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Convention center hotel can move forward as lawsuits set aside

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By Jonathan O'Connell
Monday, August 30, 2010

The lawsuits that hogtied construction of a convention center hotel in the District have been set aside and the Washington Convention and Sports Authority plans to issue bonds to finance the project in the coming weeks.

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The $550 million, 1,167-room Marriott Marquis hotel has long been cited by city officials as a needed boost for the District's convention business, but it was sidelined first by the frozen credit markets and later, in September of last year, by a lawsuit filed in D.C. Superior Court by an entity of JBG arguing that the city had conducted an illegal procurement process in choosing another development team for the project.

JBG Managing Partner Ben Jacobs now says that suit has been effectively rescinded and that the hotel "is not now impacted by the matters that were before the court."

Releases for the lawsuits, including those that the city, Marriott International and the convention center authority filed in response to JBG's action, have been placed in escrow, to be released when the bond sale closes, according to John Ross, a senior adviser to D.C. Chief Financial Officer Natwar Gandhi. Ross said the city expects to raise $161 million with the bond sale and that it ought to be complete in coming weeks. Goldman Sachs will be marketing the bonds for the convention center authority. "We expect this deal to be done by the end of October," Ross said.

Once the bonds are sold, construction can start 10 days later and is expected to last 42 to 45 months, according to the convention center authority, putting expected completion in spring 2014. The project will be developed by Quadrangle Development and Capstone Development.

Marriott and the city accused Jacobs 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. Wardman Park could suffer from competition by the new hotel, which will be more than half publicly financed.

Jacobs would not say what agreement JBG reached with Marriott. Joel Eisemann, Marriott executive vice president, did not immediately return a call for comment.

When asked what the company has accomplished with its suit, Jacobs said: "Hopefully we found a way to mitigate the consequences that we were concerned about, but this market is kind of crazy... it's all going to depend on that."

If the bonds lead to construction starting later this year, it will mean the end of a long wait for a new hotel for convention planners, who thought the project would get underway nearly three years ago, in November 2007, when D.C. Mayor Adrian M. Fenty (D) announced a land swap that gave the city full control of the site.


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