Monday, February 8, 2010
Nashville convention hotel deal looks less certain
City seeks new plans as private financing falls short By Michael Cass • THE TENNESSEAN • February 8, 2010 What once seemed like a firm deal to build a Marriott Marquis to serve as the headquarters hotel for a new downtown convention center now appears less solid. Metro leaders say they hope multiple hotel developers and operators will come forward with new private-public financing plans. The Metro Council approved construction of the $585 million convention center last month, but Mayor Karl Dean decided to hold off on presenting a hotel deal until he could find more attractive terms. But some experts say 2010 will be another difficult year for building hotels. Although the city chose Colorado-based Phelps Development and Portman Holdings of Atlanta to develop a convention center hotel last year, it didn't have contracts with them or Marriott International, which was picked to run the facility. Working with Dean's administration, the Phelps-Portman team was unable to come up with significant private financing. "Certainly the Phelps-Portman group is a very viable group, and hopefully there will be a way to bring that to a complete, solid deal," Marty Dickens, chairman of the Convention Center Authority, said Friday. "But we wouldn't want to discourage anyone if they can put together the right financing and right private investment to make it viable for the city." Dickens and Metro Finance Director Rich Riebeling said they haven't yet discussed a formal process for soliciting and evaluating hotel development proposals. Riebeling said the authority would run the process, with input from him and others in Dean's administration. Hotels built elsewhere Metro picked Phelps-Portman in June from a pool of 10 competing development teams. Phelps and Portman have built hotels together in San Diego, Atlanta, Charlotte, New York, Orlando, Denver and other cities, with Portman handling design and Phelps doing the building. Roger Zampell, Portman's senior vice president for development, said Phelps-Portman had an agreement with the city and he expects the group to have the first opportunity to bring a deal to the authority. "We would certainly hope so," Zampell said. "We went through a public process to be selected. I assume nothing has changed." Riebeling said there was no formal agreement. But he said Phelps-Portman and Marriott could still have an edge. "If they could come forward with a transaction, they would obviously be in prime position," he said. A Marriott spokeswoman, Paula Butler, said the Washington, D.C.-based company — which Metro selected to build what would be just the fourth Marriott Marquis — wouldn't comment "until a specific project is finalized." Center to open in 2013 The convention center is scheduled to open in the first quarter of 2013. Officials say they hope a hotel, which will take just two years to build, can open alongside it around the same time. Dickens said he thinks the authority can find a viable deal in the next few months. "During the first half of this year, I'm very optimistic that there will be a way for a public-private partnership that works," he said. "Now that the convention center has been approved, I think we'll be able to get there." But Mark Bloom, senior vice president for tax-free bonds with UBS Financial Services Inc. and a minority owner of the Hilton Downtown Nashville near the convention center site, said the market for financing hotels remains weak. "There's going to be very little new hotel development moving forward this year," Bloom said. "It's probably the most restrictive lending environment for hotels that we've seen in the past 30 years." Bloom said there wouldn't be much political appetite for $200 million or more in public financing so soon after the contentious convention center debate. "All that being said, if creative minds can create a public-private partnership, then you do have at least a faint heartbeat, whereas before you had a patient that was lost," he said. Others say that even in the economic downturn, downtown Nashville should look appealing to the hotel industry. The Music City Center will add more than 250,000 square feet of convention space to the downtown inventory, and a $250 million, privately financed medical trade center has been proposed for the site of the existing convention center. Feasibility study done A feasibility study by HVS Consulting found that a 750-room convention center hotel could achieve occupancy rates of about 75 percent. Its primary competitors would be the Hilton, the Renaissance, the Sheraton and the DoubleTree, which have about 1,800 rooms combined. "The overall market analysis indicates strong demand for a new lodging facility in downtown Nashville," wrote the consulting firm, which was criticized by some Metro Council members for its projections of strong demand for the convention center. Zampell said the lending markets are looking better, and the Phelps-Portman team will try to make something work in the coming months. "That'll be our task," he said.
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