Tag Archive for hotel development

Get the Hotel Financing Your City Needs for Development

Garfield Traub Hotel Case Study

Overton Hotel and Conference Center

Overton Hotel and Conference Center, Lubbock, TX

The Need:  Lubbock, Texas, a community of 200,000 population and a trading area of 750,000 located in the high plains area of west Texas and home to Texas Tech University and its student population of 35,000, lacked a full service hotel and a modern convention center to attract business meetings and tourism.  Significant tourism was being sacrificed and the city itself lacked quality meeting and support facilities for its businesses and its citizens.  Texas Tech had a Majors Program for Restaurant, Hotel and Institutional Management and no appropriate property in the community for its students to utilize for their laboratory experiences.

The Challenge: Historic hotel economic data would not support the private financing of a full-service hotel and conference center, creating a demand for public financial support in order to ensure the successful financing for the development.  Three attempts by private developers had been attempted with no success over more than half a decade leading up to the selection of Garfield Traub Development.  Texas Tech’s leadership had other priorities ranked above this initiative.

The Risk: The city had been led each time in the past to believe that the level of municipal financial participation to accomplish the successful financing of such a development was less than reality.  The real number was in excess of what the city wanted to contribute, so a gap existed that needed to be filled, and the city leadership had a great need to be schooled in the realities of hotel finance and operations.  Texas Tech might not be able to exert its influence in assisting.

 

Overton Hotel and Conference Center Tech View

Overton Hotel View from Texas Tech Stadium

The Opportunity: The city was ready to be taught and to be more collaborative because of the previous disappointments.  Texas Tech now had a new Chancellor and a desire to collaborate with the city.  The Lubbock CVB and EDA were ready to help, and the economy was advancing with tourism ripe to attract to Lubbock.  Importantly, the largest mixed use redevelopment in the nation, a 325 acre land development stretching from Texas Tech’s front door of University all the way east to downtown was advancing in its evolution and had planned for a hotel and conference center to be located within this Tax Increment Financing Zone.  The time was right.

The Solutions:

  1. Financing – A capital stack was created using a Public/Private Joint Venture with the City.  The financing consists of an equity investment by the hotel owner/operator totaling 10% of cost, a bank loan totaling 53% of cost, a city bond totaling 17% of cost, Foundation Grants to the City totaling 17% of costs, and Naming Rights and Room Licenses totaling 3%.  Because of the City’s investment, it owns the conference facility and the land underneath, and leases the facility to the hotel owner and operator for a period of 80 years.  The City’s bonds are amortized by its traditional revenues, but are enhanced by new property taxes, hotel occupancy taxes, enhanced sales tax revenues from new tourism, and do not lien the new facility.  The Foundations justified their generous contributions as enhancing the Texas Tech curriculum and enhancing the infrastructure of the community.  The new hotel designed and constructed within the conference and hotel facility separate spaces for the use of students, a new classroom, teachers office and locker facilities for weekly training.  Finally, the Naming Rights and Room Leases were geared to the alumni and friends of Texas Tech and done in concert with the Alumni Association.  Similar to stadium seat license agreements, for a onetime fee to the hotel development fund, an alumnus could purchase the rights to a room for every Friday and Saturday night for every home football game for a period of ten years.
  2. Delivery – Design-Build was utilized by the City for the conference center utilizing a fast-track, best qualifications competition allowed by Texas legislation.  The facility was delivered on time and on budget.

 

Overton Hotel Conference Ballroom

Overton Hotel Conference Ballroom

The Result:  Garfield Traub delivered a 303-room, full-service hotel with a 22,000 square-foot conference center. The Overton Hotel and Conference Center is located across University Boulevard from the Texas Tech University campus and Jones AT&T Stadium.  As mentioned above, the hotel was financed with private debt and equity and the whole development with a classic Public/Private Partnership.  The facilities offer convenience for hotel guests attending conferences, business meetings, weddings and many other social events. Guests are greeted by a stunning lobby and enjoy the expansive first class facilities and amenities. This innovative public/private partnership has produced the finest hotel and conference center in Lubbock and the region. The Overton is the only hotel in West Texas to receive the Four Diamond Award from AAA.  In Fiscal Year 2010-2011, 85% of the top room night-producing events hosted in Lubbock utilized the Overton Hotel & Conference Center as their headquarters facility. Because of the development of the Overton Hotel the increase of jobs, tourism and citywide visitor spending, sales and use taxes all took place as well as reduced pressure on residential property taxes.

