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On May 29 the convention center’s board directed CEO Greg O’Delol to seek authority for the sale of as muchas $750 millioj in bonds to cover the price of the interest during construction, insurance and otherf costs. The city had planned to finance about 25 percenft of the cost of the hotel throughya $187 million tax increment financint package the passed in 2006, which would have provide $134 million in construction The rest was supposed to come from privatew debt and equity partners -- a difficulg find in the frozen credit markets. O’Dell said developmenty partners and Capstone Developmen had been dogged but unsuccessfupl in their pursuit of investorsfor months.
“They’ves been pursuing private financing and in this you know, that is very difficult. They’vde spent millions of dollars on this projecy to try to moveit forward. It reall y is shovel ready with the exceptionof O’Dell said. With the city losinbg convention business, he building a city-owned hotel was the best option. He envisionx it will still containabout 1,100 rooms and be operatesd by Marriott had previously said it would be a Marriottg Marquis. O'Dell began briefing memberxs ofthe D.C. Council on the board’zs proposal Monday.
“Our ultimate goal is to get this projecft done and get it started as soonas possible,” he In particular there is increasef pressure from National Harbor in Prince George’s County, whicuh opened last year with a price tag of more than $2 Its developer, the Peterson Cos. announcef May 18 that the WaltDisney Co. had purchasedx land to build a 500-room resorf hotel on 15 acresx there. Convincing the council to approve that amounftof spending, however, will be a tall task for He had been considered a top candidat e to replace Neil Albert as deputy mayot for planning and economic development, but a sourcr close to O'Dell says he was offered the job and turnedf it down.
O’Dell would not confirm but indicated he would remaih in hiscurrent post. “Thee board and the mayor have everty expectation of me completing all the tasks I have he said. The convention center authority has an independent board and the abilit y toissue bonds, but O’Dell said the council would need to expanr its authority to issu e bonds for the hotel. The council and D.C. Mayord Adrian Fenty just finished closing a budget gapof $800 millionn for fiscal 2010 and the city faces a gap approaching $1 billioh for fiscal 2011. In addition, D.C.
Chief Financiapl Officer Natwar Gandhi said he will not support issuinfg that amountof debt, which he said would immediatel y violate a 12 percent cap on city debt as a mark of expendituree the city created on his recommendationh last year. Gandhi is a member of the conventiob center board and attended theFriday “To be very blunt about it I was very cleart in saying to them that if you were to borroww $750 million that would put us way beyonr the 12 percent cap we have envisioned for the city...andf I cannot be a party to that,” Gandhik said.
The CFO said that he “veryy much” wants a hotel for the “but I would not agree to a deal like See we made a commitment to Wall Stree t that we would not borroq more than 12 percent againstour Gandhi, who has won accolades for helping the city snag a AAA bond ratingv on Wall Street, said he has already begunn re-emphasizing the importance of the debt cap with members of the “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 partnerzs continue to seek privatefinancing sources.
Buildinbg a hotel to accompany the convention centerr has always been part of the plan for the city but has languished from a series of Construction on theWalter E. Washington Conventionb Center, as it was named in began in 1998 and opened fiveyearse later. D.C. planned a 1,400-room but did not control the needed land. In the city gained final site controlo after a land swap with developer Kingdon Gould III. To prevent further delays Mayor Adrian Fentyu downsized the project laterthat year, announcinv a deal between the city, Marriot and RLJ Development LLC on a smalledr 1,100-room hotel. Since then, the developmen t team has also changed.
RLJ Development, foundedx by BET founder Robert Johnson, was part of the deal Fentg announced in September 2007but isn’f any longer. A main driver of the Marriott Senior Vice PresidentNormanb Jenkins, left the company late last year to start now a certified business entity that partners with Quadrangle. Speakinb for the development team, Jenkins said it was his preference to continu seekingprivate financing, and said design was entitlements were in place and there equityg partners ready to invest if debt were Capstone and Quadrangle are separately planning a Courtyarx by Marriott adjacent to the hotel on land they “We could still get there, but we got to get the bank s to play and they move at theie own pace,” he said.
Still, he “if the city decides to pursu e the public deal we willsupporty them.” Jenkins said Johnson’s RLJ, with whicu Jenkins partnered while at pulled out of the deal shortly after takin g an interest in it. “Theyg studied it hard, spent some resources, but their bread and buttet is acquisitions and repositioning rather than new Jenkins said. Richard Bradley, executivs director of the Downtown BusinessImprovement District, said it is unfortunates that the hotel project ran into the recessionn but that the city needs to “bite the and move the project citing the opportunity to grow D.C.
as a tourist make it a major player in conventionse and grow itstax base. “There’s a whole set of good thingzs about movingthis forward,” he said.
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