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American Liberty Hospitality Seeking a Tax Abatement for a Proposed
 $50 million 250 room Embassy Suites in Downtown Houston

By Nancy Sarnoff, Houston ChronicleMcClatchy-Tribune Regional News

Sep. 22, 2007 - A local hotel developer is planning to build a 22-story Embassy Suites near the new downtown park, the latest project to be announced in this suddenly hot area.

American Liberty Hospitality expects to start construction on the 250-room full-service hotel by next summer after it receives final approval for its franchise from Hilton Hotels Corp. and secures financing. The opening is scheduled for the first quarter of 2010.

Nick Massad, president of American Liberty, said he has had preliminary discussions with public officials regarding a tax abatement for the estimated $50 million project, but won't discuss details until the negotiations are further along.

Located at 1515 Dallas at La Branch, the hotel would be near developments such as Discovery Green park, the One Park Place apartment building, the Houston Pavilions retail, office and entertainment complex and two proposed office towers. The George R. Brown Convention Center and Hilton Americas-Houston Hotel are also close by.

Hotel consultant John Keeling, who has not been involved in the project, said the Embassy Suites proposal combines an excellent location with a national brand. Most of downtown's recently developed hotels are boutiques not associated with big names.

With hotel rates expected to increase, other hotel chains have looked at or made commitments to downtown.

Later this year, an Omni hotel will be developed at 711 Polk. The project is a renovation of the long-vacant Sheraton-Lincoln Plaza. And a La Quinta may be built near Minute Maid Park, said Keeling, senior vice president for PKF Consulting.

Massad said the new downtown hotels are needed to attract more conventions.

"We have all the makings of a convention city, but we're missing one thing. We don't have the rooms downtown," he said.

The Central Business District has less than 5,000 hotel rooms, which makes it difficult to compete for conventions. By comparison, downtown San Antonio has almost 12,000 rooms.

"Downtown is grossly under-hoteled," Keeling said.

It's also the best performing hotel submarket in the Greater Houston area in terms of revenue per available room, which is how the industry measures performance. Downtown hotels should finish the year at around 66 percent occupancy, which is above the national average, according to PKF. At $160 per night, it also has the highest average room rates in the city.

A Hilton brand The new Embassy Suites, a Hilton brand, would be marketed along with the Hilton Americas-Houston through the company's national sales team. When conventions come to town, the Embassy Suites would likely set aside most of its rooms for attendees.

Average room rates would be $200 per night.

Embassy Suites offers guests two-room suites with a separate living area, bedroom and minikitchen. The Houston property would include meeting and event space, a pool, sauna, fitness center, restaurant and lounge. Houston-based Mitchell Carlson Stone is the architect.

American Liberty would lease the downtown property from a local family partnership for 99 years. Cushman & Wakefield represents the owners.

American Liberty, which develops, owns and operates a portfolio of hotels throughout the Southwest, is also building a 190-room Hilton Garden Inn on Interstate 10 and Dairy Ashford, and is planning properties in the Texas Medical Center and Clear Lake areas.

Massad said part of the reason more full-service hotels haven't been built downtown is because of rising land prices and construction costs.

Building costs have soared here and along the Gulf Coast, especially, because contractors have been focused on hurricane rebuilding efforts. Construction costs have gone up 1 to 1.5 percent each month over the past few years, Massad said.

Many hotel projects now include a condominium component to help support the hotel.

Massad said his site is not big enough to handle both uses.

"We're going to have to sharpen our pencil and negotiate things to make it work," he said. "Because of our superior location, brand, reservation system and marketing, we're confident it'll be successful."

nancy.sarnoff@chron.com

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Copyright (c) 2007, Houston Chronicle

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