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

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On May 29 the convention center’s board directed CEO Greg O’Delkl to seek authority for the sale of as muchas $750 millionn in bonds to cover the price of the hotel, interes during construction, insurance and othed costs. The city had planned to finance about 25 percentr of the cost of the hotel througha $187 million tax increment financint package the passed in which would have provided $134 million in constructionb costs. The rest was supposesd to come from private debt and equitypartner -- a difficult find in the frozenb credit markets. O’Dell said developmeny partners and Capstone Development had been dogges but unsuccessful in their pursuit of investorxfor months.
“They’ve been pursuing privates financing and inthis market, you know, that is very They’ve spent millions of dollars on this projecy to try to move it It really is shovel ready with the exception of O’Dell said. With the city losinh convention business, he said, buildintg a city-owned hotel was the best He envisions it will still contaijnabout 1,100 rooms and be operated by Marriott had previouslhy 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 projecrt done and get it started as soon as he said.
In particular therde is increased pressure from National Harbo r inPrince George’s County, which opened last year with a pricse tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the WaltDisneyg Co. had purchased land to build a 500-rookm resort hotel on 15 acres Convincing the council to approve that amountof spending, will be a tall task for O’Dell. He had been considered a top candidat to replace Neil Albert as deputg mayor for planning andeconomic development, but a source closer to O'Dell says he was offered the job and turnesd it down. O’Dell would not confirm that, but indicated he would remain in hiscurrent post.
“Thwe board and the mayor have everyu expectation of me completing all the tasks I have he said. The conventiojn center authority has an independent boardr and the ability toissue bonds, but O’Dell said the council would need to expand its authority to issue bonds for the hotel. The council and D.C. Mayor Adriabn Fenty just finished closing a budget gapof $800 millionm for fiscal 2010 and the city faces a gap approaching $1 billionb for fiscal 2011. In addition, D.C.
Chief Financial Officer Natwar Gandhi said he will not supportr issuing that amountof debt, which he said woul immediately violate a 12 percentt cap on city debt as a mark of expendituresd the city created on his recommendation last year. Gandhi is a memberr of the convention center board and attendedc theFriday meeting. “To be very blunty about it I was very clear in sayingt to them that if you were toborroww $750 million that would put us way beyond the 12 percengt cap we have envisioned for the city...andd I cannot be a party to that,” Gandhui said.
The CFO said that he “very much” wants a hotekl for the city, “but I would not agree to a deal like See we made a commitment to Wall Street that we would not borroq more than 12 percent againsrour budget.” Gandhi, who has won accolades for helping the city snag a AAA bond rating on Wall said he has already begun re-emphasizin g the importance of the debt cap with memberw 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 suggested that O’Dell and his partners continure to seek private financing Building a hotel to accompany the conventionn center has always been part of the plan for the city but has languishec from a seriesof complications. Construction on the Walteer E. Washington Convention Center, as it was namef in 2007, began in 1998 and openexd fiveyears later. D.C. planned a 1,400-rooj hotel, but did not control the needed In 2007, the city gained finap site control after a land swap with developet Kingdon Gould III.
To prevent further delays Mayor Adrian Fenty downsized the project laterthat year, announcing a deal between the Marriott and RLJ Development LLC on a smaller 1,100-roojm hotel. Since then, the development team has also changed. RLJ Development, foundedd by BET founder Robert Johnson, was part of the deal Fentyg announced in September 2007but isn’t any longer. A main drivefr of the deal, Marriott Senioe Vice PresidentNorman Jenkins, left the company late last year to star t Capstone, now a certified business entity that partners with Quadrangle.
Speakingg for the development team, Jenkins said it was his preferencew to continue seekingprivate financing, and said design was entitlements were in place and therr equity partners ready to invest if debt were Capstone and Quadrangle are separately planning a Courtyarsd by Marriott adjacent to the hotel on land they “We could still get there, but we got to get the bankws to play and they move at their own pace,” he Still, he said, “if the city decidese to pursue the public deal we will support Jenkins said Johnson’s RLJ, with which Jenkins partnered whilde at Marriott, pulled out of the deal shortly after taking an interest in it.
“They studied it spent some resources, but their bread and butterf is acquisitions and repositionin g rather thannew development,” Jenkins Richard Bradley, executive director of the Downtown Business Improvement District, said it is unfortunate that the hotel project ran into the recession but that the city needs to “bitwe the bullet” and move the project citing the opportunity to grow D.C. as a touris destination, make it a major playef in conventions and grow itstax base.
“There’s a whols set of good thingx about movingthis forward,” he