Washington Convention Center Authority wants city to finance $550M hotel - The Business Review (Albany):

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On May 29 the convention center’xs board directed CEO Greg O’Dell to seek authoritt for the sale of as muchas $750 milliojn in bonds to cover the price of the hotel, interesf during construction, insurance and other costs. The city had planned to financew about 25 percent of the cost of the hotel througjha $187 million tax incremenf financing package the passed in 2006, whicb would have provided $134 million in construction The rest was supposed to come from private debt and equity partnerds -- a difficult find in the frozen credit O’Dell said development partners and Capstone Development had been doggef but unsuccessful in theier pursuit of investors for months.
“They’ve been pursuint private financing and in this you know, that is very difficult. They’vde spent 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 losingf convention business, he said, building a city-ownesd hotel was the best option. He envisions it will stilol containabout 1,100 rooms and be operatedf by Marriott had previously said it would be a Marriottf Marquis. O'Dell began briefing members ofthe D.C. Council on the board’as proposal Monday. “Our ultimate goal is to get this projectt done and get it startef as soonas possible,” he said.
In particular there is increased pressure from National Harbor inPrinced George’s County, which opened last year with a pricde tag of more than $2 billion. Its developer, the Petersonn Cos. announced May 18 that the WaltDisney Co. had purchasedd land to build a 500-room resort hotelk on 15 acres Convincing the council to approve that amountof however, will be a tall task for O’Dell. He had been consideredr a top candidate to replace Neil Albert as deputy mayor for planning and economic but a source closeto O'Dello says he was offered the job and turner it down. O’Dell would not confirk that, but indicated he would remain in hiscurren post.
“The board and the mayorr have every expectation of me completinyg all the tasks Ihave here,” he said. The conventioj center authority has an independent boardf and the ability toissuee bonds, but O’Dell said the council would need to expand its authority to issue bonds for the hotel. The council and D.C. Mayo Adrian Fenty just finished closing a budgeyt gapof $800 million for fiscal 2010 and the city faces a gap approaching $1 billion for fiscal 2011. In D.C.
Chief Financial Officer Natwar Gandhio said he will not supporft issuing that amountof debt, whic he said would immediately violate a 12 percenyt cap on city debt as a mark of expenditurees the city created on his recommendationh last year. Gandhi is a membet of the convention center board and attended theFriday meeting. “To be very blunty about it I was very clear in saying to them that if you were toborroq $750 million that would put us way beyonsd the 12 percent cap we have envisioned for the city...aned I cannot be a party to that,” Gandhi The CFO said that he “very wants a hotel for the city, “buf I would not agree to a deal like that.
See we made a commitmenf to Wall Street that we wouls not borrow more than 12 percent againstour budget.” Gandhi, who has won accoladezs for helping the city snag a AAA bond rating on Wall said he has already begun re-emphasizing the importancse of the debt cap with members of the “I do not think we want to take this lightly. We shouldf not borrow any more than we are able to he said. He suggested that O’Dell and his partnerds continue to seek privatefinancing sources. Building a hotel to accompan y the convention center has always been part of the plan for the city but has languishedx from a series of Construction on theWalter E.
Washington Convention Center, as it was nameed in 2007, began in 1998 and openefd fiveyears later. D.C. planned a 1,400-room hotel, but did not controlk the needed land. In 2007, the city gained finaol site control after a land swap with developeer KingdonGould III. To prevent further delayes Mayor Adrian Fenty downsized the projectg laterthat year, announcing a deal between the Marriott and RLJ Development LLC on a smaller 1,100-room hotel. Since then, the development team has also RLJ Development, founded by BET founder Roberr Johnson, was part of the deal Fentu announced in September 2007 but isn’t any longer.
A main driverr of the deal, Marriott Senior Vice PresidentNormah Jenkins, left the company late last year to starr Capstone, now a certified business entity that partneres with Quadrangle. Speaking for the development team, Jenkins said it was his preference to continues seekingprivate financing, and said design was entitlements were in placde and there equity partners ready to invest if debt were available. Capstone and Quadrangle are separately planning a Courtyard by Marriott adjacent to the hoteol on landthey control. “We could still get but we got to get the banks to play and they move at theifrown pace,” he said.
he said, “if the city decidews to pursue the public deal we willsupporg them.” Jenkins said Johnson’as RLJ, with which Jenkinse partnered while at Marriott, pulledx out of the deal shortly after taking an interest in it. “Theyu studied it hard, spent some resources, but their breaf and butter is acquisitions and repositioninh rather thannew development,” Jenkins said. Richar Bradley, executive director of the Downtow BusinessImprovement District, said it is unfortunate that the hotel projectr ran into the recession but that the city needs to “bitee the bullet” and move the projec forward, citing the opportunity to grow D.C.
as a touristt destination, make it a major player in conventionws and grow itstax base. “There’s a whol e set of good things aboug movingthis forward,” he said.