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A Proposed Westin Resort Hotel at the Kentucky Horse Park, an Educational
 Theme Park, in Lexington, Kentucky May be in Jeopardy;
.
The $118 million in tax-exempt Bonds Not Sold Due to Economic Downturn
 Causing Problems with Bond-insurance Companies
By Linda B. Blackford, The Lexington Herald-Leader, Ky.McClatchy-Tribune Regional News

Apr. 3, 2008 - The proposed luxury hotel at the Kentucky Horse Park could be in jeopardy because the bonds to finance the deal haven't been sold.

And, if they aren't sold by April 15, the deal is finished, according to officials of the Finance and Administration Cabinet.

That deadline is necessary for the hotel to be finished in time for the 2010 Alltech FEI World Equestrian Games, according to a letter sent by the cabinet's general counsel, Jeffrey Mosley, to the developers.

"April 15 was a key date," said John Nicholson, director of the Kentucky Horse Park. "We do not want to have a hotel under construction while the World Games are going on."

Ryan Barrow of Ross, Sinclaire, which is selling the bonds, said they have not been sold solely because of the economic downturn, which has left bond-insurance companies in trouble and banks with liquidity problems.

"With any market swing downward, it means more time," he said.

Mosley's letter emphasized the "considerable amount of effort" by the state to set up the financing "facilitated on a very short time line."

In addition to the bond sale, April 15 is also the deadline for a final ground lease and agreement with Westin, the hotel's luxury brand.

Neither of the key developers -- Joe Straka of Boorn Partners in Cincinnati or Brad Burgess of the Thayer Group -- returned calls requesting comment yesterday.

They are the creators of a complicated financing plan to build the hotel using $118 million in tax-exempt bonds issued by the Kentucky Economic Development Finance Authority. About $75 million of those are backed by the developers, but the commonwealth could be liable for an additional $42.17 million if the hotel doesn't succeed.

A feasibility study paid for by Burgess said the hotel would have 75 percent occupancy with room rates of $175 a night. However, local hotel managers have dismissed those projections as unrealistic. By comparison, The Marriott Griffin Gate Resort on Newtown Road has an occupancy rate of 64 percent.

The developers are also eligible for a tax rebate of up to $39 million and a $3 million loan to help them make debt payments in case they run short of cash. The tax rebate is provided by legislation to encourage private development in tourism projects.

Burgess, a Florida businessman who now lives in Lexington, came up with the idea of building the 265-room luxury Westin hotel, spa and retail project with a non-profit foundation.

In March 2007, he created the Bluegrass Equine and Tourism Foundation. Two weeks later, he created KHPWESLUX LLC, a for-profit company made up of his own Thayer Group and Boorn Partners, founded by John Boorn, Mary Lynne Boorn and Joe Straka. KHPWESLUX bid on and won the last state proposal to build the hotel, beating out Corporex of Northern Kentucky. KHPWESLUX will make a $5 million development fee on the deal.

After the debt service is paid off, the foundation will distribute any profits to local equine and tourism groups.

The developers had initially mentioned a groundbreaking of April 15, but, without a bond sale, nothing can move forward.

The deal received approval from several state agencies, but has also been criticized by state and city officials.

"They could always renegotiate. But the reason the letter was sent is because the deal is time-sensitive," said Lori Flanery, deputy secretary of the finance cabinet. "My guess is they would revisit it again after the Games."

Read the Finance and Administration Cabinet's letter to the hotel developers.

Reach Linda Blackford at (859) 231-1359 or lblackford@herald-leader.com.

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To see more of the Lexington Herald-Leader, or to subscribe to the newspaper, go to http://www.kentucky.com.

Copyright (c) 2008, The Lexington Herald-Leader, Ky.

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