Thursday, May 22, 2008
Dallas Gives Final Nod to 1,000-Key Hotel Site
Clearing yet another hurdle for a convention center hotel, Dallas City Council yesterday agreed to buy an 8.34-acre parking lot from Chavez Properties, which has been waiting 20 years for the deal to gel. The seller tentatively has penciled June 19 as the closing date.
The clock has been ticking on a land option since mid-February when council plunked down $500,000 of earnest money for the Young Street lot. The 8.34-acre lot, which generates $800,000 annually, is being sold for $109.32 per sf. Council will finance the acquisition by issuing $42 million of certificates of obligation, which also got approved at yesterday's meeting.
Meanwhile, council and its team have narrowed the list of developers to Austin-based FaulknerUSA and Woodbine Development Corp., Matthews Southwest and Hamilton Properties Corp., all from Dallas. The two proposed operators are Irving, TX-based Omni Hotels Inc. and Marriott International Inc. of Bethesda, MD. A decision could be made by mid-June.
"By buying this property before the deal's done, they're going to do well," Michael H. Anderson, the Dallas partner of Cincinnati-based Chavez Properties, tells GlobeSt.com, likening the process to buying a lot and then picking a homebuilder. Council, just like others in the US, is betting on the 1,000-room convention center hotel to generate more bookings, translating into more tourism dollars for the general coffer. The city's dream house tentatively is carrying a $400-million to $500-million all-in development tab, according to Anderson.
The win didn't come easily. As would be expected, the opposition camp presented competing sites. Chavez's 1,500-space parking lot, though, sits at the front door of the convention center. "Any other location would have made it a no-deal. It's a monopolistic location," Anderson says. "There has been a lot of sensationalism. The opposition has been very, very vocal."
Anderson admits that critics pointed to the land assessment--$7.5 million. But, he points out that was levied in January 2007. The cost of dirt, like other commodities, doesn't remain flat, particularly urban infill, revenue-producing sites, he says.
Anderson says there were no real dark moments when he thought it would crater, like it did four years ago. "It was going to happen all the time," he says.
Anderson and A.C. Gonzalez, assistant city manager, worked through due diligence on a handshake until the purchase option went into play. "What is really cool," Anderson says, "is they are doing it like a business." And like all real estate development deals, interest costs can be the biggest expense. "Can you think of a better time for a city to be borrowing big money for a major project," he says. "Now is the best time in the world to be borrowing long-term capital. And with the size of a site like this, you can do anything you want."