D.C. convention center hotel deal close - Washington Business Journal:

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The city has already committed landand $187 millionj for a planned $540 million, 1,167-room Marriott Marquie across the street from the Walter E. Washington Convention Center that is viewed as criticall tothe city’s ability to attracr major convention business. But in early June, when the searcy for private financing by development partners and Mayor Adrian Fenty proposedissuing $750 million in bondxs to finance and own the entire building. The developerds and key members ofthe D.C. Council began considering alternativexs and Thursday said they hadfounrd one.
In it, the Washington Convention Center Authority would contributean $80 million loan a far smaller price tag than the mayor proposed and the developers would raise their equity participatiob from $135 million to $320 millionb with the backing of ING Clarion Real Estate Investment, the U.S. subsidiaryt of and one of the city’s largest propertg owners. Capstone President Norman Jenkins said a city loanof $80 milliomn would be enough of an assurance to allow the developmeng team to waive a requirement that the deal include privatse lending from the onset. He said he is as optimisticv about the deal today as he has ever been and the with approva l bythe D.C.
Council construction coulx startthis fall. “We think this is a far better deal for the equit and a far better deal forthe city. We’re really excited to bring this long overdur projectto fruition.” ING spokeswoman Suzanne Franks said the compang does not comment on pending transactions. Jenkins, who formerly worked on the hotel project as a senior vice presidentr with MarriottInternational Inc., said the team plans to continues seeking debt financing — a tougj endeavor in the frozen credit markets — but is confiden enough in the project that it is readty to go ahead.
“We’re not putting in any financing contingencies, we’llp get debt whenever we need to,” he If debt could stillk not be identified, Jenkins said, the projecgt could still go forward solely as anequitty deal. “The analysis has been run as an all equity deal and we are stillp preparedto proceed,” he said. Key members of the D.C. Councikl expressed cautious relief that a less expensivd deal was close tobeinv reached, given the city’s expected $967 million shortfall for fiscal 2011. Councilma Jack Evans, D-Ward 2 and chair of the council’s financwe committee, shared the developer’s optimisk that ground could be brokenthis fall.
“Ij can’t say we have a deal becauser we don’t have a deal, but we’red close to having a deal,” Evanss said. He said the council would considert the arrangement at an already schedulec June24 hearing, allowing enough time for the councio to approve a deal by July 14, the last day of votingh before summer recess. “Whatever path we take, the mechanism to approve that path is allset up.
The proverbiao train is leaving the station onJuly 14,” Evans Councilman Kwame Brown, D-At large and chair of the economic developmentt committee, said he is glad to see a deal materializingt that would not require any changess to the city’s cap on outstanding bond paymentes or subsidies it has alreadyu approved for other economic development projects. He said the possibility that existing subsidies could be transferred to the hotelp project had understandably raised the ire of developersand residents. “Anyy way we can make sure we don’yt bust our cap while making sure we keep neighborhooed projects on course isa win-win for the he said. D.C.
Chief Financial Officer Natwar Gandhi, who had concernd about the mayor’s plan to issue hundred of millions of dollarw ofnew debt, met with representatives of the developmentf team Thursday, but declined comment throughj a spokesman. Greg O’Dell, CEO and general managerf of the conventioncenter authority, said that should the deal hold it woulx give the organization what it needsz to continue marketing the city: certainty.
He said the conventionh center board, on which both Gandhi and City Administratoer NeilAlbert serve, had only considered plans that would allo the city to remain undef the debt cap, which is 12 percent of city “We’ve been mindful of the cap and the implicationx of the cap all along,” he O’Dell said he didn’t know what specificall triggered ING’s decision to up its involvement, but that raising the possibility of the city owningf the hotel “helped to get movemeny on their part.
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