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Strategic Hotel Capital Estimates Hyatt Regency New Orleans Losses Due
 to Storm Damage and Lost Business Could Exceed $100 million;
Discussing Public/private Partnership for the Renovation of
 the Hotel and its Immediate Neighborhood
By Kathy Bergen, Chicago Tribune
Knight Ridder/Tribune Business News

Oct. 1, 2005 - The Chicago-based owner of the hurricane-battered Hyatt Regency New Orleans is trying to negotiate a public/private partnership for the renovation of the hotel and its immediate neighborhood, which was suffering even pre-Hurricane Katrina.

The talks with New Orleans Mayor C. Ray Nagin come as the hotel's owner assesses whether to resurrect the 1,184-room convention hotel near the heavily damaged Louisiana Superdome and the New Orleans Arena.

In a meeting Thursday, "the mayor reached out" and offered such a partnership, said Laurence Geller, head of Strategic Hotel Capital Inc., which owns the hotel. He was accompanied at the session by Douglas Geoga, president of Global Hyatt Corp., whose Hyatt Hotels Corp. unit manages the property.

"We'll take him at face-value," Geller said Friday, adding that the form of assistance remains to be determined. "The devil's in the details," he said.

Mayor Nagin could not be reached for comment Friday.

"This was a tragedy beyond proportion, but it's a chance to rebuild a great city," he said, adding that it's also a chance to address problems that existed pre-hurricane and to take the tourism infrastructure up a few notches, as well.

The Hyatt Regency is located in one of three tourist districts, the others being the French Quarter and the casino/convention center district near the Mississippi River.

Even before the hurricane, "our neighborhood had pockets of poverty and needed rejuvenation," Geller said.

In a recent speech, Geller suggested a sweeping redevelopment encompassing all three areas, which would be linked by a light transportation system. His ideas include a hurricane museum, a children's museum, a jazz/blues hall of fame, a new exhibition hall and new housing.

To flesh out redevelopment concepts, Geller said he plans to work with "world-class" architects and planners. Chicago's Pritzker family, which owns the Hyatt chain, also awards a prestigious architecture prize and can help in identifying experts to work with, he added.

Hyatt "is committed to working with Strategic Hotel Capital on rebuilding the hotel and working with the community to help rebuild the area," spokeswoman Katie Meyer said Friday.

Strategic Hotel Capital has not made a final decision yet on whether to restore and reopen the hotel.

"We will watch and see if the local, state and federal governments can get their act together, and how money will be dispersed and when," Geller said.

To date, he says he hasn't seen effective coordination, and this worries him. "I'm terrified when there are three monolithic government agencies that have to talk to each other," he said.

A lot is at stake in the Hyatt Regency decision.

The Hyatt Regency, valued at roughly $250 million before the hurricane, is a key asset for a city where tourism has been the No. 1 employer.

And it's a significant asset to publicly traded Strategic Hotel Capital, representing 10 to 13 percent of its cash flow, Geller said.

"It's a very big bet Chicago has on New Orleans," he added, noting Hyatt also is Chicago-based, as is Strategic Hotel's insurance broker, Aon Corp.

Hurricane Katrina blew out 750 windows on the north side of the building, leading to heavy water damage. It continues to operate with a skeleton crew, serving as quarters for some city officials and relief workers, but will be closed to the public through the end of 2006.

Strategic Hotel Capital estimates its losses due to storm damage and lost business could exceed $100 million. Negotiations are under way with insurers.

"Thank heavens we have tremendous business interruption insurance and property damage insurance, so in a cash sense, we'd don't expect any real impact," he said. Still undetermined is how the disaster will be reflected in the company's financial statements.

Hyatt has not yet estimated its losses, Meyer said Friday.

Strategic Hotel Capital has not yet calculated the cost of repairs, but Geller said time is of the essence in rebuilding the city and the hotel.

"We need to start selling conventions pretty quickly for 2008," he said.


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