Plan to build a convention hotel wakes from sleep, orders room service

A plan to build a new convention hotel has snapped back to life.

A Kansas City, Missouri, redevelopment agency on Wednesday approved an agreement with the team that put together a deal to build an 800-room convention hotel on the south side of Bartle Hall. Under the agreement, the city’s Tax-Increment Financing Commission will contribute $42 million toward the $311 construction price. The bonds will be paid by new taxes the hotel generates when it opens in 2019. Ground breaking is slated for spring 2017.

A recent Kansas City Star story cast doubt on the project’s viability. Among other complications, the Star reported that the developers approached the city about guaranteeing some of the debt. Having paid $70 million to cover the bond shortfalls on the Power & Light District, city leaders were not eager to make such a bargain.

The deal is going ahead without the debt guarantee, which is not to say the project is going ahead without taxpayer assistance. The city has pledged $35 million in addition to the land, which is valued at $4.5 million. The TIF bonds also represent public participation. (Oversimplifying here, but TIF is like allowing a homeowner to spend his or her property taxes at Lowe’s.)

Almost half for the money for the hotel is coming from private sources. Under the current plan, the developers will put up $52 million and take out a $95 million mortgage. “Our perception of whether it can be done or not is backed up by our checkbook,” Tim O’Byrne, a Denver-based hotel developer who is part of the KC Hotel Developers team, said after the TIF Commission meeting.

Debt backed by catering revenues, a community-improvement district surcharge and other sources will pay for the rest of the costs to build the hotel, which Hyatt will operate. (The $52 million in private equity includes $6.5 million from Hyatt.) 

Ronnie Burt, the president and CEO of Visit KC, the city’s convention and visitors association, told the TIF Commission that a new hotel would enable Kansas City to better compete for larger conventions. Burt said Kansas City needs to put together a coalition of six hotels to bid on a 2,000-room convention. He lamented the sub-optimal “convention experience” for people visiting KC who are booked into rooms in Overland Park. (Nothing against OP, mind you. But a shuttle up and down I-35 does not top the list of favorite convention experiences.)

The downtown’s existing hotels are showing their age. One of the talking points for convention hotel boosters: It was 1985 when a major hotel last opened downtown. The City Council recently agreed to finance about half of a $33-million plan fix up the Marriott hotel complex. 

The city’s participation in the Marriott project does not concern KC Hotel Developers. Steven Rattner, a New York-based financial and real investor who is part of KC Hotel Developers, spoke of the hotels around Bartle Hall as boats in a rising tide. Conventioneers, he said, “just don’t stay at our hotel.”

Just the same, the convention hotel agreement restricts the city’s ability to put together assistance packages for other hotels around Bartle Hall for 10 years.  

The Land Clearance Redevelopment Authority, a city agency that’s also party to the deal, will discuss and vote on the convention hotel plan on Monday, October 17.