To find out how your City can successfully build a hotel and conference center to meet your City’s needs contact Garfield Traub.

In Memory of Jerry Robert Thoele

4th June 1943 – 14th July 2012

Jerry Robert Theole

Jerry Robert Theole

This memorial article was created in the memory of Jerry Robert Thoele, a former member of Garfield Traub Development, who passed away at 69 years of age.

On Saturday, July 14, at 11:51 a.m., Jerry Thoele, a loved and respected former member of the Garfield Traub Development family, passed away at Baylor Medical Center. We send our condolences and deepest sympathies to his family, business associates and friends, and acknowledge what a special individual he was, and leader and mentor to so many of us in the real estate and hospitality industry.

In the time Jerry spent as President of Garfield Traub Development’s Hospitality Division, he built bridges to the most important hotel corporations in America and forged alliances that were so important to him and to our firm. Notably, Jerry introduced Garfield Traub to the Interlink Group in Puerto Rico, where he and the leadership of Interlink developed the Sheraton Puerto Rico Hotel & Casino, which serves as the headquarters hotel for the Commonwealth’s convention center in San Juan.

The Garfield Traub team remembers him to be one of the most knowledgeable, caring, honest and decent persons we’ve had the honor to know and to be associated with.

Jerry was born in Seymour, Texas. He graduated from Midwestern State University, and earned his MBA from the University of North Texas. Jerry served proudly as a Lieutenant in the U.S. Army. Jerry began his business career in 1968, as a CPA for Arthur Andersen LLP. After leaving public accounting, he began a career in the hospitality industry with the Registry Hotel Corporation where he led developments in Scottsdale, Arizona, Naples, Florida, and Dallas including the hotel now known as the InterContinental on the Dallas North Tollway. In the past decade, Jerry served as President of the Hospitality division for Garfield Traub Development, Managing Director for Hotels & Resorts with the Interlink Group in San Juan, Puerto Rico, and was responsible for developing many prominent hotel establishments including the St. Regis Bahia Beach Resort, Sheraton Puerto Rico Hotel & Casino, and San Juan Marriott. During his distinguished career, Jerry was President of several luxury hospitality organizations. He was an active industry leader and prominent speaker at numerous hospitality conferences in the US, including a visiting lecturer at the Harvard Graduate School of Design.

Jerry will truly be missed, not only by his family, but by so many of us that he mentored and influenced in our careers. His family has requested that memorial donations may be made to the Juvenile Diabetes & Research Foundation. This Memorial Donation offers you a thoughtful, caring way to remember a loved one while contributing to an important cause of finding a cure for diabetes. Once completed, you will receive an acknowledgement letter, and the person of your choosing will also receive a letter notifying them that you have made a gift in the honoree’s name (Juvenile Diabetes & Research Foundation does not disclose the amount of the gift).

The Omni Dallas Hotel Revenue Equals Savings for Taxpayers

The Omni Dallas Convention Center Hotel

The Omni Dallas Convention Center Hotel

What if your city could develop a hotel like the Omni Dallas Hotel at no cost to taxpayers and help transform your city into a place where investors, developers and new businesses come to create new jobs, new revenue and a variety of new and improved amenities that ultimately equate to financial security for the city and for those who live in it? It so happens that cities everywhere are doing this successfully with the construction of large developments such as Hotel and Conference Centers, Performing Arts Centers and other large mixed-use developments that attract tourists and visitors from other cities and promote growth and tourism.

As a very current example, the Omni Dallas Hotel, owned by the city of Dallas, reports that it is thriving to the degree that hotel officials project that it will bring in enough net revenue to meet its first-year debt obligations, not requiring Dallas taxpayers to contribute to the mortgage payment. Furthermore, financial projections also show that taxpayer support may continue to be unnecessary in years to come.

The Omni Dallas hotel was built with $477 million in city-backed bonds, and with the current performance, the Omni Dallas Hotel Manager Ed Netzhammer sates that he is confident that every penny of the city’s financing will be accounted for by the hotel’s revenue, indicating an excellent outlook for Dallas taxpayers.

According to the 2012 forecast displayed in The Dallas Morning News, the following was reported for the Omni Dallas Hotel.

