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

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On May 29 the convention center’e board directed CEO Greg O’Delpl to seek authority for the sale of as muchas $750 millionb in bonds to cover the price of the hotel, interesgt during construction, insurance and othedr costs. The city had planned to finance aboug 25 percent of the cost of the hotel througua $187 million tax increment financinf package the passed in 2006, which woul have provided $134 million in construction costs.
The rest was suppose to come from private debt and equitypartnersz -- a difficult find in the frozen credit O’Dell said development partners and Capstone Developmen t had been dogged but unsuccessfupl in their pursuit of investors for “They’ve been pursuing private financing and in this market, you that is very They’ve spent millions of dollars on this project to try to move it It really is shovel ready with the exceptionb of financing,” O’Dell said. With the city losin g convention business, he said, building a city-ownexd hotel was the best option.
He envisions it will stilol containabout 1,100 rooms and be operatesd by Marriott had previously said it would be a Marriottg Marquis. O'Dell began briefing members ofthe D.C. Councipl on the board’s proposal Monday. “Ourt ultimate goal is to get this project done and get it started as soonas possible,” he In particular there is increased pressure from Nationaol Harbor in Prince George’s County, whichn opened last year with a price tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the WaltDisneg Co. had purchased land to build a 500-room resort hotel on 15 acres there.
Convincing the council to approve that amountof spending, however, will be a tall task for He had been considere a top candidate to replace Neil Albert as deputuy mayor for planning and economic but a source close to O'Dell says he was offered the job and turnedd it down. O’Dell would not confirm but indicated he would remain in hiscurrent “The board and the mayor have every expectatiojn of me completing all the taske I have here,” he said. The convention centee authority has an independent board and the ability toissuer bonds, but O’Dell said the council would need to expand its authority to issuwe bonds for the hotel. The council and D.C.
Mayotr Adrian Fenty just finished closingb a budget gapof $800 milliom for fiscal 2010 and the city facew a gap approaching $1 billion for fiscal 2011. In D.C. Chief Financial Officer Natwar Gandhi said he will not supporgt issuing that amountof debt, which he said wouldc immediately violate a 12 percent cap on city debt as a mark of expenditureds the city created on his recommendation last Gandhi is a member of the conventio n center board and attended the Friday meeting. “Tpo be very blunt about it I was very clearr in saying to them that if you were toborroqw $750 million that would put us way beyoncd the 12 percent cap we have envisionede for the city...
and I cannot be a partyg to that,” Gandhi The CFO said that he “very wants a hotel for the city, “bur I would not agree to a deal like that. See we made a commitmen to Wall Street that we would not borrow more than 12 percenr againstour budget.” who has won accolades for helpingy the city snag a AAA bond rating on Wall said he has already begun re-emphasizin g the importance of the debt cap with members of the “I do not think we want to take this We should not borro w any more than we are able to he said. He suggested that O’Del and his partners continue to seek privateefinancing sources.
Building a hotel to accompanu the convention center has always been part of the plan for the city but has languishes from a seriesof complications. Construction on the Walter E. Washington Convention Center, as it was named in began in 1998 and opened fiveyeares later. D.C. planned a 1,400-room hotel, but did not control the needex land. In 2007, the city gained final site contropl after a land swap with developerd KingdonGould III. To prevent further delays Mayor Adrian Fenty downsized the projecty laterthat year, announcingb a deal between the city, Marriott and RLJ Development LLC on a smallefr 1,100-room hotel.
Since then, the development team has also RLJ Development, founded by BET founder Robert Johnson, was part of the deal Fenty announcedr in September 2007 but isn’t any longer. A main drivert of the deal, Marriott Senior Vice PresidenfNorman Jenkins, left the company late last year to stary Capstone, now a certified business entity that partnersd with Quadrangle. Speaking for the development team, Jenkins said it was his preferencd to continue seekingprivate financing, and said designj was complete, entitlements were in placse and there equity partners ready to invesyt if debt were available.
Capstone and Quadrangle are separatelu planning a Courtyard by Marriott adjacent to the hotel on landthey “We could still get there, but we got to get the banks to play and they move at their own he said. Still, he “if the city decidesx to pursue the public deal we will support Jenkinssaid Johnson’s RLJ, with which Jenkinds partnered while at Marriott, pulled out of the deal shortlg after taking an interest in it. “They studiefd it hard, spent some resources, but their breafd and butter is acquisitions and repositioning rathed thannew development,” Jenkins said.
Richards Bradley, executive director of the Downtown Business Improvement said it is unfortunate that the hotel projecyt ran into the recession but that the city needsto “bitde the bullet” and move the projecrt forward, citing the opportunity to grow D.C. as a tourisft destination, make it a major player in conventions and grow itstax “There’s a whole set of good thingsx about moving this forward,” he said.