News for the Hospitality Executive
|By J. Andrew Curliss, The News & Observer, Raleigh, N.C.
Knight Ridder/Tribune Business News
Jan. 9, 2004 - RALEIGH, N.C. -- City and county administrators late Thursday picked an Atlanta hotel developer, one of the nation's largest, to put a 400-room four-star Marriott hotel in downtown Raleigh next to a proposed convention center.
Taxpayers would provide $20 million in cash to Stormont-Noble Development for the project, plus provide 100 free parking spaces and offer city-owned land under the hotel at a steep discount.
Stormont-Noble, which has developed more than 5,300 hotel rooms across the nation, would spend about $60 million on the hotel.
The administrators -- including top city and county officials -- chose Stormont-Noble over two other groups: a Raleigh team that also proposed a Marriott and a Charlotte/Texas group that proposed a Westin.
Stormont-Noble's documents show a wide lawn with fountains on Fayetteville Street Mall in front of the property, and the company says it wants to develop shops and condominiums across the mall from the hotel.
City boosters want residential and retail development at that end of downtown. But administrators said those plans were not part of the consideration for the hotel development job, which is one of the most crucial aspects of plans to build a convention complex using hotel and meals taxes already in place.
Instead, officials said, Stormont-Noble's financial strength tipped the competition.
"We've all seen 'Jerry Maguire' -- you know, 'Show me the money!' " said Tony Peterman, a Georgia consultant who advised the city on all three proposals. "That's what it comes down to in the end."
Stormont-Noble says it will bring $14.2 million in cash to the deal, which beat the others. Roughly $13 million of that would come from the Lubert-Adler Fund, a national real estate investment trust, according to company documents.
The team is led by Mitesh Shah, 34, a Wake Forest University graduate and university benefactor, who said he wants downtown Raleigh to sparkle. He said he grew up in Winston-Salem, and his brother attended UNC-Chapel Hill.
"North Carolina is home," Shah said. "This is home. And we want to be here for a very long time. We will put our best foot forward, to build confidence and gain the trust of the community."
Shah appeared at the meeting Thursday with former City Council member and lawyer Kieran Shanahan and his partner, Reef Ivey, who both have opposed the convention plans. Shah was also with Tom Drew, a Durham public-relations executive who was an ally of former Sen. Terry Sanford.
Shanahan wouldn't comment. Ivey said they had met Shah for the first time over dinner before Thursday's meeting, and they would be Shah's local lawyers.
Shah spoke only once during the meeting, to confirm that his company would build 400 rooms for the $20 million in taxpayer money instead of the 385 rooms listed in his proposal.
"Will they do that?" council member Jessie Taliaferro asked.
"Yes," he said, smiling.
The Raleigh group, which included Jay Mahan and Roddy Jones of Davidson & Jones Hotel Corp. and Gene Singleton and Doyle Parrish of Summit Hospitality Co., had orally promised to put $9 million into the deal.
The Raleigh team sat through the presentation Thursday, scribbling notes and whispering among themselves. Afterward, team members said they still felt their plans were superior. They said they were disappointed.
"Quite frankly, we're not prepared to concede that our proposal was not the best proposal," said Mahan, a past chairman of Raleigh's convention and visitors bureau. "We'll reserve judgment, though, about what we're going to do."
City and county officials ranked the Raleigh team last, based mostly on weakness in connecting the hotel to the convention center and in "urban design issues," according to records.
The third group, Trammell Crow of the Carolinas and Garfield Traub of Dallas, had said it would put $5 million toward the Westin. None of the team members were present Thursday.
The amount of cash each said it would bring to the deal was important because officials see that equity as a sign the project will actually happen. More than a dozen cities across the country have planned convention hotels in recent years, only to see them sour when lenders backed out.
City council members, who were mostly supportive, will be asked Jan. 20 to authorize formal negotiations with Stormont-Noble.
Council members and Wake County commissioners took in a three-hour presentation and looked at a 38-page report on the decision Thursday night. Administrators had analyzed the team's proposals for weeks.
Afterward, many said they were satisfied with the decision.
"It's very credible," council member Janet Cowell said.
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(c) 2004, The News & Observer, Raleigh, N.C. Distributed by Knight Ridder/Tribune Business News. HOT, MAR,