The Omni Dallas Hotel 2012 Financial Forecast

  2011 2012
Occupancy Rate 58.5% 57%
Daily Room Rate $121.97 $169.34
Revenue Per Room $71.39 $96.52

The above numbers are steadily rising, and the Omni Dallas Hotel officials noted that in January, paid occupancy was a remarkable 65 percent, or 11 percentage points above projections. These 2012 numbers put the Omni Dallas Hotel on the same level as the Hilton Anatole. The combination of November – January numbers alone exceeded projections by 34%.

The most important information from the reports comes from the fact that in 2012, the Omni Dallas hotel expects to get 70 percent of sales from groups and conventions alone. “The inclusion of headquarters hotels is crucial for convention centers,” says Steve Moffett President of the Hospitality Division of Dallas-based development company Garfield Traub Development. “The numbers show that headquarters hotels enhance the performance of their convention centers, allowing them to meet and often exceed expectations.”

In the The Dallas Morning News article titled, “Omni’s 2012 sales expected to cover first-year debt payment,” the Omni Dallas Hotel manager Mr. Netzhammer expects his hotel to be the headquarters hotel or co-headquarters hotel in 16 citywide conventions. The 16 conventions are expected to fill up most downtown hotels, meaning not only great news for the Omni Dallas Hotel, but also for other hotels, restaurants, departments stores and other various businesses located in close proximity to the Dallas Convention Center.

Another great example of this type of success is not a hotel, but a Performing Arts Center. The Durham Performing Arts Center (DPAC) in downtown Durham, NC, had its skeptics before it was built, but now the development is very successful generating revenue to not only operate profitability, but enhance the numerous businesses surrounding it in downtown Durham. In addition, it now ranks among the top 10 in attendance of touring Broadway theaters nationally, and generated multiples of its originally-estimated net revenue. Since opening, the DPAC created new demand for restaurants, hotels and shops surrounding it.

To discuss how your city can achieve similar success like the Omni Dallas hotel and the Durham Performing Arts Center by building facilities which create new economic development for the community, contact Garfield Traub Development.

DALLAS CONVENTION CENTER HOTEL DEVELOPMENT BRINGS BIG BENEFITS TO CITY

Omni Dallas Convention Center Hotel

Omni Dallas Convention Center Hotel

The new 1,000-room Dallas Convention Center Hotel made front page of the Dallas Morning News today announcing its debut this Friday. Along with that debut, the City has a lot more to be excited about with actual revenue earnings climbing well above the originally projected numbers.

This rise in revenue is not uncommon with Convention Center Hotels despite the down economy. Convention Center Hotels have proven, if planned well, to bring not only success in city revenue, but also in creating more jobs, boosting revenue for surrounding businesses, and in bringing more visitors to their cities.

The idea for the almost $500 million Dallas Convention Center Hotel stemmed from the City wanting to reap the benefits mentioned above. Luckily for Dallas, the hotel is already doing just that and it has not even opened yet.

Omni Dallas Convention Hotel Roof Top

Omni Dallas Convention Center Hotel Roof Top

According to City figures, The Dallas Omni Hotel has booked 273 meetings and conventions through 2017. And the Dallas Convention Center is already reaping the benefits from 89 of those that will use their space. Additionally, figures presented to the Dallas Morning News by Chief Financial Officer for the Dallas Convention Center & Visitors Bureau Matthew Jones, cited that in fiscal years prior to voters approving the hotel, the city booked 31 large conventions. In the fiscal years immediately following the vote, there were 45.

It is these reports that also have the City excited that they will more than likely not have to use any of their reserve funds to pay back any part of the $497 million in bonds used to build the hotel. The numbers also ease the City’s concerns that the taxpayers, who almost killed the hotel project in May of 2009 with a referendum will be angry with them in the end.

Durham Performing Arts Center (DPAC)

Durham Performing Arts Center - Durham, NC

“This anger is not uncommon with taxpayers ever since the onset of the current recession,” said Ray Garfield of Dallas-based Garfield Traub Development. “Taxpayers worry that their money is going to frivolous desires by the City, but it is actually projects like the Dallas Omni Hotel, Durham Performing Arts Center in Durham, North Carolina, and many others that prove that even though times might be tough, it is hospitality and entertainment developments like these that are helping to keep cities going and looking their best.”

