Aug. 31, 2007 - -NORFOLK

A controversial plan to build a Hilton Hotel, convention center and parking garage may be disintegrating, less than a month after a historic building was demolished to make way for it.

While the mayor and city manager publicly state their confidence in the deal with billionaire Robert L. Johnson, several city officials privately question whether he will follow through with a commitment to build the oft-delayed hotel, according to three officials who spoke on condition of anonymity.

Johnson is the founder of Black Entertainment Television and owner of the NBA's Charlotte Bobcats. His company, RLJ Development of Bethesda, Md., has a portfolio of more than 120 hotels. However, RLJ has constructed few hotels from scratch, the officials said, and with construction costs rising and credit drying up, they say Johnson is having second thoughts about the Norfolk project.

Officials with RLJ have expressed a reluctance to actually construct the hotel and are negotiating a restructuring of their deal to develop the hotel with Norfolk-based Fulco Development, officials said.

City officials are so concerned that they have held preliminary discussions with other developers interested in taking over the project, sources said.

The $125 million hotel and convention center project, proposed in early 2004, would be built largely with public funds. The city would pay for the $49 million convention center and a 611-space parking garage and provide the land for the hotel free of charge. The city spent $9.3 million acquiring land for the entire project.

Developers would spend approximately $48 million on the hotel.

Mayor Paul Fraim and City Manager Regina V.K. Williams say RLJ and Fulco Development have a binding agreement with the city and they expect it will be honored.

"To the best of our knowledge, they plan on fulfilling" the contract, Fraim said.

Construction is supposed to begin in October, according to a schedule in the master development agreement signed by the city and developers.

A series of e-mails between Roderick S. Woolard, Norfolk's director of economic development, and RLJ officials indicate the deal is far from done, however. The e-mails, obtained by The Virginian-Pilot under the Freedom of Information Act, indicated that the architecture firm designing the project, RTKL Associates of Baltimore, had not been paid $1 million for services on the Norfolk project that it was owed in late July.

RLJ officials asked the city to help pay the bills. City officials declined because they are not obligated to do so until developers have a signed contract with RTKL.

Another e-mail to Woolard from an RLJ official indicated that as of Aug. 1, financing plans for the Norfolk hotel had not been finalized.

Thomas J. Baltimore Jr., director of development for RLJ, did not return a phone call and e-mail seeking comment. Company officials said he is on vacation.

Fulco's head, former NFL star William Fuller, also did not respond to a phone call and e-mail.

The deal has been controversial in part because the project is being heavily subsidized by the city and negotiations have dragged on for nearly four years.

After the delays pushed construction costs up, the city agreed earlier this year to provide developers a $7.5 million "performance grant."

City officials took the blame for the delays, saying they resulted in large part because of design changes to the convention center.

The developers will receive a $750,000 performance grant if they are able to lure an upscale restaurant.

The project is also controversial because it calls for the demolition of three historic buildings.

Developers have already torn down the Ikon Building, located at Main and Granby streets, which was built in 1869.

The Decker and Beecroft & Bull buildings are expected to come down in the next week or two.

City officials have said the three buildings could not fit into the project, though the Decker building facade will be replicated on the face of the hotel and elements of the art deco Beecroft & Bull facade will be incorporated into the design of the new building.

Alice Allen-Grimes head of the Norfolk Preservation Alliance, said she was not surprised to hear the deal may be in peril -- a city official she declined to identify told her as much several weeks ago.

"We've heard they've gotten cold feet," she said. "It's not surprising, but it's very disturbing. I feel betrayed by our city's leadership."

When city officials announced the deal in 2005, they hailed it as a landmark because it would be the first large modern project downtown to be built by black developers.

Several council members said they have been told little about the project.

Vice Mayor Anthony L. Burfoot complained that details on the deal have been closely held by a small group of city officials. "I've asked to see renderings of the project, and so far, I have not seen any," he said.

Burfoot added that "there are some folks waiting in the wings that would love to do a Westin," which he said would be a better product than the proposed hotel. He declined to name them.

If the current deal falls through, most council members said they are in favor of finding another developer as quickly as possible rather than putting the project out for a competitive bid.

Like most of the developers who have partnered with the city on major projects recently, RLJ and Fulco were not chosen through a competitive bidding process.

"As far as we have gone, in terms of assembling the land, we would need to find the person who would be quickest to get it to the table," City Councilman Paul R. Riddick said.

Burfoot disagreed, saying, "If this deal doesn't work out, then it gives us the opportunity to do what we should have done from the start, and that's put it out to bid. Norfolk has a good name. We don't have to give the city away. We should have people compete for our business."

Harry Minium, (757) 446-2371, [email protected]

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