|By Andrea L. Stape, The Providence Journal, R.I.|
Knight Ridder/Tribune Business News
Dec. 23, 2004 - PROVIDENCE, R.I. -- The Procaccianti Group was named the top bidder for The Westin Providence yesterday, after offering to buy the state-owned hotel for $95.5 million and to build a $50-million hotel tower next door.
The Rhode Island Convention Center Authority's board of directors yesterday voted unanimously to negotiate a sale with Cranston-based Procaccianti. The company beat 14 other hotel bidders, including Warwick-based Carpionato Properties and Prince Alwaleed of Saudi Arabia.
Among hotels, this is obviously going to be a record for Providence and likely for the state," said Matt Kenney, of Pinnacle Realty Investments, a real-estate consultant hired by the authority to evaluate the bids.
With yesterday's vote, the authority -- which oversees the Westin and the Rhode Island Convention Center -- agreed to negotiate with Procaccianti, not to transfer ownership yet. The authority expects to vote on a final purchase and sale agreement with Procaccianti during its board meeting next month.
The 364-room Westin, which the state built by issuing bonds in the early 1990s, has been the subject of more than a dozen inquiries from buyers over the past year, according to the authority. With the hotel market heating up and Governor Carcieri eager to get the state out of the hotel business, the authority decided this fall to put the Westin on the market.
"It's a great opportunity for the state to get out of the hotel business at a very attractive price," said Carcieri, through spokeswoman Madeline Parmenter. "It's good for Rhode Island because it's further investment in Providence."
As a requirement of the sale, the winning bidder must put up a 200-room addition to the Westin, to increase the number of hotel rooms in Providence and attract larger conventions. With the additional hotel rooms, the convention center will be able to go after about 100 conventions it doesn't have the hotel rooms to support, said David A. Duffy, chairman of the authority.
Duffy is chairman of the authority's board, which also includes George Nee, vice chairman; Joseph Judge, treasurer; Paul MacDonald, secretary; Brad Waugh; Dave Gavitt; Dale Venturini, and Gerald Massa.
Procaccianti has promised to build the $50-million hotel tower within two years. The Westin expanion will include 200 hotel rooms, a restaurant on the first floor, three floors of office space, and luxury condominiums on the top floors, according to Procaccianti. The company has committed to moving its corporate headquarters and 100 employees from Cranston to the new tower in Providence. Procaccianti has agreed to give the state a $5-million deposit, and it will honor the existing union contract with Westin employees.
"We'll get moving as quickly as possible to get the project built," said Greg Vickowski, chief financial officer for Procaccianti.
Nationally, the privately held Procaccianti group -- which owns and manages 23 hotels, including the Holiday Inn in downtown Providence and the Sheraton Hotel in downtown Hartford -- has 3,000 employees. The company owns and manages hotels in 11 states and also manages the Waterside Convention Center in Norfolk, Va., and the Richmond Convention Center in Richmond, Va. Prior to its recent hotel success, The Procaccianti Group helped trigger Rhode Island's banking crisis in the early 1990s by defaulting on loans totaling $14.75 million.
"That was dealt with a long time ago -- we've spent the last 15 years here establishing ourselves as a hotel operator nationally," Vickowski said. "We believe we'll do a better job than any other manager operating the hotel."
Before the sale is completed, though, the heads of the House and Senate Finance Committees have called for public hearings next month, since taxpayer dollars are used annually to pay off the outstanding debt on the hotel and the convention center. Both the Procaccianti Group and the Convention Center Authority have agreed to the hearings.
Senate Finance Committee Chairman Stephen D. Alves and House Finance Committee Chairman Steven M. Costantino said earlier this week that they are concerned that the sale of the Westin would cost taxpayers more money and want the deal explained in detail to the committees.
Currently, income from the convention center, its garages and the Westin is used to help service about $6.2 million worth of the annual debt payments on the bonds. Bonds were used to finance the construction of the state-owned convention center, the Westin and the garages.
The General Assembly sets aside roughly another $18 million in tax dollars a year for the remainder of the annual debt payment. The state has $280 million of outstanding debt -- not including interest -- on the Convention Center, garages and the Westin.
The hotel sale will allow the state to pay off about $90 million of that $280-million debt. The sale will keep the annual state subsidy about the same, according to the authority. Taxpayers will still have to pay about $18 million annually to service the bonds, but the sale price of the hotel is enough to cover what the hotel was paying on the debt.
By selling the hotel, the authority is reducing the state's risk, said James McCarvill, executive director of the authority. If the hotel's income diminished while the state owned it, taxpayers would have to pay more to cover the annual debt payments, he said. By selling, the state is able to pay off a fixed amount of debt all at one time.
"It's an enormous hit to the capital debt," Duffy said. "We are working as hard as we can to make it revenue neutral."
Even with the sale, the General Assembly will still have to appropriate about $18 million a year until 2027 to pay off the remaining bonds on the buildings.
Yet, the price tag that the four-star Westin is commanding is fairly high. Three nonluxury hotels in the Boston area were sold earlier this month for $26 million to La Quinta Corporation and its affiliates. Locally, by comparison, The Providence Place mall was purchased by Rouse Co. for $510 million in April. (Rouse was purchased by General Growth Properties in August.) And FleetBoston Financial sold two Providence office buildings to Gilbane Properties last year for $48 million.
The 15 initial bids for the Westin came from national, international and local companies and ranged from $70 million to $96 million. One local bidder, Carpionato Properties, offered $82 million. Another bidder, composed of two local businessmen -- Jarrold Lavine and Richard Bready -- offered between $80 million and $90 million. Another national bidder, Faulkner USA, had the highest offer of $96 million and was among the seven finalists. But the company's bid was disqualified because it failed to provide the authority with financing specifics, Duffy said.
One of the other bidders could give Procaccianti some problems. Starwood Hotels & Resorts, which manages the Westin Providence, has 45 days to present a counteroffer to the authority. Starwood initially offered $90 million for the Westin. Starwood's contract with the Convention Center Authority gives it the option to counter any offers on the hotel. Starwood did not return calls for comment yesterday.
The Convention Center Authority made public yesterday the details of the Prococcianti offer and the amounts the other bidders offered on the hotel. Previously, the authority had refused to make the bidders' names or their offers public, saying that such disclosure could disrupt the bidding.
After making several requests for information on the bidders, The Journal last week sued the authority in Superior Court for the information. On Friday, Superior Court Judge Daniel Procaccini ordered the authority to release the list of bidders. The authority released the names, but not how much they had offered.
The Journal was pushing for a court hearing about the bid amounts, but the information was released by the authority yesterday morning.
BID-LIST: The bidders and the amounts they offered for the state-owned Westin Providence hotel include:
-- Faulkner USA, $96 million
-- The Procaccianti Group, $95.5 million
-- Cornerstone Real Estate Advisers, $95 million
-- LaSalle Hotel Properties, $94 million
-- Magna CB Ventures, $93 million
-- Eagle Hospitality Trust, $91.5 million
-- Starwood Hotels & Resorts, $90 million
-- Kennedy Associates Real Estate Counsel, $90 million
-- Jarrold Lavine and Richard Bready, $80 million to $90 million
-- Intell Management and Investment Company, $82 million
-- Carpionato Properties Inc., $82 million
-- Westbrook Partners, $82 million
-- Host Marriott, $80 million
-- Hotel Capital Advisers Inc. on behalf of Price Alwaleed of Saudi Arabia, $79 million
-- Shubh Hotels, $70 million
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