To find out more about how a Convention Center Hotel or Performing Arts Center might help your city, contact Garfield Traub.

Sheraton at the Overland Park Convention Center – References

Sheraton at the Overland Park Convention Center

Sheraton at the Overland Park Convention Center, Overland Park, KS

City of Overland Park, Kansas Director of Public Works Robert D. Lowry

March 14, 2006

TO WHOM IT MAY CONCERN:

During the period June 1999 through December 2002 I had the distinct privilege of serving as the Owner’s Representative for the City of Overland Park, Kansas for the design and construction of a new Convention Center and adjacent headquarters hotel. This was a very unique and complex project because the City Council made a commitment to fund the hotel without expending any public funds.

To make this happen, a request for proposals (RFP) was issued by the City for a development team to design, construct, finance, operate and maintain the hotel. The team selected for this project was led by Garfield Traub Development LLC. To say that the performance of this team exceeded all expectations of City staff and the City Council would be a gross understatement.

Given a very tight hotel market and a major down turn in the economy, the odds were against this project happening. But because of the leadership and expertise that Ray Garfield, Tony Traub and their team provided, the hotel was completed well ahead of schedule, under budget and the City Council made good on its commitment that no public funds would be used for the project. The end product was adopted by the Sheraton Hotel chain as its new standard, and the project was nationally recognized as the Public Sector Project of the Year by the Design-Build Institute of America (DBIA).

I have been involved in construction and construction management for almost forty years and have never seen a project executed as flawlessly as the Overland Park Sheraton Hotel at The Convention Center. The Garfield Traub team never lost sight of the desired outcome, was totally focused on exceeding the expectations of their client, and was comprised of the most professionally competent group of design, construction and management professionals I have ever had the pleasure of working with. I would actively seek an opportunity to work with the Garfield Traub organization on any type of development project in the future. They truly “under promise and over deliver.”

Please feel free to contact me at any time if you have any questions about this world-class organization.

Sincerely,

Robert D. Lowry
Director of Public Works

City Manager of Overland Park, Kansas (retired) Mr. Donald E. Pipes

February 2003

To Whom It May Concern:

In November 2002, the City of Overland Park, Kansas opened its new Sheraton Hotel and adjacent Convention Center. The dual project was a challenging goal of the City for fifteen years. The financing and development of a project of this magnitude is the most daunting and crucial phase of a project such as ours. Financing of the hotel component was key to the ultimate success of the complex and necessary for the City to move forward with the financing and development of the convention center.

Serving as City Manager of Overland Park from 1977 – 2002, I was deeply involved with all aspects of this project. Most important of all was the financial impact of the undertaking. Overland Park is a city of approximately 165,000 residents and enjoys a AAA general obligation bond rating from Moody’s and Standard and Poor’s. It was imperative that the City hire a strong, knowledgeable group to work on the financing and construction of the hotel.

Development proposals were gathered and carefully analyzed. Garfield Traub was selected as the most qualified and able to successfully negotiate all project documents and to structure and place the financing for the hotel. During the negotiations and structuring of the financing, Garfield Traub also provided vital leadership over the design, value-engineering and pre-construction process. The group exhibited extremely competent leadership and creative financing skills allowing us to break ground on the convention center and hotel for a 2002 grand opening.

The group also provided oversight of construction and pre-opening activities for the hotel and the facility was completed ahead of schedule and approximately $1.5 million under budget. Garfield Traub is also the Asset Manager for the city’s Hotel Corporation.

I highly recommend Garfield Traub Development. Their expertise proved to be invaluable to the City of Overland Park. Anyone considering site visits during the selection process is urged to include Overland Park on your visitation agenda.

Sincerely,

Mr. Donald E. Pipes
City Manager (retired)

DoubleTree Hotel and Conference Center – References

Doubletree Hotel and Conference Center

Doubletree Hotel and Conference Center Bay City, MI

Gastonia City Manager James M. (Jim) Palenicki

May 3, 2011

TO WHOM IT MAY CONCERN:

It is my distinct pleasure to offer this letter of reference and recommendation on behalf of Garfield Traub Development, LLC, and in particular its two principals, Ray Garfield and Tony Traub.

