OFFICIAL - Loews Convention Hotel (formerly Hyatt)

[hartliss]

The article's for subscribers only. Can anyone give a summary?

http://www.bizjournals.com/kansascity/n ... elays.html

Some highlights:

Instead, he said, the new goal for the project's multiple-piece financial closing is "the end of this year or early next year." That means the new Hyatt's opening "will probably be late spring or early summer (2019)," Burke told the Kansas City Business Journal.

Closing on the multiple financial pieces can't take place until the developers receive a guaranteed maximum construction price from general contractor JE Dunn Construction.

After recent conversations with experts at Stifel Nicolaus & Co., the bond underwriter for the project, "our confidence in being able to sell the bonds is high," Burke said.

"The good news is interest rates have, if anything, decreased over time," he added, "So we're trying to take advantage of that."

If interest rates appear poised to rise by the time the hotel bonds are issues, however, they could be a tough sell. That's because the value of bonds declines as interest rates rise.

Another challenge lies in the fact that the bonds will be unrated — meaning they won't be assessed by a credit rating agency such as Moody's or Standard & Poor's — largely because their repayment will not be guaranteed by the city or other public entity.

They also will be nonrecourse bonds, meaning the hotel's owners won't be on the hook for repayment, either. Repayment is "predicated on the success of the hotel," Burke said recently.

For that reason, nonrecourse bonds can be difficult to sell. But Burke said "you cover that in a number of ways: You have reserves; some get paid off earlier than others; and you pay a little more in interest rate."

Asked what was delaying the bond sale and other facets of the hotel project, Burke said there was no one particular snag — "just a lot of moving parts."

For instance, the hotel developers have yet to finalize a required joint development agreement with two local agencies that granted incentives for the project: the Land Clearance Development Authority and the Tax increment Financing Commission of Kansas City.

Meetings with those agencies aimed at finalizing the agreement are expected to begin in a couple of weeks.

In addition, Burke said, he has been working with city officials who have asked the developers to "tweak the wording" of other agreements due to "some arcane tax issues."

"Whenever there are issues, you take them one at a time and you resolve them," Burke said. "But this is doable deal, and we'll get it done."

Among those hoping he's correct are the multiple developers who invested in their own downtown hotel projects believing that the new Hyatt would create a rising convention and tourism tide that would float all boats.

[aknowledgeableperson]

Project delayed due to financing issues. Still no 1st mortgage.

[TheBigChuckbowski]

For instance, the hotel developers have yet to finalize a required joint development agreement with two local agencies that granted incentives for the project: the Land Clearance Development Authority and the Tax increment Financing Commission of Kansas City.

You would think the city would want to expedite anything they have control over...

But, overall, this isn't the dire news I thought it was after reading the headline.

[aknowledgeableperson]

I think these entities have learned from the past. No deal until financing is in place.

[flyingember]

I think these entities have learned from the past. No deal until financing is in place.

Agreed. The last thing we want is for them to turn over the land and then the hotel never happens.

[hartliss]

From the biz journal...

The agency that will issue the bonds for the proposed $310 million Hyatt convention headquarters hotel in downtown Kansas City has amended a resolution to reflect a $40 million increase in the total principal amount of bonds to be issued for the project.

But sources related to the deal, thus far, aren’t saying why.

The Land Clearance for Redevelopment Authority, which will own the hotel under a sale-leaseback agreement with its private owners, voted unanimously Wednesday to amend its original bond intent resolution to include a total principal amount “not to exceed $200 million.”

A staff report noted that “based on current projections, the total principal amount of bonds to be issued in multiple series is likely to exceed the $160 million amount cited” in the original resolution. But those projections weren’t discussed during the LCRA meeting, and sources with the hotel development team and LCRA have not yet responded to questions about the reason for the increase.

Mike Burke, the Kansas City attorney leading development of the proposed 800-room Hyatt, reported Sept. 14 that the development team will miss its goal of getting a $100 million first mortgage in place and selling $135 million in taxable and tax-exempt bonds for the hotel project this month. Instead, he said, the new goal for the project’s multiple-piece financial closing is “the end of this year or early next year.”

