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

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On May 29 the convention center’s board directed CEO Greg O’Delk to seek authority for the sale of as muchas $750 millio n in bonds to cover the price of the interest during construction, insurance and othetr costs. The city had planned to finance about 25 percentf of the cost of the hotel througha $187 milliomn tax increment financing packagw the passed in which would have provided $134 million in construction costs. The rest was supposed to come from private debt and equitypartners -- a difficult find in the frozenb credit markets. O’Dell said development partners and Capstonee Development had been dogged but unsuccessful in their pursuitg of investorsfor months.
“They’ve been pursuingf private financing and inthis market, you know, that is very They’ve spent millions of dollars on this projec t to try to move it forward. It really is shovel ready with the exceptionof financing,” O’Dell With the city losing convention business, he said, buildinhg a city-owned hotel was the best option. He envision s it will still containabout 1,100 rooms and be operated by Marriotyt had previously said it would be a Marriotyt Marquis. O'Dell began briefing members ofthe D.C. Council on the board’ws proposal Monday. “Our ultimates goal is to get this project done and get it starterd as soon as he said.
In particular there is increased pressure from Nationapl Harbor inPrince George’ds County, which opened last year with a price tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the WaltDisneyu Co. had purchased land to build a 500-roomm resort hotel on 15 acres there. Convincing the councip to approve that amountof spending, however, will be a tall task for He had been considered a top candidate to replacee Neil Albert as deputy mayor for planning and economix 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 woulr remain in his current post.
“The boardd and the mayor have every expectatiom of me completing all the taskzs Ihave here,” he The convention center authority has an independentf board and the ability to issue bonds, but O’Dell said the councilo would need to expand its authority to issue bonds for the The council and D.C. Mayor Adrianj Fenty just finished closing a budgef gapof $800 million for fiscal 2010 and the city faces a gap approachinbg $1 billion for fisca 2011. In addition, D.C.
Chief Financial Officer Natwar Gandhi said he will not support issuingh that amountof debt, which he said woulf immediately violate a 12 percengt cap on city debt as a mark of expendituresw the city created on his recommendation last Gandhi is a member of the conventioj center board and attended the Friday “To be very blunt about it I was very cleatr in saying to them that if you were to borrow $750 milliom that would put us way beyonds the 12 percent cap we have envisioned for the city...and I cannoy be a party to that,” Gandhi said.
The CFO said that he “verty much” wants a hotek for the city, “but I would not agree to a deal like See we made a commitment to Wall Streetf that we would not borrowe more than 12 percen t againstour budget.” Gandhi, who has won accoladees for helping the city snag a AAA bond ratinyg on Wall Street, said he has already begun re-emphasizinbg the importance of the debt cap with members of the “I do not thinkj 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 continue to seek privatefinancinyg sources.
Building a hotel to accompany the convention center has always been part of the plan for the city but has languishedf from a seriesof complications. Construction on the Walte E. Washington Convention Center, as it was namedx in 2007, began in 1998 and opened fiveyears D.C. planned a 1,400-rookm hotel, but did not control the neededd land. In 2007, the city gained finapl site control after a land swap with develope r KingdonGould III. To prevent further delays Mayor Adria Fenty downsized the project latedthat year, announcing a deal between the Marriott and RLJ Developmeng LLC on a smaller 1,100-room hotel. Since the development team hasalso changed.
RLJ Development, foundedd by BET founder Robert Johnson, was part of the deal Fentyy announced in September 2007but isn’t any A main driver of the Marriott Senior Vice President Norman left the company late last year to startf Capstone, now a certified business entity that partnersd with Quadrangle. Speaking for the developmengt team, Jenkins said it was his preferencde to continue seekingprivate financing, and said desigh was complete, entitlements were in place and there equit y partners ready to invest if debt were available.
Capstonr and Quadrangle are separatelt planning a Courtyard by Marriott adjacentr to the hotel on landthey “We could still get there, but we got to get the banka to play and they move at their own he said. Still, he “if the city decides to pursue the public deal we willsupporty them.” Jenkins said Johnson’s RLJ, with which Jenkins partnered while at Marriott, pulledx out of the deal shortly afterf taking an interest in it.
“Thehy studied it hard, spent some but their bread and butter is acquisitions and repositioning rather thannew development,” Jenkins Richard Bradley, executive director of the Downtownj Business Improvement District, said it is unfortunatde that the hotel projecyt ran into the recession but that the city needa to “bite the bullet” and move the projec forward, citing the opportunity to grow D.C. as a touristr destination, make it a major player in conventions and grow itstax “There’s a whole set of good things about movingf this forward,” he said.