Beginning in Summer, 1996, and extending through the Autumn of 2002, I served as City Manager for the City of Bay City, Michigan. It was impressed upon me early in that tenure that the principally-defined redevelopment goal of our community was to finance and construct a first-class, full-service, Downtown Hotel/Conference Center of true “destination” quality. In fact, for well over a decade previous to that time a series of roadblocks and outright failures had left the project as little more than an unfulfilled dream that many were dismissing as “impossible”. Then, however, I discovered Garfield Traub Development and its consummately-skilled leaders, Ray Garfield and Tony Traub.

With their combined expertise in complex, tax-exempt bond transactions and Hospitality-oriented real estate deals, we were ultimately able to make possible a financing and development package that truly would have remained impossible using any other developers or consultants, under any other scenarios.

Drawing upon the utmost in financial creativity and personal relationships within the national financial and hospitality communities, Ray and Tony allowed us to experience the on-tune, in-budget, ground­breaking on a $34 million, 150-room, Double Tree-branded hotel and conference center that, in many ways, serves as the national “model” for anchoring urban-core redevelopment and success in a small city.

The Garfield Traub Development team, along with their excellent supporting organization, not only made the difference in financing; they also assisted in the identification and selection of an operator and design team; acquired a top national franchise; assisted with the negotiation of all critical legal, operational, and financial documents; and, provided important management support for the public relations and communications efforts necessary to gain stakeholder support.

Even though I am now many years removed from my tenure in Bay City, I can state that I remain steadfast in my admiration for the ability and professionalism possessed by these two men and their supporting organization. I can state unequivocally, that in their collective absence, the City of Bay City would not have completed the successful, and otherwise-long-awaited fulfillment of its primary redevelopment objective.

If you should wish to speak to me further about my experiences with the Garfield Traub Development team, or about the financing and development of the Bay City Double Tree Hotel and Conference Center, please don’t hesitate to contact me at my home number (704) 854-4178; or e-mail palenicki@bellsouth.net at your convenience.

Sincerely,

James (Jim) M. Palenicki
Gastonia City Manager

 

Bay Area Convention and Visitors Bureau
Executive Director Shirley M. Roberts

July 12, 2004

Dear Ray:

There is an energy and excitement in Bay City today that didn’t exist a few years ago. People here are beginning to see the potential of this sleepy little town along the Saginaw River. They are finally beginning to believe we can make great things happen here. It’s really amazing how one new, significant development can change the course of an entire community.

The concept of building a hotel/conference center in Downtown Bay City had been on the drawing board for at least 15 years. One after another, local officials attempted to negotiate a deal with what seemed the “private developer du jour.” Several times, just when it seemed everything was coming together nicely, one or the other (local officials or private developer) backed out and our community’s dreams for a new landmark came to a screeching halt. Following this series of starts and stops, people here were largely skeptical a deal could ever materialize.

Garfield Traub Development entered the scene during a period when the community was soundly divided on the issue. Most who were knowledgeable about the many failed attempts to work with private developers on the project thought they had seen and heard it all. The non-profit model you suggested was an entirely new approach and seemed, at first glance, too good to be true. In fact, the model worked exceedingly well. Garfield Traub successfully leveraged approximately $12 million in grants, $3.4 million in loans, and a $4 million loan from the City’s economic development corporation to secure $15.4 million in tax-exempt hotel revenue bonds to finance the project.

Following more than a decade of debate, and after only 18 months of construction, Bay City celebrated the first guest at its new Doubletree hotel and conference center in early June 2004. The first-class, full-service facility offers magnificent views of the Saginaw River and the Wenonah Park amphitheater; 150 guest rooms including two suites; 15,000 square feet of meeting space and a 7,600 square foot ballroom.

The Doubletree has indeed become the new landmark we hoped it would be. Still in its infancy, the property has received rave reviews for its accoutrements, meeting facilities and service. These, too, can be attributed to Garfield Traub and the extensive network you brought to the table. From the layout of the meeting facilities to securing the Hilton Corporation Doubletree brand…from selecting the architects to choosing the right interior design firm…Garfield Traub’s influence permeates the facility and has made a permanent mark on Bay City’s downtown riverfront landscape.

I certainly enjoyed working with you on this project and thought you should know how much our new hotel and conference center has impacted our community. Please feel free to call on me if I can be of any help to you in the future.

