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

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On May 29 the convention center’s boardc directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 millionn in bonds to cover the price of the hotel, interesg during construction, insurance and other costs. The city had planne d to finance about 25 percent of the cost of the hotel througha $187 million tax increment financing packag the passed in 2006, which woul have provided $134 million in construction The rest was supposed to come from private debt and equituy partners -- a difficult find in the frozen creditg markets. O’Dell said development partners and Capstonew Development had been dogged but unsuccessfupl in their pursuit of investorsfor months.
“They’ve been pursuinh private financing and inthis market, you that is very difficult. They’ve speng 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 losingv convention business, he said, building a city-owned hoteol was the best option. He envisions it will still contaihabout 1,100 rooms and be operatedx by Marriott had previously said it would be a Marriotf Marquis. O'Dell began briefing memberws ofthe D.C. Councilp on the board’s proposal Monday.
“Oure ultimate goal is to get this project done and get it startedr as soonas possible,” he In particular there is increased pressure from Nationapl Harbor in Prince George’s which opened last year with a priced tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the WaltDisneyt Co. had purchased land to build a 500-rook resort hotel on 15 acrex there. Convincing the council to approve that amoungof spending, however, will be a tall task for He had been consideredd a top candidate to replace Neil Albert as deputyt mayor for planning and economic development, but a sourcw close to O'Dell says he was offeredf the job and turned it O’Dell would not confirm that, but indicated he woulf remain in his current post.
“Thse board and the mayof have every expectation of me completinb all the tasks I have he said. The convention center authoritt has an independent board and the ability to issue but O’Dell said the councik would need to expand its authority to issure bonds for the hotel. The council and D.C. Mayo r Adrian Fenty just finished closing a budget gapof $800 milliojn for fiscal 2010 and the city facew a gap approaching $1 billion for fiscak 2011. In addition, D.C.
Chie Financial Officer Natwar Gandhi said he will not support issuinhg that amountof debt, which he said woulf immediately violate a 12 percent cap on city debt as a mark of expenditureas the city created on his recommendation last Gandhi is a member of the convention centet board and attended the Friday meeting. “Tlo be very blunt about it I was very cleat in saying to them that if you were toborrow $750 millioj that would put us way beyond the 12 percent cap we have envisioned for the city...ane I cannot be a party to Gandhi said. The CFO said that he “vergy much” wants a hotel for the “but I would not agree to a deallike that.
See we made a commitmenty to Wall Street that we wouldf not borrow more than 12 perceny againstour budget.” Gandhi, who has won accoladews for helping the city snag a AAA bond ratingy on Wall Street, said he has alreadh begun re-emphasizing the importance of the debt cap with memberas of the council. “I do not think we want to takethis lightly. We should not borroa any more than we are able to he said. He suggested that O’Dell and his partnerss continue to seek private financing Building a hotel to accompany the convention center has always been part of the plan for the city but has languishedc from a seriesof complications. Constructiom on the Walter E.
Washingtonh Convention Center, as it was names in 2007, began in 1998 and opened fiveyearsd later. D.C. planned a 1,400-room hotel, but did not contro l the needed land. In 2007, the city gained final site control after a land swap with developeer KingdonGould III. To prevent further delaya Mayor Adrian Fenty downsized the project latetrthat year, announcing a deal between the city, Marriotr and RLJ Development LLC on a smallere 1,100-room hotel. Since then, the development team has also RLJ Development, founded by BET founder Robertt Johnson, was part of the deal Fentyt announced in September 2007 but isn’t any longer.
A main driver of the deal, Marriott Senior Vice PresidentNorman Jenkins, left the companyu late last year to start now a certified business entity that partnerxs with Quadrangle. Speaking for the developmentt team, Jenkins said it was his preferencw to continue seekingprivate financing, and said design was complete, entitlements were in place and therr equity partners ready to invest if debt were available. Capstons and Quadrangle are separately planning a Courtyarde by Marriott adjacent to the hotel on landthey control. “We coule still get there, but we got to get the banks to play and they move at their own pace,” he said.
Still, he said, “ivf the city decides to pursue the public deal we willsupporf them.” Jenkins said Johnson’s RLJ, with which Jenkina partnered while at Marriott, pulled out of the deal shortly after taking an interest in it. “They studieds it hard, spent some resources, but theid bread and butter is acquisitions and repositioning rather thannew development,” Jenkins said. Richard Bradley, executivwe director of the Downtown Business Improvement District, said it is unfortunates that the hotel projecg ran into the recession but that the city needs to “bitee the bullet” and move the project forward, citingb the opportunity to grow D.C.
as a tourisrt destination, make it a major playert in conventions and grow itstax “There’s a whole set of good things abouft moving this forward,” he