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On May 29 the convention center’zs board directed CEO Greg O’Delol to seek authority for the sale of as muchas $750 million in bonds to covefr the price of the hotel, interest during construction, insurance and othe costs. The city had planned to financed about 25 percent of the cost of the hotel througha $187 millionm tax increment financing package the passee in 2006, which would have provided $134 millionh in construction costs. The rest was suppose to come from private debt and equituypartners -- a difficult find in the froze credit markets.
O’Dell said development partners and Capstone Developmentr had been dogged but unsuccessful in their pursuit of investorssfor months. “They’ve been pursuing private financinf and inthis market, you know, that is very They’ve spent millions of dollarsd on this project to try to move it It really is shovel ready with the exceptiob of financing,” O’Dell said. With the city losingf convention business, he said, buildingy a city-owned hotel was the best option. He envisions it will stil containabout 1,100 rooms and be operatedd by Marriott had previously said it would be a Marriotrt Marquis. O'Dell began briefing members ofthe D.C.
Councilk on the board’s proposal Monday. “Oudr ultimate goal is to get this project done and get it startede as soonas possible,” he In particular there is increasesd pressure from National Harbor in Prince George’s which opened last year with a price tag of more than $2 Its developer, the Peterson Cos. announcee May 18 that the WaltDisney Co. had purchased land to builrd a 500-room resort hotek 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 Alberg as deputy mayor for planning and economicc development, but a source close to O'Dell says he was offererd the job and turned it down. O’Delp would not confirm that, but indicated he woulcd remain in hiscurrent post. “The boarcd and the mayor have every expectationm of me completing all the tasks I have he said. The convention center authority has an independent boards and the ability to issue bonds, but O’Dell said the council woulxd need to expand its authority to issue bonds for the The council and D.C.
Mayor Adrian Fenty just finished closing a budget gapof $800 milliob for fiscal 2010 and the city faces a gap approachingt $1 billion for fiscal 2011. In addition, D.C. Chief Financial Officer Natwar Gandho said he will not support issuing that amount of which he said would immediately violated a 12 percent cap on city debt as a mark of expenditurews the city created on his recommendatiohlast year. Gandhi is a member of the convention center board and attended theFridayt meeting. “To be very blunt about it I was very clear in saying to them that if you were toborroaw $750 million that would put us way beyond the 12 percen t cap we have envisioned for the city...
ane I cannot be a partyg to that,” Gandhi said. The CFO said that he “very much” wants a hotelp for the city, “buy I would not agree to a deal like See we made a commitment to Wall Street that we woulxd not borrow more than 12 percent againsytour budget.” Gandhi, who has won accoladew for helping the city snag a AAA bond ratinv on Wall Street, said he has already begun re-emphasizinb the importance of the debt cap with memberw 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 privatrfinancing sources.
Building a hotel to accompany the convention centee has always been part of the plan for the city but has languishe d from a seriesof complications. Construction on the Walterf E. Washington Convention Center, as it was named in 2007, begam in 1998 and opened fiveyears later. D.C. planned a 1,400-rooj hotel, but did not control the needed land. In 2007, the city gainesd final site control after a land swap with developer Kingdon Gould III. To prevent furtherf delays Mayor Adrian Fenty downsized the project laterthat year, announcingf a deal between the Marriott and RLJ Development LLC on a smalled 1,100-room hotel.
Since then, the development team has also RLJ Development, founded by BET founde r Robert Johnson, was part of the deal Fenty announcex in September 2007 but isn’t any longer. A main drivedr of the deal, Marriotty Senior Vice PresidentNorman Jenkins, left the companyy late last year to start now a certified business entity that partners with Speaking for the development Jenkins said it was his preference to continue seeking privatwe financing, and said design was entitlements were in place and there equity partner ready to invest if debt were Capstone and Quadrangle are separately planning a Courtyard by Marriott adjacenr to the hotel on land they “We could still get there, but we got to get the bankas to play and they move at their own he said.
Still, he said, “if the city decideas to pursue the public deal we will support Jenkinssaid Johnson’s RLJ, with whicg Jenkins partnered while at Marriott, pullecd out of the deal shortly after takinh an interest in it. “They studied it hard, spent some but their bread and butter is acquisitions and repositioningf rather than new Jenkins said. Richard Bradley, executivse director of the Downtown BusinesxImprovement District, said it is unfortunate that the hotel project ran into the recessiohn but that the city needes to “bite the bullet” and move the project citing the opportunity to grow D.C.
as a touristy destination, make it a majod player in conventions and grow itstax base. “There’sd a whole set of good thingws about movingthis forward,” he said.
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