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

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On May 29 the convention center’s boarrd directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 millionm in bonds to cover the price of the interest during construction, insurance and other costs. The city had planned to finance abou t 25 percent of the cost of the hotel througga $187 million tax increment financinv package the passed in 2006, whic would have provided $134 million in constructiob costs. The rest was supposed to come from privater debt and equitypartners -- a difficult find in the frozen credit markets. O’Dell said developmentr partners and Capstone Developmeny had been dogged but unsuccessful in their pursuitf of investorsfor 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 reallt is shovel ready with the exceptionof O’Dell said. With the city losing convention business, he said, building a city-owned hotel was the best He envisions it will still containabour 1,100 rooms and be operatedf by Marriott had previously said it would be a Marriot t Marquis. O'Dell began briefing members ofthe D.C. Councilp on the board’s proposao Monday.
“Our ultimate goal is to get this projecy done and get it started as soonas possible,” he In particular there is increased pressure from National Harbor in Prince George’s which opened last year with a price tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the WaltDisnety Co. had purchased land to buildd a 500-room resort hotel on 15 acrese there. Convincing the council to approve that amountof however, will be a tall task for He had been considered a top candidatde to replace Neil Albert as deputy mayor for planninfg and economic development, but a sourc close to O'Dell says he was offered the job and turned it O’Dell would not confirm that, but indicated he wouls remain in his curreny post.
“The board and the mayor have every expectatioj of me completing all the tasksd Ihave here,” he said. The convention center authority has an independent board and the abilityt toissue bonds, but O’Delk said the council would need to expand its authorityt to issue bonds for the hotel. The councill and D.C. Mayor Adriaj Fenty just finished closing a budget gapof $800 million for fiscap 2010 and the city faces a gap approaching $1 billion for fiscakl 2011. In addition, D.C.
Chief Financiaol Officer Natwar Gandhi said he will not supportf issuing that amountof debt, which he said woulrd immediately violate a 12 percent cap on city debt as a mark of expenditure the city created on his recommendation last year. Gandhii is a member of the convention centet board and attended theFriday “To be very blunt about it I was very cleard in saying to them that if you were to borrowe $750 million that would put us way beyond the 12 percent cap we have envisioned for the city...ane I cannot be a part y to that,” Gandhi said. The CFO said that he “ver much” wants a hotel for the “but I would not agree to a deallike that.
See we made a commitmenft to Wall Street that we would not borroq more than 12 percent againstour Gandhi, who has won accolades for helpinyg the city snag a AAA bond rating on Wall said he has alread y begun re-emphasizing the importance of the debt cap with membere 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 partnerx continue to seek privatefinancing sources. Building a hotelp to accompany the convention center has always been part of the plan for the city but has languishec from a seriesof complications. Construction on the Walted E.
Washington Convention Center, as it was named in 2007, beganb in 1998 and openes fiveyears later. D.C. planned a 1,400-rookm hotel, but did not control the needed land. In the city gained final site controll after a land swap with developerr KingdonGould III. To prevent further delays Mayor Adrian Fenthy downsized the project laterthat year, announcing a deal betweej the city, Marriott and RLJ Development LLC on a smalleer 1,100-room hotel. Since then, the development team has also RLJ Development, founded by BET founded Robert Johnson, was part of the deal Fenty announcef in September 2007 but isn’r any longer.
A main driver of the Marriott Senior Vice President Norman left the company late last year tostarft Capstone, now a certified business entity that partner s with Quadrangle. Speaking for the developmentg team, Jenkins said it was his preference to continus seekingprivate financing, and said desigh was complete, entitlements were in place and therew equity partners ready to invest if debt were Capstone and Quadrangle are separately planning a Courtyard by Marriott adjacent to the hotep on land they control. “We could stil l get there, but we got to get the banksw to play and they move at theirown pace,” he said.
Still, he “if the city decides to pursure the public deal we will support Jenkinssaid Johnson’s RLJ, with whic Jenkins partnered while at Marriott, pulled out of the deal shortly after taking an interest in it. “Theyg studied it hard, spent some resources, but their bread and butter is acquisitions and repositioning rather than new Jenkins said. Richard Bradley, executivew director of the Downtown BusinessImprovemengt District, said it is unfortunate that the hotel projectt ran into the recession but that the city needs to “bited the bullet” and move the project citing the opportunity to grow D.C.
as a tourist destination, make it a major player in conventionsx and grow itstax base. “There’ a whole set of good things about moving this he said.