|By Laura Jesse, San Antonio Express-News|
Knight Ridder/Tribune Business News
Mar. 25, 2005 - The developer for a proposed Convention Center headquarters hotel submitted its guaranteed fixed price for the project to City Council members Thursday and reconciled plans to drop 500 public parking spaces for the facility.
But discussion of FaulknerUSA's promised $77.3 million in equity for the $227.5 million project took center stage in the monthly briefing from city staff and representatives of the developer.
Jorge Rodriguez of Coastal Securities, one of the city's financial advisers, said negotiations still are under way with New York-based Marathon Asset Management, which would finance FaulknerUSA. Those talks are to solidify banking arrangements and set a date by which the money would be paid.
"We have the commitment of equity, but not the cash on hand," Rodriguez said.
He explained it's not a question of whether Marathon has the money, but how it would disburse the funding. Marathon is hesitant to provide all the money up front because it would get a smaller return on its investment than by doling it out as the project develops.
If Marathon were to pay the money out over the 30 months of construction, it would receive higher returns, but at the risk of slowing construction and lowering the ratings on the bonds that would partially finance the project. Lower bond ratings increase the amount of interest on the debt, adding to the overall cost of the project.
"Marathon has the wherewithal to put the money there from Day 1," FaulknerUSA President Mark Schultz said. "But they don't want a negative impact on their projected return."
Assistant City Manager Chris Brady said he and Rodriguez are going to New York on Monday to listen to representatives of Marathon and negotiate more.
"Hopefully we will have a strategy next week," Brady said.
The promise of money, but no cash on hand, did not sit well with council members.
"Basically those are just words," Councilman Art Hall said.
Councilman Carroll Schubert said he has seen billion-dollar businesses go bankrupt overnight.
"The numbers frankly don't faze me," he said, referring to Marathon's worth.
The hotel update also included FaulknerUSA's guaranteed fixed price of $227.5 million -- $12.5 million more than its original proposal.
Once Hyatt Corp., which would operate the hotel, entered exclusive negotiations with the developer and designers met with other key stakeholders in the project, changes were made, increasing the cost, Brady said.
The price tag includes an additional 73,002 square feet of building space; furniture, fixture and equipment upgrades made by Hyatt; terraces added to the second, third and fourth floors; a bridge spanning the River Walk; and payment to the city for knocking off 500 public parking spaces in the planned underground garage.
Because the addition of 120 to 145 condominiums to the project reduced the number of public parking spaces, FaulknerUSA would pay the city $2.5 million to develop off-site parking and an additional $4.5 million was taken off the construction total, Brady said.
CITY COUNCIL ROUNDUP
LOBBYING DUO: The council rescinded a February vote giving Loeffler Tuggey Pauerstein Rosenthal the city's federal lobbying contract and instead awarded it to two firms. Holland & Knight and Patton Boggs will split lobbying duties in Washington, D.C., according to each's strengths. Each firm will be paid a maximum of $12,000 a month for 17 months.
PERMIT REPLACEMENT: Residents with garage sale permits will be able to get a replacement permit if it rains on the day of their sale. Current regulations did not allow for such permits to be issued if the sale was rained out, making residents pay an additional $16 for a new permit. Rained-out residents must request the replacement from Code Compliance within seven days from the initial permit date. However, if it rains on the second try, an additional replacement will not be issued.
QUOTE OF THE DAY: "Jorge, you've been using this term 'memorialization." Is that a financial term or a funeral term?" -- Councilman Joel Williams, questioning Jorge Rodriguez of Coastal Securities about financing for the Convention Center hotel.
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