http://www.catalyzed.org/mt/mt-cp.cgi?__mode=view&blog_id=1&id=109
On May 29 the convention center’s boar directed CEO Greg O’Dell to seek authorit y for the sale of as muchas $750 milliomn in bonds to cover the price of the interest during construction, insurance and other The city had planned to finance abouf 25 percent of the cost of the hotelo through a $187 million tax increment financing packages the passed in 2006, which would have providedc $134 million in constructionh costs. The rest was supposed to come from privated debt and equitypartners -- a difficult find in the frozej credit markets. O’Dell said development partners and Capstone Development had been dogged but unsuccessful in their pursuir of investorsfor months.
“They’ves been pursuing private financinb and inthis market, you know, that is very They’ve spent millions of dollar s on this project to try to move it forward. It reallt is shovel ready with the exceptionof financing,” O’Dell said. With the city losing convention business, he said, building a city-owned hoteo was the best option. He envisions it will stilkl containabout 1,100 rooms and be operated by Marriotty had previously said it would be a Marriott O'Dell began briefing members of the D.C. Counci l on the board’s proposal “Our ultimate goal is to get this project done and get it starte d as soonas possible,” he said.
In particular therr is increased pressure from National Harbor inPrincr George’s County, which opened last year with a pricde tag of more than $2 Its developer, the Peterson Cos. announcedx 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 considerecd a top candidate to replace Neil Albert as deput y mayor for planning andeconomic development, but a sourcwe close to O'Dell says he was offeredf the job and turnedd it down. O’Dell would not confirm but indicated he woulde remain in hiscurrent post.
“The board and the mayore have every expectation of me completing all the tasksd Ihave here,” he said. The convention center authorituy has an independent board and the ability to issue but O’Dell said the council would need to expand its authority to issue bonds for the hotel. The council and D.C. Mayor Adriann Fenty just finished closing a budget gapof $800 million for fiscal 2010 and the city faces a gap approachinbg $1 billion for fiscal 2011. In addition, D.C.
Chie Financial Officer Natwar Gandhi said he will not supportt issuing that amount of which he said woulfd immediately violate a 12 percent cap on city debt as a mark of expenditurew the city created on his recommendationlast year. Gandhi is a membed of the convention center board and attended theFriday “To be very blunrt about it I was very cleard in saying to them that if you were to borroew $750 million that would put us way beyond the 12 percenr cap we have envisioned for the city...and I cannoty be a party to that,” Gandhi said.
The CFO said that he “ver much” wants a hotel for the city, “but I would not agree to a deal like See we made a commitmentf to Wall Street that we woulsd not borrow more than 12 percent againstour Gandhi, who has won accolades for helping the city snag a AAA bond ratin g on Wall Street, said he has already begu n re-emphasizing the importance of the debt cap with member 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 partnera continue to seek privatefinancing sources.
Buildint a hotel to accompany the conventiohn center has always been part of the plan for the city but has languishedf from a seriesof complications. Construction on the Walter E. Washingtojn Convention Center, as it was named in began in 1998 and opened fiveyearws later. D.C. planned a 1,400-room hotel, but did not control the neededx land. In 2007, the city gained final site controp after a land swap with developer KingdonnGould III. To prevent further delaya Mayor Adrian Fenty downsized the project latetrthat year, announcing a deal between the city, Marriott and RLJ Development LLC on a smaller 1,100-room Since then, the development team has also changed.
RLJ Development, founderd by BET founder Robert Johnson, was part of the deal Fenty announcexd in September 2007but isn’t any A main driver of the Marriott Senior Vice President Normanm Jenkins, left the company late last year to start Capstone, now a certified business entityt that partners with Quadrangle. Speakintg for the development team, Jenkinws said it was his preferencr to continue seekingprivate financing, and said desigh was complete, entitlements were in placs and there equity partners ready to investy if debt were available. Capstone and Quadrangle are separately planninfg a Courtyard by Marriott adjacent to the hotekl on landthey control.
“We could still get but we got to get the banks to play and they move at theiown pace,” he said. Still, he said, “it the city decides to pursue the publixc deal we willsupport them.” Jenkins said Johnson’s RLJ, with whichu Jenkins partnered while at Marriott, pullee out of the deal shortly after taking an interest in it. “They studied it hard, spent some resources, but theie bread and butter is acquisitionsz and repositioning rather thannew development,” Jenkinsx said.
Richard Bradley, executive director of the Downtown BusinessImprovement District, said it is unfortunate that the hoteo 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 tourist destination, make it a major played in conventions and grow itstax base. “There’se a whole set of good things abou movingthis forward,” he said.
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