|By Steve Lackmeyer, The Daily Oklahoman|
Knight Ridder/Tribune Business News
May 8, 2004 - A final agreement to reopen downtown Oklahoma City's Skirvin Hotel calls for the city to loan up to $18.4 million -- most or all of which would be paid back by the developer over 15 years.
The deal eliminates previous plans for the city to contribute $10 million without any repayment. The cost of renovating the property, meanwhile, is up from $42 million to $46.4 million.
The agreement, concluded this week after months of negotiations with Dallas developer John Weeman, calls for his team, Skirvin Partners, to buy the building from the city within 90 days and reopen it by spring 2006.
The details will be presented to the city council Tuesday with a vote scheduled the following week.
The $18.4 million loan draws heavily from federal funds allocated to the city for inner-city revival and a tax increment financing district created to boost downtown redevelopment.
Without the money being paid back to the city, funding will be scarce for future development projects and efforts to boost older neighborhoods.
The payback of the loan ranges from the city losing out on $4.3 million should the hotel perform poorly, or a total repayment with a profit to the city of between $1 million and $5.5. million if the Skirvin has moderate to high occupancy.
"The hotel's success will determine how much of the $18 million we will get back," Assistant City Manager Cathy O'Connor said.
"Most of the scenarios show that even if there is a moderate level of success, we'll get the money back."
Pending applications for historic preservation grants and legislation for new market tax credits could cut the $18.4 million in half.
The $18.4 million needed to reopen the Skirvin as a Hilton Hotel also represents a worst-case financing scenario that assumes construction of a Bricktown Embassy Suites, which is cited for $4 million of the gap.
The $35 million Embassy Suites would lower the Skirvin's profitability by being in the same reservation system, but City Manager Jim Couch is advising the council to consider the $18.4 million loan as an incentive to draw two full-service hotels with a total of 480 rooms to downtown.
"The Oklahoma City chamber, Downtown Oklahoma City Inc. and the convention and visitors bureau all want the most quality hotel rooms we can get downtown," Couch said.
"That's the goal, so we can get more conventions."
A financial analysis shows the hotels will create 741 construction jobs, 607 permanent jobs, with a $41.7 million economic impact.
The 93-year-old Skirvin closed in 1988, and promises of its restoration have ended in failure several times in the past decade.
Couch said the city probably couldn't have completed a successful deal five years ago.
Times have changed, he said, with the successful openings of two new hotels and millions being spent on retail, residential and office development downtown.
Couch promises this time is "the real deal."
The development team is led by Weeman, a former Hilton development officer, and includes Faulker USA, a company with a portfolio including the Hilton Austin Convention Hotel and Hilton Bergstrom Airport Hotel, and Marcus Hotels and Resorts, recently named a top operator by Hilton.
Investment by the team in the project will total $27.9 million.
Weeman said the agreement is based on conservative estimates, and foresees no problems moving forward with interior demolition this summer if the agreement is approved May 18.
Advanced designs have been completed, he said, and the team is about to hire an interior designer.
Weeman predicted the hotel will boost Oklahoma City as a destination, and that the city will recover the entire loan.
"This is a solid deal," Weeman said. "We've had the best attorneys and accountants in the U.S. involved in this. I fully expect to see it in the next hospitality investment conference as a model of how private and public entities can work together to make things happen."
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(c) 2004, The Daily Oklahoman. Distributed by Knight Ridder/Tribune Business News. HLT,