As Developers Pull Out Of Hotel Projects, Cities Are Stepping In To See Them Through
As debt markets have seized up, developers increasingly have pulled back from active construction projects, including a handful of hotels near convention centers in major U.S. cities.
But rather than let those sites sit fallow, some local authorities have decided to step up as financial backers to ensure real estate developments they see as economically critical actually open to visitors, CoStar reported.
When Brookfield Properties pulled out of a $276M expansion to the Savannah Convention Center in May, just six months before the project’s opening date, the Savannah-Georgia Convention Center Authority intervened.
The developer blamed problems in securing financing as well as site issues, the Savannah Morning News reported. Instead, the project will be financed by bonds issued by the SGCCA.
The SGCCA is working with Hilton on the project, which would add 400 rooms next to the convention center with an opening date in May 2024.
Savannah isn't the only city in Georgia where local authorities are participating in hotel construction. The pandemic threw plans for the Signia, Atlanta’s 1,000-room hotel for the Georgia World Congress Center, into jeopardy.
But the Georgia World Congress Center Authority, which owns the land in the heart of Downtown Atlanta, secured $450M in revenue bonds, invested another $55M and got a $25M investment from Hilton, the Atlanta Business Chronicle reported. That hotel is expected to open early next year.
Another developer pulled out of a convention center hotel project in Indianapolis after it couldn't come to terms on financing, citing interest rates and doubts over the future of the convention industry.
The Signia by Hilton Indianapolis Pan Am Plaza is supposed to be part of the expansion of the Indiana Convention Center, which also includes adding 143K SF of flexible space that connects to the convention center via a skywalk over Capitol Avenue.
The Indianapolis City-County Council approved $625M in bonds to finance the 800-key hotel in June, WRTV reported. The project’s groundbreaking took place in August, and the expansion is expected to open in the fall of 2025.
The Omni Fort Lauderdale is expected to deliver 800 hotel rooms in Broward County, Florida, by 2026 after breaking ground in June 2022. The Omni is part of the Broward County Convention Center’s planned expansion and is backed by almost $389.5M in bonds from the county government.
Taxes generated by guest spending are among the benefits cited by local authorities as they justify investments. The pandemic isn't the only moment when local governments have stepped up to back hotels that are part of convention center expansions. During the Great Recession, the D.C. Convention Center Authority put up hundreds of millions of dollars worth of bonds to help finance a 1,160-room Marriott Marquis and a new convention center.
