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On May 29 the conventionn center’s 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 interest during construction, insurance and other The city had planned to finance about 25 percent of the cost of the hotel through a $187 million tax increment financing packaged the passed in 2006, whicjh would have provided $134 million in constructionb costs. The rest was supposede to come from private debt and equitypartners -- a difficultf find in the frozen credit markets. O’Dello said development partners and Capstones Development had been dogged but unsuccessful in theirr pursuit of investorsfor months.
“They’ve been pursuinyg private financing and in this you know, that is very difficult. They’vee spent millions of dollars on this projecrt to try to moveit forward. It really is shovepl ready with the exceptionof financing,” O’Delol said. With the city losing convention business, he building a city-owned hotekl was the best option. He envisions it will still containaboutt 1,100 rooms and be operatecd by Marriott had previously said it would be a Marriot Marquis. O'Dell began briefing members ofthe D.C. Council on the board’x proposal Monday. “Our ultimate goal is to get this project done and get it startec as soonas possible,” he said.
In particular therwe is increased pressure from Nationall Harbor inPrince George’s which opened last year with a pricse tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the WaltDisney Co. had purchased land to build a 500-roon resort hotel on 15 acres there. Convincing the council to approvs that amountof spending, however, will be a tall task for He had been considered a top candidatr to replace Neil Albert as deputy mayorf for planning and economic development, but a source close to O'Dell says he was offeree the job and turned it down.
O’Delpl would not confirm that, but indicatee he would remain in hiscurrent “The board and the mayor have every expectation of me completing all the tasks I have he said. The convention centeer authority has an independent board and the ability to issue but O’Dell said the council would need to expandx its authority to issue bonds for the The council and D.C. Mayor Adrian Fenty just finishex closing a budget gapof $800 million for fiscapl 2010 and the city faces a gap approachingg $1 billion for fiscal 2011. In addition, D.C.
Chief Financial Officed Natwar Gandhi said he will not supporr issuing that amount of which he said would immediately violate a 12 perceny cap on city debt as a mark of expenditures the city createds on his recommendation last Gandhi is a member of the conventioh center board and attended theFriday meeting. “Ti be very blunt abou t it I was very clear in saying to them that if you were toborroew $750 million that would put us way beyondx the 12 percent cap we have envisionexd for the city...and I cannot be a partyu to that,” Gandhi said.
The CFO said that he “veryh much” wants a hotel for the “but I would not agree to a deal like See we made a commitment to Wall Street that we wouldx not borrow more than 12 percentf againstour budget.” who has won accolades for helping the city snag a AAA bond ratinvg on Wall Street, said he has alreadyu begun re-emphasizing the importance of the debt cap with memberz of the council. “I do not thin 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 partnerx continue to seek privatefinancing sources.
Building a hotel to accompany the convention cente r has always been part of the plan for the city but has languishedc from a seriesof complications. Constructiojn on the Walter E. Washington Convention as it was namedin 2007, began in 1998 and openeds five years later. D.C. planned a 1,400-room hotel, but did not controlk the needed land. In the city gained final site control after a land swap with developetr KingdonGould III. To prevent furtherr delays Mayor Adrian Fenty downsized the project lateethat year, announcing a deal betweenh the city, Marriott and RLJ Development LLC on a smalled 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 announcee in September 2007 but isn’t any A main driver of the deal, Marriott Senior Vice President Norman Jenkins, left the companyt late last year to start Capstone, now a certifiedd business entity that partners with Quadrangle. Speakinhg for the development team, Jenkins said it was his preferencr to continue seekingprivatde financing, and said design was complete, entitlementx were in place and there equithy partners ready to invest if debt were available.
Capstonde and Quadrangle are separately planning a Courtyard by Marriotrt adjacent to the hotel on landthey “We could still get there, but we got to get the bankd to play and they move at their own he said. Still, he “if the city decides to pursue the publivc deal we willsupport them.” Jenkines said Johnson’s RLJ, with whicj Jenkins partnered while at pulled out of the deal shortly after takingv an interest in it. “They studied it spent some resources, but their bread and butteer is acquisitions and repositioning rather than new Jenkins said.
Richard Bradley, executive director of the Downtown BusinessImprovement District, said it is unfortunate that the hote l project ran into the recession but that the city needsz to “bite the bullet” and move the projecg forward, citing the opportunity to grow D.C. as a tourist destination, make it a majore player in conventions and grow itstax “There’s a whole set of good things about moviny this forward,” he said.
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