Best personal regards,

Shirley M. Roberts
Executive Director

Overton Hotel and Conference Center References – Lubbock, TX

City of Lubbock City Manager Lee Ann Dumbauld Reference Letter

City of Lubbock LogoMay 6, 2011

To Whom It May Concern:

As City Manager of the City of Lubbock, I am writing to say how impressed I am with the leadership, professionalism and attention to detail shown by Garfield Traub Development LLC as part of the development team for the Overton Hotel and Conference Center. This project includes a 304 room hotel and a 47,400 square foot conference center.

Garfield Traub delivered a high quality product that has become a landmark for the City of Lubbock. I would highly recommend them to your city should you consider a project of this scope.

Best regards,

Lee Ann Dumbauld, City Manager

Mayor of Lubbock Texas Tom Martin

May 6, 2011

To Whom It May Concern:

As Mayor of the City of Lubbock, I have had the pleasure of dealing directly with Garfield Traub Development LLC as the developer of the Overton Hotel and Conference Center. This project includes a 304 room hotel and a 47,400 square foot conference center.

Garfield Traub Development’s professionalism in completing this project was very impressive and the result is a first class, state-of-the-art facility. I would highly recommend them to complete a project of similar scope in your city.

Best regards,

Tom Martin, Mayor of Lubbock, Texas

Assistant City Manager Development Services Rob Allison

November 18, 2009

To Whom It May Concern:

As Assistant City Manager for Development Services for the City of Lubbock and being involved with the Overton Hotel and Conference Center, I am writing to say how pleased I. am with Garfield Traub Development LLC. The City of Lubbock contracted with Garfield Traub Development LLC to perform development management services for the hotel and conference center project including fund raising, operational solutions, design and construction. This project has been a dream of the City for many years and we are extremely satisfied with the services of Garfield Traub Development LLC and the final product. The project broke ground on September 26, 2007 and includes a 304 room hotel and 47,400 square foot conference center as part of a large redevelopment project called Overton Park adjacent to Texas Tech University.

1 have been impressed with Garfield Traub Development’s leadership, professionalism, and their attention to detail. Their staff, including Steve Moffett, has taken great pride in providing outstanding service and commitment to the project.

The selection of Garfield Traub Development- LLC as part of the team has delivered our community a high quality product, and I would give them. my highest recommendation to complete any first-class facility for you. If the City of Lubbock has a future project of similar scope, we would not hesitate to use Garfield Traub Development.

Best Regards,

Rob Allison, Assistant City Manager Development Services

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Top Factors in Choosing an Event Location – Garfield Traub

Part of excerpt taken from Jim Butler of the Global Hospitality Group® Hospitality Lawyers | Authors of www.HotelLawBlog.com

Founder of Garfield Traub Development provided a wealth of information as one of the “top experts in public-private financing for hotel developments” on a panel for JMBM’s Global Hospitality Group®. The panel was for hotel developers, governmental entities and educational institutions about the feasibility and economics of building a hotel using a variety of public and private financing.

To view Ray Garfield’s presentation, see the easy download link at the end of his summary.

Ray GarfieldRay Garfield
Principal
Garfield Traub Developments LLC
972-716-3838
rgarfield@garfieldtraub.com
Ray Garfield and his company, Garfield Traub Developments, specialize in turn-key development of hotels, conference centers and entertainment venues for municipalities, airports, college campuses and hospitals. These developments can bring hundreds of thousands of people into the communities in which they are located to spend money and generate sales tax, without burdening schools or other public resources.

Ray points out that the number one factor for group meeting planners in selecting a location for a conference is the number of suitable hotel rooms nearby the meeting facility. So, if a city is in the convention center business, it has to be in the hotel business in one form or another.

Ray noted that with loan underwriting much more conservative today than it has been in the past, there is a significant gap between the equity that private developers are willing to invest and the debt that private developers are able to raise to develop a new hotel. Public-private financing is often the only way to fill the gap – without it, a hotel development will very difficult to build in today’s financial environment.

Ray has developed some innovative ideas for piecing together a variety of sources of financing for his projects. For example, Garfield Traub recently completed a $67 million, 303 room, independent hotel in Lubbock, Texas across from Texas Tech University, using a combination of two-thirds private funds and one third public funds. In collaboration with the University’s Restaurant-Hotel-Institutional Management school at Texas Tech, Garfield Traub designed a classroom in the city’s conference facility, and raised $11 million in grants to the city to help with the financing for the facility. The city also sold $11.4 million in bonds for the project. The combination of grants and bonds helped to fill the gap between the total cost of the project and the private equity and first mortgage loan.

