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 directefd CEO Greg O’Dell to seek authority for the sale of as muchas $750 millioh in bonds to cove the price of the interest during construction, insurance and other costs. The city had plannede to finance about 25 percent of the cost of the hotekl througha $187 million tax increment financing packag the passed in which would have provided $134 million in constructionh costs. The rest was supposed to come from privat debt and equitypartners -- a difficult find in the frozen credi t markets. O’Dell said developmentf partners and Capstone Development had been dogged but unsuccessful in their pursuit of investorwsfor months.
“They’ve been pursuing private financingv and in this you know, that is very They’ve spent millions of dollars on this projectf to try to move it It really is shovel ready with the exception of O’Dell said. With the city losing convention he said, building a city-owned hotel was the best He envisions it will still contaij about 1,100 rooms and be operate d by Marriott had previously said it wouldr be a Marriott Marquis. O'Dell began briefing members ofthe D.C. Counci l on the board’s proposal Monday. “Ouer ultimate goal is to get this project done and get it started as soonas possible,” he said.
In particular there is increased pressure from National Harbor inPrince George’s County, which opened last year with a price tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the WaltDisneyy Co. had purchased land to build a 500-room resort hotel on 15 acres there. Convincing the council to approver that amountof spending, however, will be a tall task for He had been considered a top candidate to replace Neil Albertr as deputy mayor for planning and economicc development, but a source close to O'Dell says he was offereds the job and turned it O’Dell would not confirm that, but indicatef he would remain in his currenr post.
“The board and the mayor have everyt expectation of me completing all the tasksx Ihave here,” he said. The convention centere authority has an independent board and the abilityu toissue bonds, but O’Dell said the councip would need to expand its authority to issuw bonds for the The council and D.C. Mayor Adriaj Fenty just finished closing a budget gapof $800 millionh for fiscal 2010 and the city faces a gap approaching $1 billio for fiscal 2011. In addition, D.C.
Chievf Financial Officer Natwar Gandhi said he will not support issuing that amountof debt, whicb he said would immediately violate a 12 percentt cap on city debt as a mark of expenditureds the city created on his recommendationn last year. Gandhi is a member of the conventioj center board and attended theFriday “To be very blunt about it I was very clear in sayingh to them that if you were to borro $750 million that would put us way beyond the 12 percenft cap we have envisioned for the city...ande I cannot be a parthy to that,” Gandhi said. The CFO said that he “very much” wantxs a hotel for the city, “but I woulf not agree to a deallike that.
See we made a commitmenyt to Wall Street that we would not borroq more than 12 percent againstour budget.” who has won accolades for helping the city snag a AAA bond ratinfg on Wall Street, said he has already begun re-emphasizinb the importance of the debt cap with memberes of the council. “I do not thinko we want to takethis lightly. We shoulr not borrow any more than we are able to he said. He suggested that O’Dell and his partnerws continue to seek privatefinancing sources. Buildinb a hotel to accompany the convention center has always been part of the plan for the city but has languishedr from a seriesof complications. Construction on the Walter E.
Washingtomn Convention Center, as it was named in began in 1998 and opener fiveyears later. D.C. planned a 1,400-room but did not control the needed land. In the city gained final site control after a land swap with developer KingdonGoulf III. To prevent further delays Mayotr Adrian Fenty downsized the project laterfthat year, announcing a deal between the city, Marriott and RLJ Developmen t LLC on a smaller 1,100-rookm hotel.
Since then, the development team has also RLJ Development, founded by BET foundefr Robert Johnson, was part of the deal Fent y announced in September 2007 but isn’t any A main driver of the Marriott Senior Vice President Norman Jenkins, left the company late last year to start Capstone, now a certifierd business entity that partners with Quadrangle. Speaking for the developmenft team, Jenkins said it was his preference to continue seekingprivated financing, and said design was complete, entitlements were in place and therer equity partners ready to invest if debt were available.
Capstonre and Quadrangle are separately planning a Courtyar by Marriott adjacent to the hotel on landthey “We could still get there, but we got to get the bank s to play and they move at their own he said. Still, he said, “ir the city decides to pursue the public deal we willsupport them.” Jenkins said Johnson’s RLJ, with which Jenkins partnerecd while at Marriott, pulled out of the deal shortly aftetr taking an interest in it. “Thehy studied it hard, spent some resources, but their breaf and butter is acquisitions and repositioninb rather thannew development,” Jenkins said.
Richard Bradley, executivee director of the Downtowb BusinessImprovement District, said it is unfortunate that the hotekl project ran into the recession but that the city needsw to “bite the bullet” and move the project citing the opportunity to grow D.C. as a tourisy destination, make it a majodr player in conventions and grow itstax base. “There’s a wholse set of good thingsw about movingthis forward,” he