Jun. 17, 2008 - Local development firm Matthews Southwest will enter exclusive negotiations with City Hall to build a publicly owned Dallas Convention Center hotel, the City Council's economic development committee ruled Monday.

Following a lengthy closed-door briefing Monday with city managers and economic development staff, the committee ranked other developer finalists FaulknerUSA and Woodbine Development Corp. second and third, respectively.

All three finalists met the city's minimum criteria for building the planned hotel, said council member Ron Natinsky, chairman of the economic development committee.

But Matthews Southwest "provided us with a proposal that best addresses the guidelines we've given them," said Mr. Natinsky, who declined to offer specific reasons, citing ongoing negotiations.

"Their proposal offered a lot of excitement -- more than just a hotel. There's retail, entertainment, everything," said Deputy Mayor Pro Tem Dwaine Caraway, who also declined to elaborate.

Council member Jerry Allen, another committee member, declined to comment on the selection of Matthews Southwest.

The council's decision is something of an upset victory for Matthews Southwest, a relatively small Dallas-based firm best known for developing the South Side on Lamar apartments, Beat condominiums and Gilley's Dallas -- all immediately south of downtown.

None of these local projects is as large or as complex as the planned convention center hotel, which city officials estimate will involve a 1,200-room hotel facility and various ancillary retail and entertainment development, together costing as much as $500 million.

To date, the company's signature project is a $1.4 billion, 58-story office tower under construction in downtown Calgary, Alberta. The company also served as the primary developer of Toronto's convention center hotel.

Matthews Southwest and top city officials will now enter a 60-day negotiation period with the goal of signing a memorandum of understanding between the two sides. If successful, the council's economic development committee plans to direct the city staff to negotiate a final development agreement ahead of beginning the hotel's design and construction.

In case negotiations sour, however, the economic development committee on Monday pre-emptively directed the staff to immediately begin talks with Austin-based FaulknerUSA. Woodbine Development would remain an option of final resort. (The city disqualified a fourth finalist, Hamilton Properties, for not submitting a bid security.)

"We've tried hard to take this project and understand what the city wants, and to create energy," company president Jack Matthews said. "We're a small company that does large deals. We took a strong go at this from the beginning."

Matthews Southwest owns a considerable amount of property south of the Dallas Convention Center, even donating to City Hall the land on which it built the Dallas Police Headquarters.

But Mr. Natinsky said Dallas Convention Hotel negotiations are focusing solely on an 8.34-acre downtown tract bounded by Young, Market and Lamar streets, which the city purchased last month from a private landholder for about $42 million in public funds.

City documents indicate that the minimum criteria for a qualified developer include its ability to build a hotel of 1,200 rooms with 100,000 square feet of meeting space and provide at least 720 parking spaces.

Laura Roe, senior vice president of Austin-based FaulknerUSA, said she "respects the city's decision, and we wish the city great luck. ... If we are called upon to step up into negotiations, our experience allows us to get ready almost overnight. We're very well prepared."

Dallas officials had engaged in exclusive convention center hotel talks with Dallas-based Woodbine between 2004 and 2007. But negotiations stalled in part over funding disagreements, and earlier this year, city officials issued an open request for proposals from prospective developers, initially receiving six.

Some city officials had previously considered Woodbine, owned by billionaire oilman Ray Hunt, a logical choice to build a convention center hotel, given its development of the Hyatt Regency Dallas and Reunion Tower.

The company also leases Union Station from the city and owns dozens of acres of property immediately around the Dallas Convention Center.

"We were disappointed by the decision," said Cami Hardee, senior vice president for Woodbine. "We only really know what we've read at this point, so we don't really have any direction from the city just yet."

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