Marriott International Inc. and billionaire entrepreneur Robert L. Johnson have offered to build the 1,220-room hotel planned near the Washington Convention Center, a deal that would resolve a dispute about where to put the project and unburden the District government of paying for it.
The offer was prompted by D.C. officials who approached Marriott several months ago about using private money to develop what is to become both the District's largest hotel and a key to the success of the new Convention Center.
The District has been considering for the past two years whether to pay for the $400 million hotel by issuing publicly financed bonds, but some critics had questioned putting public funds at risk. Concern over the cost had also sparked a fight among D.C. officials about whether to put the hotel on land the city already owns, or on property closer to the Convention Center site at Mount Vernon Square NW.
Under the terms of the proposed deal, Marriott, Johnson, and a "small group of investors" would build the hotel on a site preferred by Mayor Anthony A. Williams (D) at Ninth Street and Massachusetts Avenue NW, according to Johnson, city officials and others familiar with the proposal submitted to the District on July 7.
The developers would lease the land from the District, finance the construction and operate the hotel as a private enterprise. However, they have asked for some guarantees, proposing, for example, that until the hotel meets certain profit levels, they be given a portion of the tax revenue generated by the property.
Johnson, who founded Black Entertainment Television and sold it for $3 billion, moved into the hotel business five years ago. He said he would invest some of his own money into the proposed deal with the District, although he is not sure how much.
"It's just a question of what would be our appetite," he said. "We can put up the appropriate equity, and we're somebody who has the development experience."
D.C. officials, Johnson and a Marriott executive say the discussions are preliminary. The Convention Center board is expected to meet today to discuss the proposal. Jeffrey L. Humber Jr., the board's outgoing chairman, declined to comment.
"I don't know if it's a good deal for the city until I sit across the table and negotiate the transaction," said City Administrator Robert C. Bobb, who also sits on the Convention Center board. "My preference has always been to do a public-private financing deal, but as they say, the devil is in the details."
"Marriott is an excellent partner to have, and with Bob Johnson and other partners, it's clearly a project we'd like to see happen," Bobb said.
The deal comes after years of debate about where to put the hotel and how to pay for it. D.C. Council Chairman Linda W. Cropp (D) has argued that the hotel would be cheaper to build at the site of the old Convention Center, while Williams wants it next to the new one.
Marriott had already been chosen to run the hotel. Though much of the public debate about the project was based on the assumption that the District would finance it, Bobb said the Convention Center board encouraged him to approach Marriott about a private deal.
"This is what they sent back," Bobb said of the letter outlining the proposal.
Roger W. Conner, a spokesman for Marriott, confirmed the company is "in discussions" with Johnson to "make [the hotel] happen for the city." In February, Marriott put $20 million into one of Johnson's hotel funds.
Bobb said he hoped the proposed deal would make the project move faster but cautioned, "my experience thus far is that it seems to take an awful long time to get things done in this city."
Johnson now owns more than 20 hotels, run by Marriott and Hilton. He has served on the board of directors for Hilton for more than a decade. His hotel company, RLJ Development LLC, is in a partnership with D.C. developer Robert Gladstone to build a $450 million hotel to support Baltimore's convention center near the Inner Harbor.
In the D.C. hotel deal, Johnson said the taxes would go to the developers at first to help persuade lenders to finance the project.
"There's a risk involved in a huge project like this," Johnson said. "The risk is that you build it and you get a 9/11 shock that causes hotel travel to dry up or dwindle significantly. And you don't know what interest rates are going to be over the course of the project."
Construction on the hotel wouldn't start at least until next year and would take several years to complete, developers said.