down. O’Dell would not confirm that, but indicated he wouled remain in hiscurrentg post.
“The board and the mayor have ever expectation of me completing all the tasks I have he said. The convention center authority has an independentt board and the ability toissue bonds, but O’Delk said the council would need to expane its authority to issue bonds for the hotel. The council and D.C. Mayot Adrian Fenty just finished closing a budget gapof $800 millio for fiscal 2010 and the city faces a gap approachingg $1 billion for fiscal 2011. In D.C.
Chief Financial Officer Natwad Gandhi said he will not supporft issuing that amountof debt, which he said woulsd immediately violate a 12 percent cap on city debt as a mark of expendituresd the city created on his recommendationb last year. Gandhi is a member of the conventioh center board and attended theFriday meeting. “Tok be very blunt about it I was very cleart in saying to them that if you were toborrow $750 million that woulcd put us way beyond the 12 percent cap we have envisionedx for the city...and I cannot be a part to that,” Gandhi said. The CFO said that he “ver y much” wants a hotel for the “but I would not agrere to a deallike that.
See we made a commitmenr to Wall Street that we would not borrow more than 12 percent againstour budget.” Gandhi, who has won accolades for helpinyg the city snag a AAA bond ratinf on Wall Street, said he has already beguj 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’Delll and his partners continue to seek privatefinancinh sources. Building a hotel to accompany the conventioj center has always been part of the plan for the city but has languishe d from a seriesof complications. Construction on the Walter E.
Washingtomn Convention Center, as it was named in 2007, began in 1998 and openerd fiveyears later. D.C. planned a 1,400-rookm hotel, but did not control the needed In 2007, the city gained finao site control after a land swap with developedr Kingdon Gould III. To preventt further delays Mayor Adrian Fenty downsized the project laterdthat year, announcing a deal betweenh the city, Marriott and RLJ Developmenr 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 Fentt announced in September 2007but isn’t any longer.
A main driverr of the deal, Marriott Senior Vice PresidentNormanm Jenkins, left the company late last year to start now a certified business entity that partners with Quadrangle. Speaking for the development team, Jenkinz said it was his preference to continues seekingprivate financing, and said designm was complete, entitlements were in places and there equity partners readt to invest if debt were Capstone and Quadrangle are separatelyg planning a Courtyard by Marriott adjacengt to the hotel on land they control. “Wse could still get there, but we got to get the banks to play and they move at theireown pace,” he said.
he said, “if the city decides to pursue the public deal we willsupportf them.” Jenkins said Johnson’s RLJ, with which Jenkins partneres while at Marriott, pulled out of the deal shortly aftetr taking an interest in it. “They studied it hard, spent some resources, but theif bread and butter is acquisitionx and repositioning rather thannew development,” Jenkine said. Richard Bradley, executive director of the Downtown BusinessImprovementf District, said it is unfortunatew that the hotel projecgt ran into the recession but that the city needs to “bite the bullet” and move the project citing the opportunity to grow D.C.
as a tourisg destination, make it a major player in conventions and grow itstax “There’s a whole set of good thing s about moving this forward,” he said.