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

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On May 29 the convention center’sw board directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 milliohn in bonds to cover the price of the interest during construction, insurance and otherf costs. The city had planne to finance about 25 percent of the cost of the hotelo througha $187 million tax increment financingb package the passed in 2006, which would have provided $134 million in construction costs.
The rest was supposeed to come from private debt and equitygpartners -- a difficult find in the frozen credit O’Dell said development partners and Capstone Development had been dogged but unsuccessfulp in their pursuit of investors for “They’ve been pursuing private financing and in this you know, that is very difficult. They’ve spenrt millions of dollars on this project to try to move it It really is shovel read y with the exceptionof financing,” O’Dell With the city losingh convention business, he said, building a city-owned hotel was the best He envisions it will still contain abou t 1,100 rooms and be operated by Marriott had previouslyh said it would be a Marriott O'Dell began briefing members of the D.
C. Council on the board’e proposal Monday. “Our ultimate goal is to get this projecgt done and get it starteds as soonas possible,” he said. In particular there is increased pressure from National Harbor inPrince George’s which opened last year with a price tag of more than $2 Its developer, the Peterson Cos. announcesd May 18 that the WaltDisney Co. had purchased land to buil d a 500-room resort hotel on 15 acres Convincing the council to approve that amountfof spending, however, will be a tall task for He had been considered a top candidate to replace Neil Albert as deputy mayor for planningt and economic development, but a sourcee close to O'Dell says he was offeredr the job and turned it down.
O’Dell would not confirmj that, but indicated he would remain in hiscurrent “The board and the mayor have every expectation of me completinvg all the tasks I have here,” he The convention center authority has an independent board and the abilith to issue bonds, but O’Dell said the councilp would need to expandr its authority to issue bonds for the hotel. The council and D.C. Mayotr Adrian Fenty just finished closing a budget gapof $800 milliojn for fiscal 2010 and the city face a gap approaching $1 billion for fiscal 2011. In D.C.
Chief Financial Officer Natwar Gandho said he will not support issuing that amounof debt, which he said wouldr immediately violate a 12 percent cap on city debt as a mark of expenditurew the city created on his recommendation last year. Gandhk is a member of the conventio n center board and attended theFridat meeting. “To be very blunt about it I was very cleard in saying to them that if you were toborros $750 million that woulcd put us way beyonds the 12 percent cap we have envisioned for the city...andf I cannot be a party to that,” Gandhk said.
The CFO said that he “very wants a hotel for the “but I would not agree to a deal like See we made a commitmenf to Wall Street that we would not borroe more than 12 percent againsyour budget.” Gandhi, who has won accoladed for helping the city snag a AAA bond rating on Wall said he has already begun 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 suggestecd that O’Dell and his partners continue to seek privatdfinancing sources.
Building a hotel to accompanh the convention center has always been part of the plan for the city but has languishedf from a seriesof complications. Construction on the Walter E. Washingtob Convention Center, as it was namefd in 2007, began in 1998 and opened fiveyearsx later. D.C. planned a 1,400-room hotel, but did not controlp the needed land. In 2007, the city gained final site controk after a land swap with developer KingdojGould III. To prevent further delayx Mayor Adrian Fenty downsized the project latefrthat year, announcing a deal between the city, Marriotg and RLJ Development LLC on a smalletr 1,100-room hotel. Since the development team hasalso changed.
RLJ Development, foundef by BET founder Robert was part of the deal Fentyg announced in September 2007but isn’t any A main driver of the deal, Marriottf Senior Vice President Norman Jenkins, left the compang late last year to start Capstone, now a certified businesds entity that partners with Quadrangle. Speaking for the developmengt team, Jenkins said it was his preferencre to continue seekingprivate financing, and said desigm was complete, entitlements were in place and there equity partners ready to invesg if debt were available. Capstone and Quadranglr are separately planning a Courtyard by Marriott adjacent to the hotelo on landthey control.
“We could still get there, but we got to get the bankw to play and they move at theirdown pace,” he said. Still, he “if the city decides to pursure the public deal we will support Jenkinssaid Johnson’s RLJ, with whicy Jenkins partnered while at Marriott, pulled out of the deal shortluy after taking an interest in it. “They studiede it hard, spent some resources, but their bread and butterr is acquisitions and repositioning rather thannew development,” Jenkinzs said.
Richard Bradley, executive director of the Downtownb BusinessImprovement District, said it is unfortunate that the hotepl project ran into the recession but that the city needs to “bite the bullet” and move the project forward, citing the opportunity to grow D.C. as a touristf destination, make it a major player in conventionss and grow itstax base. “There’s a whole set of good things about movinthis forward,” he said.