New Music City Center Narrative: No Hotel and Who Needs One Anyway?
Thu., Dec. 3 2009 @ 7:30PM
The key message Mayor Karl Dean and his finance director Rich Riebeling tried to send in today's unveiling of a financing plan for a new convention center can be summed up in 10 words: no hotel for now and we don't need one anyway.
Flanked by wingmen from Goldman Sachs (the bond underwriters), HVS (the consulting firm that has produced demand and revenue estimates) and Bass, Berry & Sims (the city's bond counsel), Dean and Riebeling told a joint meeting of two Metro Council committees that no hotel is on the table right now because, in Riebeling's words, "If we came to you today with a hotel plan it would have to be a public financing deal." Dean declared that "we will have a convention center hotel" but wants to wait for a better funding scheme than is currently feasible.
So what Dean and Riebeling did float today is a plan to finance a convention center without a hotel. Consultants at HVS, who just a few weeks ago presented demand and revenue estimates for the convention center assuming the presence of a 750-room hotel, reworked their projections to assume no new headquarters hotel ever (see the chart at the bottom of this post). Although it has often been stated that a hotel is essential for a city building a big new convention center, the new narrative is that a hotel would be nice, but, as Riebeling put it, "the convention center financing works very well without the hotel."
A curious aspect of today's proceedings involves the role of the Nashville Medical Trade Center announced earlier this week as a possible repurposing of the existing convention center. Although MCC and NMTC are conceptually and financially distinct, the mayor today suggested not so coyly that their fortunes are now intertwined. Commenting on the delay in proposing a convention hotel, Dean said that MCC and NMTC together will generate the revenue needed to support a hotel. Riebeling added that information about the medical mart could help stimulate private investor interest in a hotel. With these comments they are implying that the feasibility of a hotel hinges on the NMTC project--a venture that as presented earlier this week is long on hoopla but rather short on fiscal specifics.
Given Dean's insistence that there will ultimately be a hotel, how long is it likely to be before a hotel proposal is formalized? Dean and Riebeling both dropped hints that it could be a while. "There's going to be lots of discussion about a hotel over the next several months," Riebeling remarked. Dean observed that building a hotel takes a year less than building the convention center, so even a delay of as much as a year in getting the hotel going wouldn't preclude simultaneous openings.
It's hard to avoid noticing a bit of an internal contradiction in the conversation about a hotel. On the one hand, Dean and Riebeling are saying we must commence with convention center construction right away because costs and interest rates will never be more favorable. "It would be a grave mistake" to delay, says Dean, and Riebeling insists the financing works without a hotel anyway. But if center construction is financially advantageous now and riskier later, wouldn't the same be said of hotel construction?
The larger question to be addressed in coming weeks is this: If the deal works so handsomely without a hotel, then why would the city ever want to publicly finance one? Riebeling hinted that waiting will give "more interest by private market lenders" a chance to surface. But just how likely is that? Convention headquarters hotels around the country were not attracting much in the way of private investment even before the recession hit. Asked how likely by one Council member, Riebeling declined to offer any odds.
One last thing: some new mysteriously moving numbers. The top row of the chart below shows revenue projections that consultant HVS presented last month, assuming a hotel. The next two rows are new projections HVS presented today--with a hotel (middle row) and without a hotel (bottom row). That bottom row contains the numbers in play right now since the financing deal now before the Council excludes a hotel.
It is nonetheless curious that the with-hotel revenue numbers presented today (middle row) in two key categories--sales tax redirect and tourist development zone revenue--are markedly higher than the with-hotel numbers presented just a few weeks ago (top row). What's up with that?
Flanked by wingmen from Goldman Sachs (the bond underwriters), HVS (the consulting firm that has produced demand and revenue estimates) and Bass, Berry & Sims (the city's bond counsel), Dean and Riebeling told a joint meeting of two Metro Council committees that no hotel is on the table right now because, in Riebeling's words, "If we came to you today with a hotel plan it would have to be a public financing deal." Dean declared that "we will have a convention center hotel" but wants to wait for a better funding scheme than is currently feasible.
So what Dean and Riebeling did float today is a plan to finance a convention center without a hotel. Consultants at HVS, who just a few weeks ago presented demand and revenue estimates for the convention center assuming the presence of a 750-room hotel, reworked their projections to assume no new headquarters hotel ever (see the chart at the bottom of this post). Although it has often been stated that a hotel is essential for a city building a big new convention center, the new narrative is that a hotel would be nice, but, as Riebeling put it, "the convention center financing works very well without the hotel."
A curious aspect of today's proceedings involves the role of the Nashville Medical Trade Center announced earlier this week as a possible repurposing of the existing convention center. Although MCC and NMTC are conceptually and financially distinct, the mayor today suggested not so coyly that their fortunes are now intertwined. Commenting on the delay in proposing a convention hotel, Dean said that MCC and NMTC together will generate the revenue needed to support a hotel. Riebeling added that information about the medical mart could help stimulate private investor interest in a hotel. With these comments they are implying that the feasibility of a hotel hinges on the NMTC project--a venture that as presented earlier this week is long on hoopla but rather short on fiscal specifics.
Given Dean's insistence that there will ultimately be a hotel, how long is it likely to be before a hotel proposal is formalized? Dean and Riebeling both dropped hints that it could be a while. "There's going to be lots of discussion about a hotel over the next several months," Riebeling remarked. Dean observed that building a hotel takes a year less than building the convention center, so even a delay of as much as a year in getting the hotel going wouldn't preclude simultaneous openings.
It's hard to avoid noticing a bit of an internal contradiction in the conversation about a hotel. On the one hand, Dean and Riebeling are saying we must commence with convention center construction right away because costs and interest rates will never be more favorable. "It would be a grave mistake" to delay, says Dean, and Riebeling insists the financing works without a hotel anyway. But if center construction is financially advantageous now and riskier later, wouldn't the same be said of hotel construction?
The larger question to be addressed in coming weeks is this: If the deal works so handsomely without a hotel, then why would the city ever want to publicly finance one? Riebeling hinted that waiting will give "more interest by private market lenders" a chance to surface. But just how likely is that? Convention headquarters hotels around the country were not attracting much in the way of private investment even before the recession hit. Asked how likely by one Council member, Riebeling declined to offer any odds.
One last thing: some new mysteriously moving numbers. The top row of the chart below shows revenue projections that consultant HVS presented last month, assuming a hotel. The next two rows are new projections HVS presented today--with a hotel (middle row) and without a hotel (bottom row). That bottom row contains the numbers in play right now since the financing deal now before the Council excludes a hotel.
It is nonetheless curious that the with-hotel revenue numbers presented today (middle row) in two key categories--sales tax redirect and tourist development zone revenue--are markedly higher than the with-hotel numbers presented just a few weeks ago (top row). What's up with that?
 |
5 comment(s) / Post a Comment
