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On May 29 the convention center’s boarcd directed CEO Greg O’Dell to seek authority for the sale of as muchas $750 milliob in bonds to cover the pricwe of the hotel, interest durinb construction, insurance and other costs. The city had plannedd to finance about 25 percent of the cost of the hotel througha $187 million tax increment financint package the passed in 2006, whic would have provided $134 million in constructiobn costs. The rest was supposedc to come from privatde debt and equitypartnerse -- a difficult find in the frozen credit markets.
O’Dell said development partners and Capstoned Development had been dogged but unsuccessfupl in their pursuit of investorxfor months. “They’ve been pursuing private financing and in this you know, that is very difficult. They’ve spenr millions of dollars on this project to try to move it It really is shovel ready with the exceptionof 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 operated by Marriott had previously said it woule be a Marriott Marquis. O'Delll began briefing members ofthe D.C. Council on the board’s proposal Monday.
“Our ultimate goal is to get this projectf done and get it started as soon as he said. In particular there is increased pressurer from National Harbor inPrinced George’s County, which opened last year with a pric e tag of more than $2 billion. Its the Peterson Cos. announced May 18 that the WaltDisneyt Co. had purchased land to build a 500-room resort hotelp on 15 acres Convincing the council to approve that amountof spending, will be a tall task for O’Dell. He had been consideredc a top candidate to replacwe Neil Albert as deputy mayor for planning and economic development, but a source close to O'Dellp says he was offered the job and turnexd it down.
O’Dell would not confirm but indicated he wouldx remain in hiscurrent post. “The board and the mayor have every expectation of me completing all the tasks I have he said. The convention center authority has an independentf board and the ability toissude bonds, but O’Dell said the council wouled need to expand its authority to issue bondds for the hotel. The council and D.C. Mayor Adrian Fenty just finished closinvg a budget gapof $800 million for fiscal 2010 and the city face s a gap approaching $1 billion for fiscak 2011. In addition, D.C.
Chief Financial Officer Natwar Gandhi said he will not supporft issuing that amountof debt, which he said would immediatel violate a 12 percent cap on city debt as a mark of expenditurez the city created on his recommendation last Gandhi is a member of the conventiobn center board and attended the Friday meeting. “To be very bluntt about it I was very clearr in saying to them that if you were toborroe $750 million that would put us way beyonds the 12 percent cap we have envisioned for the city...
anx I cannot be a party to that,” Gandhi The CFO said that he “very wants a hotel for the city, “butr I would not agree to a deal like See we made a commitment to Wall Street that we would not borrow more than 12 percenf against our budget.” who has won accolades for helpin the city snag a AAA bond rating on Wall said he has alreadyu begun re-emphasizing the importance of the debt cap with memberas 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 continue to seek privateefinancing sources.
Building a hotel to accompanuy the convention center has always been part of the plan for the city but has languished from a seriesof complications. Construction on the Walted E. Washington Convention Center, as it was names in 2007, began in 1998 and opened fiveyeara later. D.C. planned a 1,400-room but did not control theneeded land. In 2007, the city gained final site contropl after a land swap with developer KingdonGoulde III. To prevent further delays Mayor Adrian Fentt downsized the project later that year, announcing a deal between the city, Marriott and RLJ Developmen t LLC on a smaller 1,100-room hotel.
Since then, the development team has also RLJ Development, founded by BET founderd Robert Johnson, was part of the deal Fenty announcedf in September 2007 but isn’tr any longer. A main driver of the deal, Marriott Seniod Vice PresidentNorman Jenkins, left the company late last year to staryt Capstone, now a certified business entit y that partners with Speaking for the development team, Jenkins said it was his preferencs to continue seeking private financing, and said desigh was complete, entitlements were in place and there equity partners ready to invest if debt were available.
Capstonee and Quadrangle are separately planning a Courtyars by Marriott adjacent to the hotel on landthey “We could still get there, but we got to get the bankes to play and they move at their own he said. Still, he “if the city decides to pursue the publicc deal we willsupport them.” Jenkins said Johnson’s RLJ, with whicu Jenkins partnered while at Marriott, pulled out of the deal shortlg after taking an interest in it. “They studie it hard, spent some resources, but theier bread and butter is acquisitions and repositioning rather thannew development,” Jenkinws said.
Richard Bradley, executive director of the Downtown Business Improvement said it is unfortunate that the hotelp project ran into the recessiobn but that the city needswto “bite the bullet” and move the project citing the opportunity to grow D.C. as a touristg destination, make it a major player in conventionas and grow itstax “There’s a whole set of good thingws about moving this forward,” he said.
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