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

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On May 29 the convention center’s boards directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 millioj in bonds to cover the price of the interest during construction, insurance and othed costs. The city had planned to financ about 25 percent of the cost of the hote througha $187 million tax increment financing package the passed in 2006, which would have provided $134 milliojn in construction costs. The rest was supposed to come from privats debt and equitypartners -- a difficult find in the frozem credit markets. O’Dell said development partnera and Capstone Development had been dogge but unsuccessful in their pursuig of investorsfor months.
“They’ve been pursuin g private financing and inthis market, you that is very difficult. They’ve spent millions of dollars on this projecf to try to moveit forward. It reallyu is shovel ready with the exceptiobnof financing,” O’Dell said. With the city losing conventiomn business, he said, building a city-owned hotel was the best He envisions it will still containabout 1,100 roomsw and be operated by Marriott had previouslhy said it would be a Marriott Marquis. O'Dell begaj briefing members ofthe D.C. Council on the board’ proposal Monday.
“Our ultimate goal is to get this project done and get it starte as soonas possible,” he In particular there is increaserd pressure from National Harbor in Prince George’s which opened last year with a pricd tag of more than $2 Its developer, the Petersohn Cos. announced May 18 that the WaltDisney Co. had purchasede land to build a 500-room resort hotel on 15 acresz there. Convincing the council to approvre that amountof spending, however, will be a tall task for He had been considered a top candidate to replace Neil Albergt as deputy mayor for planning and economic but a source close to O'Dell says he was offerec the job and turned it O’Dell would not confirm that, but indicated he would remain in his currenyt post.
“The board and the mayor have ever y expectation of me completing all the tasks I have he said. The convention centeer authority has an independent board and the ability toissue bonds, but O’Dell said the council woulc need to expand its authority to issue bonds for the The council and D.C. Mayor Adriahn Fenty just finished closing a budget gapof $800 millionj for fiscal 2010 and the city faces a gap approachinf $1 billion for fiscal 2011. In D.C.
Chief Financial Officer Natwar Gandhui said he will not support issuinf that amountof debt, whicnh he said would immediately violate a 12 percent cap on city debt as a mark of expenditurezs the city created on his recommendation last year. Gandhj is a member of the convention center board and attendecd theFriday meeting. “To be very blunt aboutg it I was very clear in saying to them that if you were toborrowa $750 million that would put us way beyond the 12 perceny cap we have envisioned for the city...anrd I cannot be a partyh to that,” Gandhi said.
The CFO said that he “veryt much” wants a hotel for the “but I would not agre to a deal like See we made a commitmentf to Wall Street that we would not borrow more than 12 perceny againstour budget.” Gandhi, who has won accolades for helpinh the city snag a AAA bond ratinh on Wall Street, said he has alreadyy begun re-emphasizing the importance of the debt cap with membersz of the council. “I do not thini we want to takethis lightly. We shoul not borrow any more than we are ableto borrow,” he He suggested that O’Delll and his partners continue to seek privat e financing sources.
Building a hotel to accompany the convention centerf has always been part of the plan for the city but has languishefd from a seriesof complications. Construction on the Walter E. Washington Convention Center, as it was names in 2007, began in 1998 and opened fiveyeards later. D.C. planned a 1,400-room but did not control the needed In 2007, the city gainef final site control after a land swap with developee Kingdon Gould III. To prevent furthe r delays Mayor Adrian Fenty downsized the project lateerthat year, announcing a deal betweemn the city, Marriott and RLJ Development LLC on a smaller 1,100-rook hotel.
Since then, the development team has also RLJ Development, founded by BET founder Robert Johnson, was part of the deal Fentgy announced in September 2007 but isn’f any longer. A main driver of the Marriott Senior Vice PresidentNorman Jenkins, left the compan y late last year to start Capstone, now a certifiede business entity that partners with Quadrangle. Speakint for the development team, Jenkins said it was his preferenc to continue seekingprivate financing, and said design was complete, entitlements were in place and therse equity partners ready to invest if debt were Capstone and Quadrangle are separately planning a Courtyarr by Marriott adjacent to the hoteol on land they “We could still get but we got to get the banks to play and they move at theie own pace,” he said.
Still, he “if the city decides to pursue the public deal we willsuppory them.” Jenkins said Johnson’s RLJ, with whichh Jenkins partnered while at pulled out of the deal shortluy after taking an interest in it. “They studied it hard, spent some but their bread and butterd is acquisitions and repositioning rather thannew development,” Jenkinas said. Richard Bradley, executive directorf of the Downtown Business Improvement said it is unfortunate that the hotep project ran into the recession but that the city needssto “bite the bullet” and move the project citing the opportunity to grow D.C.
as a tourisr destination, make it a major player in conventionsx and grow itstax base. “There’s a whols set of good things about moving this he said.