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DST Realty, a Part Owner of the 983-room Marriott in Downtown Kansas City,
Pitches Bold Ideas to Build a Neighboring 1,000-room Convention Hotel

By Kevin Collison, The Kansas City Star, Mo.McClatchy-Tribune Regional News

January 6, 2010 --DST Realty is pitching an idea that would dramatically broaden the proposal to build a 1,000-room convention hotel downtown.

The concept, in the early stage of discussion, calls for not only building the convention hotel, but also adding 400 rooms to the 983-room Marriott complex at 12th and Wyandotte streets.

DST officials believe their $465 million plan would yield several hundred additional rooms at a lower cost per unit. It would also make financing the convention hotel more feasible by including an established revenue source.

DST Realty, a major player in the downtown real estate market, is a co-owner of the Marriott Downtown.

"Incorporating the Marriott under a common management with the new hotel will allow for marketing efficiencies and coordination, and will add a proven cash generator that will facilitate the financing of the new hotel and the additional rooms," Steve Taylor, vice president of DST Realty, said in a statement Tuesday.

Besides constructing the 1,000-room hotel recommended by the Convention & Visitors Association, the DST idea calls for building a 250-room wing on the north side of the existing Marriott tower and adding 150 rooms to the historic Muehlebach building in space left unfinished after an earlier renovation in the mid-1990s. The Muehlebach is part of the Marriott complex.

The design of the 22-story Marriott tower, which originally opened in 1985 as the Vista International, included elevator service and other accommodations for a north wing to be added.

DST Realty would then sell the Marriott to whatever development entity the city would create should it decide to move forward with the proposal.

The single ownership structure for the expanded Marriott complex and the new hotel would control 2,400 rooms a short distance from Bartle Hall.

The idea is not expected to be presented to the hotel steering committee established by the city until mid-January.

"What's encouraging about the concept is the bigger picture," said Convention & Visitors Association President Rick Hughes. "We have some creative, connected people in the community thinking outside the box on this project."

The co-leaders of the steering committee are Kansas City Councilwoman Cindy Circo and businessman Bill George.

"It is interesting enough to do the legwork on it," Circo said. "It all gets down to the numbers. There will be some negativity, I'm sure, but I think it would be absolutely irresponsible not to look into it."

George said, "It's an intriguing concept that we're spending some time on."

The city is not expected to have a formal plan presented on the original 1,000-room hotel concept until at least April.

The steering committee has narrowed down the list of sites for a new hotel to four: Barney Allis Plaza; a site that includes the historic Power & Light Building northwest of 14th Street and Baltimore Avenue; a site southwest of 14th and Baltimore; and a site on the south side of Interstate 670 near 16th and Wyandotte streets.

The Marriott Downtown was intended to be the city's primary convention hotel when the revamped Marriott complex opened in 1997. The hotel's ownership group includes DST Realty, United Fidelity Life Insurance, a company controlled by the Merriman family, and a development group that includes Larry Bridges.

The Marriott project, which received substantial tax-increment financing help, has required city subsidies. But DST Realty believes it's been self-sufficient.

The $465 million price tag of the DST proposal involves $315 million for the 1,000-room hotel; $85 million to purchase the existing Marriott; $16 million to pay off its remaining bond; $40 million to add the 400 rooms; and $9 million for two other downtown sites controlled by DST that could be used for future hotel projects.

A source familiar with the local and national hotel industry however, believes a more realistic price for the existing Marriott, using today's depressed hotel market values, would be closer to $40 million.

The DST proposal argues that including the property and hotel room tax revenues now generated by the Marriott, about $5.8 million a year, would make it easier to obtain financing for the new hotel project.

"We are concerned about the economics of the new convention hotel," Taylor said.

"Any decisions about a new hotel should be made in the context of a longer-term plan that includes the potential for additional rooms that will complement the entertainment district and the city's convention facilities."

George said that should the city establish an authority or some other development entity to build a new convention hotel, combining it with the Marriott and controlling 2,400 rooms would help attract new convention business.

Bill Lucas, the chairman of the Convention & Visitors Association, said the idea was worth exploring, but cautioned the city may not be able to absorb more than the 1,000 rooms recommended for a new hotel.

As president of Crown Center Development, Lucas is familiar with both the Westin and Hyatt hotels.

"While it's a bold initiative," Lucas said of the DST proposal, "it's a big leap of faith...I'd need convincing that there's a demand to move the dial that much."

To reach Kevin Collison, call 816-234-4289 or send e-mail to kcollison@kcstar.com.

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To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com.

Copyright (c) 2010, The Kansas City Star, Mo.

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