The Pennsylvania Avenue Development Corporation, hoping to salvage a pivotal project in the redevelopment of downtown Washington, granted a Florida developer yesterday six more months to arrange financial for restoration of the historic Willard Hotel.
For more than two years, the developer, Stuart S. Golding and his group, have been seeking financing for the $90-million project. But the developer has been thwarted by near record high interest rates of about 20 percent and the relative reluctance of investors to buy into a project heavily dominated by hotel space, which is less profitable than office space.
Golding, whose latest deadline to secure financing expired Monday, could offer no assurances to the PADC board of directors yesterday that he would be able to obtain the funds by Dec. 7, when the extension will run out.
Instead, Golding disclosed that the group does not have a firm commitment even for partial financing of up to $70 million, which it had claimed two months ago. Moreover, he said, the group has determined that the original project design that won the competition for PADC approval in 1978 could never be financed and is being redrawn.
But rather than declare Golding in default yesterday because of the missed deadline, the board granted the extension -- fearing that such a declaration would lead at least to lengthy court proceedings and perhaps to a delay of up to a year to select another developer through a design competition.
It was unclear what the PADC, the quasi-government corporation overseeing development of that stretch of the avenue between 15th Street and the Capitol, would do if Golding failed to meet the new deadline.
The board could allow a number of interested developers to compete for the right to do the renovation, or it could decide to grant the lease to Washington developer Oliver T. Carr Jr., who has waged a long and often bitter fight with Golding for the Willard.
Carr, who was one of the losers of the original design competition and also was ordered by the courts to relinquish control of a parcel of land next to the hotel, has said he could easily arrange financing for the project. He has been waiting in the wings enthusiastically for Golding's plans to fall through, hoping he would be a logical preemptive second choice. PADC Chairman Max N. Berry said yesterday, however, that it was "unlikely that the board would enter unilateral negotiations with any one developer," including Carr.
Yesterday's session ended with future of the project still in doubt and some of the corporation members resentful of the continuing delay. "I've been in the construction business for 20 yeasr and I've never seen such a fiasco in my life," said Thomas F. Murphy. "We're going to look like goddamn fools."
The Willard, which Berry yesterday called "the crown jewel of our avenue," is located at the corner of 14th Street and Pennsylvania Avenue NW. Once one of the city's grandest hotels, the Willard was closed in 1968 after business dropped dramatically following the riots of that year.
Renovation of the hotel was planned as an important element of downtown redevelopment, anchoring redevelopment on both sides of 15th Street that is expected to expand eastward to the convention center near Mount Vernon Square. The first delays cropped up shortly after Golding was granted development rights. He did not sign the lease until April 1980, 15 months later than expected, because, he said, high interest rates made it difficult to provide financing. The renovation project was to be completed next year but completion by then is considered unlikely.
In 1978, Carr submitted a proposal to restore the hotel and build an adjacent office building. He argued that the restoration would be profitable only if subsidized by office space.
But the PADC rejected his bid and others and instead granted the development rights to Golding, noting that his plan included no office space at all. PADC and city policy is to discourage downtown Washington from turning out like the K Street area with its succession of office buildings that are full of workers by day but resemble a ghost town by night.
Carr has fought Golding at a number of turns. First he sued to keep PADC from seizing an adjacant parcel of property he had purchased, and earlier this year he helped block Golding from applying to the federal government through the city for a $20 million loan to become part of his financing loan to become part of his financing package.
At yesterday's meeting, Golding was accompanied by one of his partners, Melvin H. Swig, one of the owners of the Fairmont Hotel Corp. of San Francisco. Swig and his family, once content to let Golding arrange the deal, have become "much more active" in the Willard project in recent months, Berry said.
Golding said that architects are currently redrawing plans for the restoration to increase the number of projected hotel rooms from 596 to 650, thus reducing the average construction cost per room from more than $150,000 to about $130,000. James O. Gibson, the District's planning director, said the average cost of building a new hotel room was about $125,000.
Golding said the high cost per room was cited by potential investors as a major reason for shying away from the project."When we started, we thought we had the right formula," he said. "When you go to a lender with a figure of $150,000 a room, they think you've lost your mind."
The Florida developer blamed high interest rates as largely responsible for the delay. "When we started, the prime [interest] rate was 8 1/2 percent," he said. "Now it's 20."
Golding said his group is considering turning some of the projected hotel rooms into cooperative apartments, an arrangement he said would be more attractive to investors. But Swig, his partner, said he disagreed with that idea.
Some PADC board members questioned Golding and Swig sharply. "I've never seen anything like this," said Murphy. "I'm not voting for anything until I see some money on the table." Murphy abstained in the final 6-to-2 vote. Lawrence B. Simons and Roland Cook voted against the extension.