By then, the developers won’t need to sell just $135 million in bonds, however. During Wednesday’s LCRA meeting, Roxsen Koch, a Polsinelli PC attorney representing the hotel developers, said “the latest working number is $172 million,” which was the basis for the “not to exceed $200 million” language in the amended bond resolution.

After the meeting, Burke, Koch and LCRA Executive Director Joe Egan were not immediately available to respond to the questions about the bond issue, such as: Is this just a shifting of the debt stack from mortgage to bonds? Has the projected cost of the hotel increased? Is it because of an anticipated interest rate increase?

First announced by the developers and city officials in May 2015, the new Hyatt’s estimated opening date has been pushed back from early 2019 to late spring or early summer of that year because of the recently announced financing delay.

The project originally was expected to open in 2018. But it faced an earlier delay when Citizens for Responsible Government filed an unsuccessful lawsuit aimed at forcing a vote on city-approved incentives for the hotel.

Neither the city nor the LCRA will be on the hook for repayment for the hotel bonds. But according to documents related to the bond sale, the generous incentive package approved for the project last year will support repayment of the bonds.

The incentive package the City Council approved in July 2015 included tax increment financing, which was expected to generate enough revenue to pay off $42.2 million in tax-exempt TIF bonds; a community improvement district sales surcharge and special assessments, which were expected to support repayment of $82.4 million in taxable bonds; $35 million in cash from the city; and $62.4 million in payments the city will make to the hotel owners over 15 years through an agreement that will give the Hyatt exclusive catering rights in the Kansas City Convention Center’s grand ballroom and conference center.

St. Louis-based Stifel Nicolaus & Co. and Kansas City-based Valdes & Moreno Inc. have been selected as co-underwriters for the hotel bonds, which will be unrated — meaning they won’t be assessed by a credit rating agency such as Moody’s or Standard & Poor’s. They also will be nonrecourse bonds, meaning the hotel owners, the city or other public entity will not guarantee repayment.

One source familiar with the hotel deal recently said it was unlikely that a lender would agree to a $100 million first mortgage for a project in which only $25.3 million in investor capital — or “8 percent skin in the game” — has been pledged.

But Scott Anderson, a well-known Kansas City bond and public finance lawyer, saw it differently. Anderson is not involved in the Hyatt development.

Anderson noted that the $25.3 million in investor capital was part of $72.3 million in total equity, which also includes $39.5 million in cash and land from the city and $8.5 million in “key money” from Hyatt.

“Equity is equity,” he said, “and in this case, the equity represents 24 percent of the project cost. Twenty to 25 percent down on commercial projects is pretty standard.”

Anderson said it was highly likely the developers would be able to sell the bonds, as well, even though the first mortgage holder probably will demand that all of the real estate be pledged as collateral for that chunk of the debt.

“The people involved in these types of projects don’t do them unless they know they can sell them,” he said. “In the 20 years I’ve been doing (bond work), I honestly can’t think of a single issue that was brought to market where the bonds weren’t sold.”

Whether bondholders are likely to get paid off, however, is a different question, which Anderson said he couldn’t answer without seeing the yet-to-be-released prospectus.

Burke has said bond reserves and higher interest rates will help market the bonds.

[miz.jordan17]

New article, but not sure if there's any new content. Only for subscribers :/.
http://www.bizjournals.com/kansascity/n ... ncing.html

[hartliss]

New article, but not sure if there's any new content. Only for subscribers :/.
http://www.bizjournals.com/kansascity/n ... ncing.html

Similar to the write up in the Star from Sunday, nothing new.

[atticus23]

Was there anything new in the KCBJ's subscriber content article from today?

[missingkc]

I don't see anything in today's KCBJ.

[hartliss]

Timothy O’Byrne, one of the developers of the proposed $311 million Hyatt convention headquarters hotel, acknowledged that it would have been a lot easier to sell as much as $200 million in bonds to finance the project if the city had agreed to guarantee the debt.

