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Oklahoma City's plans for a conference hotel could require city subsidies

Meeting focuses on city's plans for a conference hotel.

by Steve Lackmeyer Modified: June 8, 2010 at 11:59 am •  Published: June 8, 2010
Two veterans in the business of financing hotels cautioned that any city looking to add a large conference hotel should prepare to back it with either subsidies or incentives.

The "How You Build It” conference, hosted Monday at the Cox Convention Center by the International Economic Development Conference, also included warnings that getting such deals done in the current economy is tougher than ever.

Roy Williams, president of the Greater Oklahoma City Chamber, confirmed Monday civic leaders still hope to see a new conference center hotel built in conjunction with a $280 million convention center approved by voters in December as part of MAPS 3. But funding for a hotel is uncertain. A panel of experts with the Urban Land Institute warned during a presentation earlier this year the city will likely need to provide subsidies of up to $60 million.

Lisa Sexton, senior vice president of public finance investment banking at El Segundo, Calif.-based Piper Jaffray & Co., and J. Mark Tobin, principal with HREC Development Resources of Greenwood, Colo., said all but two of 17 hotels with 700 or more rooms built between 1997 and 2008 — and not in gaming or resort areas — required public participation.

"A private developer who says I can build a 500-room hotel in your backyard without any assistance is not going to happen,” Tobin said.

Sexton listed convention hotels being built across the country the past several years that required municipal bond guarantees of 30 to 60 percent.

She added that over the past few years highly rated insurers are no longer giving any consideration to hotel properties and that most conference-size hotels require 100 percent municipal guarantees.

With such participation comes risk for cities, as recounted by not just Tobin and Sexton, but even those attending the conference.

A delegate attending from Cedar Rapids, Iowa, reported his city was struggling to revive the fortunes of a conference hotel defaulted by the developer, while Tobin recounted a Boston project where the developer "whittled” down planned meeting and public space, then sold it for a $40 million profit a year later.

Sexton recalled how Baltimore subsidized a conference hotel on its waterfront only to see it become so successful that the city was left without the ability to reserve the blocks of convention room nights that inspired the project.

Sexton said the city then chose another route and built a new hotel it would control.

by Steve Lackmeyer
Business Reporter
Steve Lackmeyer is a reporter, columnist and author who started his career at The Oklahoman in 1990. Since then, he has won numerous awards for his coverage, which included the 1995 bombing of the Alfred P. Murrah Federal Building, the city's...
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At a glance
Cautionary tales:

Myrtle Beach: This city built a hotel along the beach, separated from any other development, and without a franchise, Tobin said. Before the hotel opened in 2001, there were two potential buyers, and the one the city chose lost its financing after a year of negotiating the deal. The city chose to build it as a city hotel and is paying debt service out of its general fund.

Indianapolis: Tobin said he visited this city several months ago and listened to a pitch by the city's mayor for building a convention hotel on the far end of a retail pedestrian mall, far from the convention center, to encourage pedestrian traffic. "Meeting planners don't care about that,” Tobin said.

St. Louis: This city chose to build a conference hotel in its distressed economic empowerment zone. "One has to ask whether the timing of that city's growth needed a hotel at that location,” Tobin said. "It's had challenges because of its capital and timing.”


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