JBG and Marriott agree to allow convention center hotel construction to start

The Marriott Wardman Park is part of the conflict between JBG Cos. and Marriott International.
The Marriott Wardman Park is part of the conflict between JBG Cos. and Marriott International. (Dennis Brack/the Washington Post)
By Jonathan O'Connell
Capital Business Staff Writer
Wednesday, July 7, 2010

The JBG Cos. and Marriott International have reached an agreement in principle to allow construction to begin on the District's planned $550 million convention center hotel this fall.

The District, with Marriott as a partner, has been trying to build a dedicated convention center hotel since before the Walter E. Washington Convention Center opened in 2003. The project appeared ready to begin last year until JBG, a Chevy Chase-based developer, sued the city alleging an irregular procurement process, halting the project.

JBG has been accused of using the lawsuit to lean on Marriott for concessions at another property, the Marriott Wardman Park, which the developer purchased with Los Angeles-based CIM Group in 2005. The city, Marriott and the Washington Convention and Sports Authority then filed lawsuits against JBG.

The deal between the two companies would allow all the lawsuits to be settled and the convention center authority to begin issuing the bonds needed to finance the 14-story, 1,167-room Marriott Marquis hotel planned for Massachusetts Avenue and Ninth Street NW, according to D.C. Attorney General Peter J. Nickles.

The deal was reached in a July 1 meeting at city offices in the John A. Wilson Building among Nickles, D.C. Council member Jack Evans (D-Ward 2) and executives from the two companies.

Nickles said that all substantive matters have been resolved and that he expected the final signatures to be in place in the next day or two. "I have every expectation that it will be done in the next 48 hours," he said.

He said Mayor Adrian M. Fenty (D) had been pushing for the matter to be settled as quickly as possible. "I want a press conference next week," Nickles said. "The fight is over, the bonds will be issued, we'll break ground, we'll have 2,000 jobs for city residents."

JBG Managing Partner Ben Jacobs did not respond to requests for comment. Joel Eisemann, executive vice president of Marriott International, declined to confirm a deal. "We may be able to provide additional information sometime in the next week or so," he said.

Last year the D.C. Council and Fenty committed $272 million in public money to the project and agreed to give the development team, led by Quadrangle Development, a 99-year ground lease on city-owned land.

Evans, who has faced scrutiny over his role in negotiating a settlement in the deal because he is a real estate attorney at Patton Boggs, declined to comment. He previously recused himself from council votes on financing for the deal.

The lack of a dedicated hotel has forced major convention organizers in the city to rely on shuttle buses to a bevy of locations. Gregory A. O'Dell, president and chief executive of the convention center authority, said the deal would quickly enhance the authority's ability to attract major clients. The next steps, he said, were finalizing the deal with the developers, settling the authority's suit with JBG "to make sure there isn't any future impact over the project" and issuing the bonds.

"Obviously, from our perspective, this will reinforce our ability to move quickly toward a groundbreaking of the hotel, which is sorely needed," he said.

What Marriott and JBG agreed to in the deal is not known, but the companies' dispute largely centered around the 1,316-room Wardman Park hotel, at 2660 Woodley Rd. NW in Woodley Park, rather than the planned convention center hotel.

Along with CIM Group, JBG purchased Wardman Park -- the largest hotel in the city -- near the peak of the real estate market, with plans to transform portions into condominiums. But with the housing market sputtering, JBG argued in court that a heavily subsidized deal for Marriott to build a convention center hotel would unfairly harm hotel business at Wardman Park.

In March, a D.C. Superior Court judge dismissed JBG's lawsuit, weakening the developer's position.

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