During a Wednesday meeting of the Tax Increment Financing Commission of Kansas City, Finance Director Randy Landes shared some figures that helped explain the city's reluctance to take that financial risk.

The proposed Hyatt convention center hotel (behind the Kauffman Center for the Performing Arts) faces financing challenges because Kansas City is not backing bonds for the project.
Enlarge
The proposed Hyatt convention center hotel (behind the Kauffman Center for the Performing… more

JWALLACE

A redevelopment agreement for the 800-room hotel was on the TIF Commission agenda. But Landes shared the figures — on development debt — during a report to the commission on the city’s financial participation in economic development incentive programs.

Kansas City’s “skin in the game,” Landes reported, has included nearly $97 million in supplemental debt payments that the city has had to make as a result of bond issues it agreed to back in recent years.

According to Landes, 15 bond issues with principals totaling nearly $550 million have been issued in support of development projects and backed by the city’s annual appropriation pledge.

The primary payment source for principal and interest payments for such bond issues is the incremental tax revenue the projects generate.

“But if the incremental revenues don’t come in (as projected),” Landes said, “we have to reach into our pocket and make the payments.”

That has happened with nine of the 15 bond issues the city has agreed to back.

The largest taxpayer subsidy, $70.7 million to date, was tied to the $295.5 million in bonds issued to help finance development of the Kansas City Power & Light District. Other subsidies have included $10.7 million for the $13.3 million in Prospect North bonds and $6.4 million for the $37.9 million in 12th & Wyandotte bonds.

Development attorney Mike Burke was a partner in the law firm that worked on Prospect North, aka Renaissance North, a proposed 88-acre mixed-use development near Maple Woods Community College in the Northland. From 2001 to 2004, the city issued $13.2 million in tax increment financing bonds for the project. But it failed, and the city remains on the hook for the bonds.

Now, Burke is leading the Hyatt’s development team, KC Hotel Developers LLC. After the city’s nearly 10-year effort to land an acceptable convention headquarters hotel deal, KC Hotel Developers stepped forward with its proposal for an 800-room Hyatt with no financial risk to the city.

“The financing process for this project is much more complicated than other downtown projects because there is no city guarantee of the financing as with other downtown projects,” the developers said in a release.

[normalthings]

Are there any new renderings out for the Hotel?

[hartliss]

Are there any new renderings out for the Hotel?

There weren't any with the Bizjournal article.

[flyingember]

“But if the incremental revenues don’t come in (as projected),” Landes said, “we have to reach into our pocket and make the payments.”

That's how business works. If you don't have revenue you can't make payments

If they want the city to back the bonds then come up with a profit sharing plan where the city gets 10% of revenues, or something like that. Put up or stop complaining the city didn't give enough free money.

$97 million of backed bond debt is approx 13,000 homes worth of sidewalks at $7k each.

If anyone still doesn't understand why the city is cutting back on incentives, it's because developers are putting the city on the hook for their failures and more and more people are noticing.

[JLowe2018]

From the business journal today:

"Now, however, HNTB Corp., the project architect, can begin its work. Roxsen Koch, a Polsinelli PC attorney representing the developers, said delivery of the guaranteed maximum price should follow in 17 or 18 weeks, sometime around February.

The developers hope to close on the mortgage loan and bonds soon enough after that to allow a spring groundbreaking."

[moderne]

HNTB designed both Bartle Hall and the ballroom. Maybe they will continue with the deco-esque modern styling.

[Bill Durban]

Is it just the Star, or are some on the city council trying to cause trouble?
http://www.kansascity.com/news/business ... 36423.html

[hartliss]

Is it just the Star, or are some on the city council trying to cause trouble?
http://www.kansascity.com/news/business ... 36423.html

Thought the same thing. Interesting the tid-bit about Loar having interest another group to build a hotel - which she denied. Rumors or truth...either way this has become a hot mess.

[KCLover]

http://www.bizjournals.com/kansascity/n ... rdles.html

New rendering

[KCPowercat]

Much less sexy.