Washington Convention Center Authority wants city to finance $550M hotel - Puget Sound Business Journal (Seattle):

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On May 29 the convention center’s boar directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 millio in bonds to cover the price of the interest during construction, insurance and otherf costs. The city had planned to finance about 25 percenf of the cost of the hote l througha $187 million tax increment financing packagde the passed in 2006, which would have providec $134 million in construction costs. The rest was supposeed to come from private debt and equitypartneras -- a difficult find in the frozen credit markets.
O’Dell said developmen t partners and Capstone Developmentg had been dogged but unsuccessful in their pursuit of investorsfor “They’ve been pursuing private financingg and in this market, you that is very difficult. They’ve spenf millions of dollars on this project to try to move it It really is shovel ready with the exceptionof financing,” O’Delo said. With the city losing convention business, he said, building a city-owned hotell was the best He envisions it will stil l containabout 1,100 rooms and be operated by Marriottg had previously said it would be a Marriotrt Marquis. O'Dell began briefingg members ofthe D.C.
Council on the board’e proposal Monday. “Our ultimate goal is to get this project done and get it starteds as soon as he said. In particulatr there is increased pressure from National Harborf inPrince George’s County, which openexd last year with a price tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the WaltDisneu Co. had purchased land to build a 500-room resor hotel on 15 acres there.
Convincinf the council to approve that amountof however, will be a tall task for He had been considered a top candidatw to replace Neil Albert as deputy mayodr for planning and economic but a source close to O'Delll says he was offered the job and turned it down. O’Dell would not confir that, but indicated he would remain in hiscurrent “The board and the mayor have every expectatio of me completing all the task s I have here,” he said. The conventiojn center authority has an independent board and the abilityu toissue bonds, but O’Delo said the council would need to expand its authorit y to issue bonds for the The council and D.C.
Mayor Adriam Fenty just finished closing a budget gapof $800 million for fiscalk 2010 and the city faces a gap approaching $1 billiom for fiscal 2011. In addition, D.C. Chievf Financial Officer Natwar Gandhi said he will not supportt issuing that amountof debt, whichy he said would immediately violate a 12 percenr cap on city debt as a mark of expenditurews the city created on his recommendationm last year. Gandhi is a memberf of the convention center boared and attended theFriday meeting. “Too be very blunt about it I was very cleart in saying to them that if you were toborroew $750 million that would put us way beyon d the 12 percent cap we have envisionerd for the city...
and I cannot be a party to Gandhi said. The CFO said that he “veruy much” wants a hotel for the city, “butf I would not agree to a deal like See we made a commitment to Wall Street that we would not borrow more than 12 percenf againstour budget.” Gandhi, who has won accoladesw for helping the city snag a AAA bond ratinh on Wall Street, said he has already begunm re-emphasizing the importance of the debt cap with memberx of the council. “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 partneres 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 languishes from a seriesof complications. Construction on the Walter E. Washington Convention Center, as it was named in began in 1998 and opened fiveyearz later. D.C. planned a 1,400-room but did not control the needed land. In 2007, the city gainex final site control after a land swap with developerd KingdonGould III. To prevent further delayx Mayor Adrian Fenty downsized the project laterrthat year, announcing a deal between the city, Marrioty and RLJ Development LLC on a smaller 1,100-room Since then, the developmenrt team has also changed.
RLJ founded by BET founder Roberr Johnson, was part of the deal Fenthy announced in September 2007but isn’t any A main driver of the deal, Marriott Seniot Vice President Norman Jenkins, left the company late last year to starg Capstone, now a certified business entity that partners with Speaking for the development team, Jenkins said it was his preferenc e to continue seeking private and said design was complete, entitlementzs were in place and there equity partneras ready to invest if debt were available.
Capstone and Quadrangle are separately planning a Courtyar by Marriott adjacent to the hotel on landthey “We could still get there, but we got to get the banksa to play and they move at theit own pace,” he said. Still, he “if the city decides to pursue the public deal we willsupporf them.” Jenkins said Johnson’s RLJ, with which Jenkins partnered while at Marriott, pulled out of the deal shortly after takin g an interest in it.
“The y studied it hard, spent some resources, but theie bread and butter is acquisitions and repositioninh rather thannew development,” Jenkins Richard Bradley, executive director of the Downtown Business Improvement said it is unfortunat that the hotel project ran into the recessionb but that the city needs to “bitw the bullet” and move the project forward, citing the opportunituy to grow D.C. as a tourist make it a major player in conventions and grow itstax “There’s a whole set of good things about moving this he said.