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San Antonio City Council Not Happy with Faulkner USA's Design for 1,000 room
 Convention Center Hotel, Calling it a "Regular Looking Hotel"

By Melissa S. Monroe, San Antonio Express-NewsMcClatchy-Tribune Business News

Aug. 3, 2006 - The developer of the 1,000-room Convention Center hotel was put in the hot seat Wednesday by City Council members who said San Antonio is not getting what it was promised for the downtown project that has been controversial for more than a decade.

Council members criticized the design of the project, calling it a "regular-looking hotel." They asked what happened to the San Antonio culture and identity it was supposed to have, where the river was that had been planned to run through the hotel, and how the developer will designate parking for the public in the underground garage.

Councilman Art Hall said the original design the panel was shown in meetings last year is not the one it's seeing today.

But changes stemmed from the city's Historic and Design Review Commission not approving the original look, said Carl Kernodle, senior vice president and director of design for Austin-based Faulkner USA, the developer of the project. For example, he said, the river in the hotel just couldn't be done.

Council members also questioned rising construction costs and whether Faulkner has accounted for that.

"This sounds like a lot of misrepresentation to what we were told and where we are today," Hall said.

Convention Facilities Director Michael Sawaya said the project is not behind schedule and is slated for completion Feb. 6, 2008. Faulkner is responsible for all costs that exceed the project's $217 million budget, he said. The total cost is expected to be about $285 million.

The 34-floor hotel will be adjacent to the Lila Cockrell Theater and will take the place of the former 1,200-space Convention Center Garage at Market and Bowie streets.

The project has been controversial, going in fits and starts for several years.

This time, the city was able to make it work by putting up $208 million worth of bonds and $77 million in private equity. For the private equity portion, Faulkner is putting up $11 million and Hyatt is providing $14 million. Marathon Real Estate was putting up more than $52 million, but it recently sold its equity to Barclays Capital Real Estate Finance for $60 million.

City Manager Sheryl Sculley said what's more important than the look of the hotel is its financial performance. "Otherwise we are stuck with the bill."

If the hotel's revenue is not enough to cover payments to bondholders, the developer would turn to state sales and occupancy tax revenue and finally to local hotel taxes to foot the bill.

Despite the criticism, the hotel has been selling itself. Through June 30, Hyatt's sales staff has already booked almost 200,000 hotel rooms, with another 313,196 tentatively booked. At this rate, it is 18 percent above its booking goal, said Scott Lane, Hyatt's director of sales and marketing.

Kernodle said Faulkner is getting ready to hire a public relations and marketing team to sell the 147 residential condominiums at the top of the hotel, which will range from $229,500 to more than $1.5 million.

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Copyright (c) 2006, San Antonio Express-News

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