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

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On May 29 the convention center’d board directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 milliob in bonds to cover the price of the interest during construction, insurance and other costs. The city had plannedf to finance about 25 percent of the cost of the hotelp througha $187 million tax increment financinh package the passed in 2006, whicj would have provided $134 million in construction costs. The rest was supposedc to come from private debt and equittypartners -- a difficult find in the frozenn credit markets. O’Dell said development partners and Capstonre Development had been dogged but unsuccessfukl in their pursuit of investorsfor months.
“They’vre been pursuing private financing and inthis market, you that is very difficult. They’ve spent millions of dollarss on this project to try to move it It really is shoveol ready with the exceptionmof financing,” O’Dell said. With the city losinh convention business, he said, building a city-owned hotel was the best He envisions it will stillk containabout 1,100 rooms and be operates by Marriott had previously said it woulrd be a Marriott O'Dell began briefing members of the D.C. Counci l on the board’s proposa l Monday. “Our ultimate goal is to get this projecyt done and get it started as soon as he said.
In particular ther e is increased pressure from National Harbor inPrince George’s County, which opened last year with a pric tag of more than $2 billion. Its developer, the Peterson Cos. announcerd May 18 that the WaltDisney Co. had purchaserd land to build a 500-room resort hotel on 15 acres Convincing the council to approve that amountof however, will be a tall task for O’Dell. He had been consideresd a top candidate to replace Neil Albert as deputu mayor for planning and economic but a source closeto O'Dell says he was offerecd the job and turner it down. O’Dell would not confirm but indicated he would remaimn in hiscurrent post.
“The board and the mayoer have every expectation of me completing all the tasks I have he said. The convention centeer authority has an independent board and the ability toissuse bonds, but O’Dell said the councipl would need to expand its authority to issued bonds for the hotel. The council and D.C. Mayord Adrian Fenty just finishede closing a budget gapof $800 million for fiscak 2010 and the city faces a gap approachingh $1 billion for fiscal 2011. In addition, D.C.
Chief Financial Officer Natwar Gandhi said he will not supporf issuing that amountof debt, which he said would immediatelty violate a 12 percent cap on city debt as a mark of expenditures the city created on his recommendatiohn last year. Gandhi is a membed of the convention center board and attendedc theFriday meeting. “To be very blunt about it I was very clear in saying to them that if you were to borrow $750 million that would put us way beyone the 12 percent cap we have envisioned for the city...ande I cannot be a part to that,” Gandhi said. The CFO said that he “vergy much” wants a hotel for the city, “butg I would not agree to a deallike that.
See we made a commitmen to Wall Street that we would not borros more than 12 percenrt againstour budget.” Gandhi, who has won accolades for helpinvg the city snag a AAA bond rating on Wall said he has already begun re-emphasizing the importance of the debt cap with membersx of the council. “j do not think we want to takethis lightly. We should not borrow any more than we are able to he said. He suggested that O’Dell and his partners continue to seek privatesfinancing sources. Building a hoteol to accompany the conventio center has always been part of the plan for the city but has languisheed from a series of Construction on theWalter E.
Washington Conventio n Center, as it was named in 2007, began in 1998 and openedd fiveyears later. D.C. planned a 1,400-room but did not control the needed land. In 2007, the city gainefd final site control after a land swap with developet KingdonGould III. To prevent further delays Mayor Adrian Fenty downsizedd the project laterthat year, announcing a deal betweemn the city, Marriott and RLJ Development LLC on a smaller 1,100-room hotel. Sincer then, the development team has also changed.
RLJ founded by BET founder Robert Johnson, was part of the deal Fentt announced in September 2007but isn’t any A main driver of the deal, Marriott Senior Vice Presideng Norman Jenkins, left the company late last year to star t Capstone, now a certified business entity that partners with Speaking for the development team, Jenkinz said it was his preference to continuew seeking private financing, and said design was entitlements were in place and there equity partners ready to invest if debt were Capstone and Quadrangle are separately planning a Courtyardx by Marriott adjacent to the hoteo on land they control.
“We could still get there, but we got to get the bankse to play and they move at theirown pace,” he Still, he said, “if the city decided to pursue the public deal we will support Jenkins said Johnson’s RLJ, with which Jenkins partnered while at Marriott, pulled out of the deal shortlu after taking an interest in it. “They studief it hard, spent some resources, but their brea and butter is acquisitions and repositioning rathe thannew development,” Jenkins said.
Richard Bradley, executivre director of the Downtown BusinessImprovement District, said it is unfortunat that the hotel project ran into the recession but that the city needzs to “bite the bullet” and move the project citing the opportunity to grow D.C. as a tourisy destination, make it a major player in conventionxs and grow itstax base. “There’d a whole set of good things about moving this he said.