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

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On May 29 the convention center’s board directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 milliobn in bonds to cover the price of the hotel, interes t during construction, insurance and other costs. The city had planned to financ e about 25 percent of the cost of the hotel througha $187 million tax increment financing package the passes in 2006, which would have provided $134 million in constructiobn costs. The rest was supposed to come from privats debt and equitypartners -- a difficul t find in the frozen credit markets.
O’Dell said development partners and Capstoner Development had been dogged but unsuccessfulk in their pursuit of investorwsfor months. “They’ve been pursuiny private financing and in this you know, that is very difficult. They’ve spenf millions of dollars on this projectr to try to moveit forward. It reallt is shovel ready with the exceptionnof financing,” O’Dell said. With the city losinhg convention business, he said, building a city-owned hotel was the best He envisions it will still containhabout 1,100 rooms and be operatee by Marriott had previously said it woulxd be a Marriott Marquis. O'Dell began briefingf members ofthe D.C.
Council on the board’sd proposal Monday. “Our ultimate goal is to get this projecyt done and get it started as soon as he said. In particular there is increased pressured from National Harbor inPrincr George’s County, which opened last year with a prics tag of more than $2 Its developer, the Peterson Cos. announceed May 18 that the WaltDisney Co. had purchasedx land to build a 500-room resort hotel on 15 acrese there.
Convincing the council to approvse that amountof however, will be a tall task for He had been considered a top candidate to replace Neil Albert as deputy mayotr for planning and economic development, but a source close to O'Delol says he was offered the job and turnede it down. O’Dell would not confirm but indicated he would remain in hiscurrent “The board and the mayor have every expectation of me completiny all the tasks I have here,” he The convention center authority has an independent board and the abilitg to issue bonds, but O’Dell said the councilp would need to expand its authority to issue bonds for the hotel. The councilo and D.C.
Mayor Adrian Fenty just finishex closing a budget gapof $800 million for fiscap 2010 and the city facexs a gap approaching $1 billion for fiscal 2011. In D.C. Chief Financial Officer Natwar Gandhu said he will not support issuing that amounyof debt, which he said woulsd immediately violate a 12 percent cap on city debt as a mark of expenditurews the city created on his recommendation last year. Gandhik is a member of the convention center boarrd and attended theFriday meeting. “Tol be very blunt about it I was very cleaer in saying to them that if you were toborrow $750 million that would put us way beyond the 12 percent cap we have envisioned for the city...
anc I cannot be a partty to that,” Gandhi said. The CFO said that he “vert much” wants a hotel for the “but I would not agree to a deal like See we made a commitment to Wall Streetg that we would not borrow more than 12 percenty againstour budget.” Gandhi, who has won accoladesz for helping the city snag a AAA bond rating on Wall Street, said he has already begun re-emphasizing the importance of the debt cap with membersw of the council. “I do not thinki 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 partner continue to seek privatefinancing sources.
Building a hoteo to accompany the convention centee has always been part of the plan for the city but has languishexd from a seriesof complications. Construction on the Walter E. Washington Convention Center, as it was named in began in 1998 and opened fiveyears D.C. planned a 1,400-room hotel, but did not contro the needed land. In 2007, the city gainef final site control after a land swap with developef KingdonGould III. To prevent further delays Mayor Adrian Fenty downsized the project laterthat year, announcintg a deal between the city, Marriott and RLJ Development LLC on a smalle r 1,100-room hotel. Since then, the developmenft team has also changed.
RLJ Development, founded by BET founder Robert Johnson, was part of the deal Fentyh announced in September 2007but isn’ft any longer. A main driver of the Marriott Senior Vice PresidentNormanm Jenkins, left the company late last year to start Capstone, now a certified business entity that partnersa with Quadrangle. Speaking for the development team, Jenkins said it was his preference to continuse seekingprivate financing, and said design was entitlements were in place and there equitgy partners ready to invest if debt were Capstone and Quadrangle are separatelyt planning a Courtyard by Marriott adjacent to the hotel on land they “We could still get but we got to get the banks to play and they move at theire own pace,” he Still, he said, “if the city decidee to pursue the publifc deal we will support Jenkins said Johnson’s RLJ, with which Jenkin partnered while at Marriott, pulled out of the deal shortluy after taking an interest in it.
“Theyh studied it hard, spent some resources, but theit bread and butter is acquisitions and repositioning rather than new Jenkins said. Richard Bradley, executive director of the Downtowm BusinessImprovement District, said it is unfortunate that the hotel projecg ran into the recession but that the city neede to “bite the bullet” and move the project forward, citingt the opportunity to grow D.C. as a touristt destination, make it a majotr player in conventions and grow itstax “There’s a whole set of good things abouy moving this forward,” he said.