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FaulknerUSA Unanimously Chosen By San Antonio City
 Council to Build 1,000 room Convention Hotel; Commits
 $77.3 million to $215 million Project
By Greg Jefferson, San Antonio Express-News
Knight Ridder/Tribune Business News

Dec. 22, 2004 - The City Council on Tuesday unanimously chose FaulknerUSA of Austin to build a long-sought Convention Center hotel that already has seen two developers fall by the wayside.

That history goes back nearly 20 years, and council members were mindful as they demanded that talks with FaulknerUSA not be allowed to linger.

"We need to be able to insure success for a project that will have a dramatic impact on the community for a very long time to come," said Councilman Roger Flores Jr., whose District 1 encompasses the Convention Center.

FaulknerUSA's proposed 1,000-room hotel would be two brilliantly colored towers. At 525 feet, it would be the second tallest structure in San Antonio, in the shadow only of the nearby Tower of the Americas.

The hotel would stand beside the Lila Cockrell Theatre, incorporate the San Antonio River and provide five levels of underground parking.

Assistant City Manager Chris Brady expects to have an agreement ready for the council to vote on next April or May.

The council also agreed Tuesday to hire the law firm of Bracewell & Patterson for $250,000 to negotiate for the city. The same attorneys represented San Antonio in talks with the last would-be developer.

FaulknerUSA won the council's support largely on the strength of its financial commitment to the deal: $77.3 million for a hotel attached to the Convention Center that the company estimates it can build for $215 million. The commitment also played a big part in getting the city staff's recommendation two weeks ago.

Houston-based Hines and a partnership between Related Lodging Group and the hotel unit of San Antonio's Zachry Construction offered $30 million and $35 million for the project, respectively.

Yet, the gulf between FaulknerUSA's pledge and its competitors' led some to question FaulknerUSA's ability to deliver.

"I think most people think it's a good proposal," Councilman Carroll Schubert said. "I think some people think it's too good a proposal."

FaulknerUSA is building an 1,100-room headquarters hotel in Denver, and it has completed two others in the past year, including one in Omaha, Neb., and the 800-room Hilton next to Austin's convention center.

Councilman Art Hall quizzed FaulknerUSA President Mark Schultz on delays in the Austin project and another in Osceola County, Fla., and he urged inserting a clause in the contract requiring the company to have its financing in place by June 1.

Council members, meanwhile, went out of their way to note that the deal involves no tax abatements from the city.

Instead, the city's plan calls for the developer to tap $130 million in federal, tax-exempt empowerment zone bonds for the hotel's construction, in addition to its own funding.

A taxable bond would cover the remaining expenses.

"This is a better deal than we've looked at in the past," Councilman Julian Castro said.

The hotel deal's most recent previous incarnation, which included a tax abatement, folded almost three years ago when Related Lodging and Starwood Hotels & Resorts Worldwide failed to line up financing. Council members scrapped the city's lease agreement with the companies in February 2002.

Critics of the latest plan say it will take business from other San Antonio hotels, and they cite other cities' convention hotels that failed to meet projections.

Castro said the council's aim in seeking a headquarters hotel is to strengthen San Antonio's hospitality industry and to create jobs.

"This is the most significant way we're going to do that," he said.

The hotel is expected to bring 600 jobs, and FaulknerUSA agreed in its proposal to pay its workers a living wage.

In the meantime, Brady proposed setting up a group to vet FaulknerUSA's designs -- drawn up by partner Kell Munoz, a local architectural firm -- before submitting them to the city's Historic and Design Review Commission in February. Reviewers, he said, could include several council members, downtown interest groups and neighborhood associations.

Councilwoman Patti Radle called for public participation in the process. She said she liked the designs' boldness but added that "we want to be bold without being annoying."

Plans call for the hotel to open in early 2008.

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