|By Andrea L. Stape, The Providence Journal, R.I.|
Knight Ridder/Tribune Business News
Aug. 26, 2004 - The Rhode Island Convention Center Authority is expected to decide this morning if it will put the state-owned Westin Providence hotel up for sale.
The board, which oversees the hotel and the convention center, is set to decide if it will accept proposals from developers interested in buying the Westin and developing the empty piece of land next to it.
The panel will also decide whether to look for a commercial real estate broker to market the Westin nationally.
These are decisions the board has been contemplating for close to a year, according to David A. Duffy, chairman of the authority. But with interest in buying the Westin rising along with the health of the hotel industry, and debate about a state-subsidized downtown hotel resolved, Duffy said it's the right time to seriously entertain offers.
"This is not coming out of the blue (to the board) . . .," said Duffy. "At the end of the day, I hope to have approval of the two . . ."
If the board agrees to start taking purchase proposals, Duffy emphasized that it wouldn't mean that the state is definitely going to sell the hotel.
"We want to see what the market has to offer," he said.
If the authority agrees to accept offers, it will consider only development proposals that meet certain criteria.
Any buyer of the Westin would also be required to build a tower with at least 200 hotel rooms on the adjacent land, said Duffy.
The authority will also accept proposals from hotel developers interested only in developing a hotel on the adjacent parcel. In that case, the state would continue to own the Westin.
Also, Duffy said the authority would be open to having condominiums in the tower next to the Westin, but it would also have to contain at least 200 hotel rooms.
"I believe it's incumbent upon the authority to take a leadership position, to provide more hotel rooms to provide for convention demands," said Duffy. The authority has said for years that the convention center could attract larger events if the city had more hotel rooms.
The last time the Convention Center Authority solicited proposals for the hotel was in 1998. But the state didn't receive any offers that were high enough to consider seriously, said James McCarvill, executive director of the Convention Center Authority.
Now, though, the authority is expecting a different response.
Already, the authority has received a dozen unsolicited inquiries from national hotel developers interested in buying the Westin, Duffy said.
"Because there's a level of interest, we need to take this step (and officially request offers) or go on record to say, 'No, we're going to hold it for a while,' " said McCarvill.
Now that the controversy over a publicly subsidized downtown hotel has been resolved, the authority expects greater interest from developers. Earlier this year, the General Assembly agreed to give former state Rep. Vincent J. Mesolella Jr. $20 million in tax credits to build a hotel across the street from the Convention Center. But last month Governor Carcieri vetoed the decision, and the General Assembly decided not to vote to override the veto.
Three hotel developers with local ties said in July that they were ready to submit proposals to build a hotel on the land adjacent to the Westin -- if they didn't have to compete with a publicly subsidized hotel.
Yesterday, one of the developers, Arnold "Buff" Chace, said his company -- Cornish Associates -- would still be interested in submitting a proposal to the authority to develop the land next to the Westin.
In addition, the state's contract with Starwood Hotels to manage and run the Westin expires next year. The hotel could fetch a higher price if it's not encumbered with a five-year management contract, said McCarvill.
Any decisions the authority makes today will not ultimately determine the fate of the hotel -- just open the doors for serious offers, he said. It's a move the governor has endorsed.
"Governor Carcieri has consistently said that the state should not be in the hotel business," said Jeff Neal, a spokesman for Carcieri.
Still, selling the hotel would be complicated by $285 million the state owes on it and the convention center. In the early 1990s, the state issued $354 million worth of bonds to build the two facilities. Profit from the hotel, which had a net income of $8.9 million in fiscal 2004, is used to service the debt each year. The state still spends about $17 million a year subsidizing the hotel and the center.
Selling the Westin alone might not generate enough money to pay off all the outstanding bonds, said McCarvill. And that's why the authority is requiring any buyer to build the 200-room tower next door, he said. The additional room tax and income tax will ensure that the state has additional revenue to help pay down any remaining debt, he explained.
"It's not a simple decision because of the cash flow from the hotel," said McCarvill.
The Convention Center Authority's board consists of David Duffy, chairman; George Nee, vice chairman; Joseph Judge, treasurer; Paul MacDonald, secretary; Brad Waugh; Dave Gavitt; Dale Venturini; and Jerry Massa.
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