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Hotels and financing

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It seems like this is a new way to help finance hotel construction. At least I have never heard of it before. Are hotels going up in other cities?

I put up a small article on this in the New Eng. section, but thought since there were renderings, I'd put this story here.

Westin by the new convention center ~20 stories

hotel1.jpg

Mandarin oriental on Boylston near Pru ~14 stories

hotel2.jpg

Regent Boston, watrefront

hotel3.jpg

City loans boost 3 plans for hotels expected to aid Hub convention prospects

By Thomas C. Palmer Jr., Globe Staff, 11/13/2003

The city yesterday awarded $40 million in loans to three Boston hotel developers in an effort to jump-start construction by next summer and create more than 1,000 new lodging rooms.

The Westin Convention Center Hotel in South Boston, the Mandarin Oriental Hotel on Boylston Street in the Back Bay, and the Regent Boston Hotel on Battery Wharf in the North End won the funding, designed to generate jobs and tax revenue quickly.

Executives on the winning teams, which had had trouble getting all of their financing from conventional sources, said the city loan program, offered at an interest rate of 12 percent, would allow them to proceed almost immediately with construction.

The city has been anxious to see more hotel rooms built because having enough lodging is viewed as important to the future of the Boston Convention & Exhibition Center, scheduled to open next summer. Many of the larger projects have been stalled because the tourism industry has been in a slump since the 2001 terrorist attacks.

"We're thrilled this is in place, and it really gets us over the top," said Richard L. Martini, development director for the new convention center hotel, which is being built by the Fallon Co., New England Development, and Starwood Hotels & Resorts Worldwide Inc.

All three hotels must be underway in the spring, said Boston Redevelopment Authority spokeswoman Susan Elsbree, or they will lose the money.

Robin Brown, a partner in CWB Boylston LLC, said the $15 million loan his 150-room, $230 million Mandarin Oriental Hotel will receive "absolutely" makes the difference between a continuing financial struggle and getting underway.

"Hotel financing has been a bit of a bear since 9/11," Brown said. "Quite frankly, this amount of money on a project like we're building comes at a perfect time. We should be in the ground by April," he said, referring to the start of construction.

Richard Friedman, developer of the planned hotel at the old Charles Street Jail on Cambridge Street, applied for the money and was one of four projects that didn't get any.

"Obviously we're disappointed. We have a financial gap in our project, and it would have closed the gap," said Friedman, who owns the Charles Hotel in Harvard Square. But, he added, "I applaud the city's creativity."His 300-room, $80 million project is about $8 million short. He hopes to continue to work with the city to make up the missing amount.

Elsbree, of the BRA, said a similar loan program may be repeated next year.

The funding comes from the Department of Housing and Urban Development. The city, which can use the money to generate economic development, loaned $15 million of the $40 million pot for the 790-room convention center hotel, at D and Summer streets next to the new Boston Convention & Exhibition Center.

City officials estimate the three hotels will create more than 1,200 jobs and yield more than $10 million in annual tax revenue.

Developer Harold Theran's long-delayed Battery Wharf project, a Regent Boston Hotel, will move forward with the $10 million loan that it received yesterday, he said.

RBW LLC, the development company, has a construction loan of $135 million and is negotiating for about $45 million more in financing for the project, which like the other two, has permits to go forward.

Working with the city, Theran increased the number of condominium units planned at Battery Wharf from 79 to 103 and reduced the number of hotel rooms from 183 to 144.

The city has been pushing developers to build more housing, and in the current real estate market residences are easier to finance than hotels.

"We've been waiting for the tide to turn," Theran said, and the city loans will make construction possible in the spring.

Three hotel developers that took out applications in the end did not apply for loans.

The four projects that applied but did not receive any money are One Court Square, near Government Center; the Grand Hyatt at Fan Pier; a new hotel at Columbus Center over the Massachusetts Turnpike in the South End; and Friedman's jail hotel.

Exact terms of the financing deals are to be negotiated, city officials said.

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Having lots of hotel rooms downtown is absolutely essential to attracting large conventions. How many hotel rooms does Boston have in the downtown now? I've heard that there has traditionally not been enough, similar to Philadelphia.

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The Westin Hotel in Providence is owned by the State of Rhode Island. The Westin is attached to the Convention Centre and the Providence Place Mall and is essential for the state's convention business. In fact there is need for a second convention centre hotel of similar size to the Westin. Most likely a Sheraton will be built on the other side of the Convention Centre on a parcel that currently holds a decrepid building owned by the city. There is a big debate in the state now about weather or not the state should fund this second hotel. The Governor is dead set against it and it looks like the developers are looking for private funding.

The problem with convention centre hotels is that they are more expensive to build. There are a lot of ammenities, such as meeting rooms and what-not, that conventioneers expect. A hotel should devote as much of its square footage as possible to rooms that it can make money off of. All the convention related space is space that needs to be built, but will never earn the income that rooms do.

Providence needs this space to compete with Hartford which has a new convention centre opening next year (if I remember correctly). Providence also needs to compete for the smaller conventions that are on the fence about going to Boston or saving money by using a smaller facility.

Hotels are part of the infrastructure of cities nowadays. Business travel and tourism are important economic engines. Cities need to play their part in making sure that they have this infrastructure in place to attract people and businesses to the cities.

Providence recently got GTECH to agree to relocate their corporate headquarters to Providence. Part of what GTECH needed to have in place to move to Providence was a hotel. GTECH got a lot of breaks from the city in order to be persuaded to move here. They have now teamed up with a local developer to build a hotel downtown. This one company has enough people travelling in from other parts of the country to want to build its own hotel! That's the way the business world works today.

I LOVE those renderings. I'm really excited to see that Madarin is going to go forward. The pictures look so nice, I want to post one...

Westin003.jpg

Providence Westin

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I was unable to find comprehensive information on the number of hotel rooms by city, but I did learn a little.

The four biggest metros are LV, Orlando, LA, and Atlanta.

LV has 126,000 rooms and Atlanta has 86,000.

Boston has 46,000 metro and 17,000 city (a lot of hotels in 48 sqaure miles).

Philly has 10,500 city.

all from Bizjournal .com

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Atlanta does have an insane amount of hotel rooms considering it's not a large tourist destination like the top 3.

As for city loans helping to boost construction of hotels, I don't think it's anything relatively new. I know for a fact that city/county loans have spawned several hotels in Atlanta and other cities. There is even a plan currently to restore the old Wincoff Hotel here in Atlanta through a loan program.

Look at the thread in MidAtlantic to see how Baltimore is using a loan program to bring a 750 room hilton. It's becoming more common place his the hotel industry is obviously not doing very well and getting conventional loans for construction is difficult.

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Could Atlanta's role as an airline hub be part of the reason why it has so many rooms?

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Could Atlanta's role as an airline hub be part of the reason why it has so many rooms?

I think that part of the impact. I think the large convention business is probably the #1 factor, airport certainly helps (you can see an extremely large grouping of airport hotels like very few cities around Hartsfield-Jackson.

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