See below to view or download Ray’s presentation at Meet the Money® 2010, where he shared with some of the information he provides to cities considering hotel development.

Top Factors in Choosing an Event Location

 

JMBM’s Global Hospitality Group® Perspective


Jim Butler

Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.

Jim Butler is a founding partner of JMBM and Chairman of its Global Hospitality Group®. Jim is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” and you will see why.

JMBM’s troubled asset team has handled more than 1,000 receiverships and many complex insolvency issues. But Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. For example, they have developed some unique proprietary approaches to unlock value in underwater hotels that can benefit lenders, borrowers and investors. (GOOGLE “JMBM SAVE program”.)

Whether it is a troubled investment or new transaction, JMBM’s Global Hospitality Group® creates legal and business solutions for hotel owners and lenders. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.

Developing Hotels Using Stimulus Dollars

Sheraton at the Overland Park Convention Center

Sheraton at the Overland Park Convention Center Overland Park, KS

Many cities are currently in the process of selecting a hotel development team to deliver their essential meeting facilities and hotels and are analyzing the appropriate methodology for development financing. Therefore, it is essential to understand all available federal, state and local financial programs and economic incentives available to provide the turn-key delivery program that is expected by public-sector clients.

First and foremost, municipalities should be aware of Build America Bonds (BABs), which have been available since February 2009. This program was created by the American Recovery and Reinvestment Act of 2009, commonly known as the Stimulus Act.

The Stimulus Act provides an alternative method for municipalities to finance capital costs for essential new facilities.  Besides BABs, the Stimulus Act creates Recovery Zone Economic Development Bonds, Recovery Zone Facility Bonds and other initiatives, but only BABs are not subject to volume caps and allocations.

One of the best local stimulus approaches is to attract more tourism. The associated local spending and tax revenues generated by annual convention visitors can number from tens of thousands to millions depending on a city’s size. In recent years, cities with convention facilities not supported by modern, connected headquarters hotels have sought to renovate and enlarge or build new convention and meeting facilities, essential to drawing group business to their communities, and many have and are developing the essential, adjacent hotels to ensure success in recruiting groups and events.

BABs currently provide for a federal rebate equal to 35 percent of taxable bond interest payments to a municipal issuer, providing significantly less expensive borrowing than traditional tax-exempt municipal debt, resulting in a more financeable project.  Two municipalities have issued BABs for hotel development financing of their convention center headquarters hotel developments within the past year – Dallas, TX and Franklin County (Columbus), OH.

In order to make Dallas’s new 1,000–room Omni Hotel at the Dallas Convention Center more affordable, it was a goal of the City to achieve a financing rate below 5.5 percent.  Of their $479 million bond offering lead-managed by Citigroup, $388 million was BABs issued at a taxable interest rate of just over 7 percent. However, with the federal 35 percent interest rebate, the net effective interest cost to the City is approximately 4.5 percent.  The use of BABs saved the City of Dallas 150 basis points (1.5 percent) on its then current tax-exempt borrowing rate for comparable maturities, enabling the new headquarters hotel to provide much less taxpayer risk in future operations and debt service costs.

BABs can be utilized not only for public hotels, but for any public facility capital costs which could ordinarily be financed by tax-exempt municipal bonds. The Stimulus Act now provides a vital and meaningful tool allowing municipal governments to access a larger and more efficient bond market to make their own local economic stimulus projects a reality.

Ray Garfield is Principal of Garfield Traub, the nation’s leading development services firm focused exclusively on essential public facilities. Garfield Traub acts as the lead coordinator for all public and public/private project development needs, including financing, design, construction and asset management.  For more than 35 years, Garfield Traub and its principals have financed more than $11 billion in debt and equity and developed more than 30 million square feet of all property types, nationally and abroad.

***IMPORTANT UPDATE: Although the American Recovery and Reinvestment Act expired at the end of 2010, Garfield Traub is second to none in providing turnkey financial and development solutions for public/private partnerships (PPP or P3) and public developments using a variety of advantageous funding and financing programs.  For more information on how Garfield Traub can create a hotel development team that will help you quickly deliver your essential development within schedule and budget, call us at 972-991-5200 or e-mail us.

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