Aug. 22, 2002 - VIRGINIA BEACH, Va.--Town Center's developers said Wednesday that they will start construction next month on a $20 million hotel in the center after arranging financing from an unusual source: Hampton University's endowment fund. 

The university is using some of its $175 million endowment to lend Armada/Hoffler $18 million to build a 175-room Hilton Garden Inn. The loan is the university's first real estate investment. 

"We try to diversify so we can maximize our return," said Hampton University President William R. Harvey. "And we have done a pretty good job of that between stocks, bonds, real estate and some other investments. For us, this is just a diversification of our portfolio." 

The university is lending the money at roughly 8 percent interest and will have 35 percent equity in the hotel. After several meetings and a visit to the Town Center site, the university's 21-member endowment fund board approved the deal unanimously, Harvey said. 

"It's a good business decision," he said. 

Armada/Hoffler has built nearly a dozen buildings for Hampton University over the past 15 years. "We know them to be a quality builder and a quality organization," Harvey said. 

Louis S. Haddad, Armada/Hoffler's president and CEO, said the university's loan "enabled this exciting project to commence at a time when such projects are rare." 

The Chesapeake-based Armada/Hoffler has teamed with the city of Virginia Beach to build Town Center, a 19-acre project intended to become a central business district along Virginia Beach Boulevard across from Pembroke Mall. The city is spending nearly $50 million on roads, parking structures and utilities in the first two phases. Armada/Hoffler is spending more than $140 million. 

The first phase, now under way, includes a 23-story main office tower, nine levels of parking with 1,335 spaces, a five-story office building for the Pender & Coward law firm and street-level retail and restaurant space for a total of more than 900,000 square feet of new buildings. 

The second phase is expected to include the Hilton Garden Inn, a 334-unit apartment building, more restaurants and retail space and two more parking garages. 

Hilton Garden Inns are limited-service hotels catering to business travelers with rooms starting around $100 a night. Town Center developers have said such hotels encourage guests to use surrounding restaurants and shops rather than spending all their time -- and money -- in the hotel. 

The peninsula's Hampton University is a historically black university with about 6,000 students and 1,000 faculty and staff members. 

Harvey said the city's involvement in the project also encouraged the university to lend the money. 

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(c) 2002, The Virginian-Pilot, Norfolk, Va. Distributed by Knight Ridder/Tribune Business News. HLT,