Quote:
Originally Posted by snfenoc
Here's a rendering of the hotel.
Meh. It's OK... I am not a big fan of modern architecture, but it's better than the sprawlscraper proposed on Q street. |
This hotel project fascinates me. I have to applaud the efforts of mayor Steinberg and his team because executing a hotel project today is extraordinarily difficult.
In the last five years I have worked on half-a-dozen hotel projects and in the last year or so getting financing has been next to impossible.
Most capital structures require >40% equity, so on a $90M project the developer must have put together a minimum $36M to get project funded. That funding will now cost you 10% for your construction, 8% for your perm. You're looking at another $10M right there to start plus a crippling debt service to ops.
Construction costs for convention hotels have exploded and we're seeing $600,000/key as commonplace. If that holds then you're looking at a nearly $200M project ($80M equity). That's a lot of money for both equity and debts markets, especially in today's environment where hotels are being returned to the lender in droves (locally, see San Francisco and Napa). And with many first-term loans coming due in the next few years, this could turn into a bloodbath (what works at 3.75% is catastrophic at 7%). Btw - hotel costs were about half that five years ago.
It will have to be subsidized by the City, but I wonder what form that subsidy will take. Will it directly add to the capital stack a provide some equity? Will it waive all fees to afford developer to contribute more as the sponsor? Will it subsidize the debt payments? Tax credits? Occupancy guarantees?
What subsidies can they legally offer? I can't wait to see how the funding is structured.
I'm also interested to see what flag the hotel will be. I'd be surprised if it already has a major presence near the convention center, so I am (purely) guessing that takes out Sheraton, Hyatt, and probably Marriot. Obviously a convention hotel, so probably not a boutique flag like Salt or Ace. Also, because it's aiming at the conventioneer, that probably eliminates the luxury flags like St. Regis or Four Seasons.
What's left? Just throwing darts at the board here, but the closest Hilton flag is the Embassy Suites on Capitol Mall at the river. That's pretty far away to capture convention traffic. Hmmm...
A darkhorse is the Cambria brand, which is the high-end flag for Choice Hotels. They are offering significant seed money as they work to increase market share. Hmmmm...
As noted, I can't wait to see how this plays out.
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