A story in Monday's editions misidentified the architect who designed the Willard Hotel in Washington and The Plaza Hotel in New York. The architect was Henry J. Hardenbergh.
Florida developer Stuart S. Golding, who 15 months ago won the right to restore the once stately Willard Hotel, said yesterday that skyrocketing interest rates will prevent the project from going forward at this time.
The setback in the ambitious renovation project near the White House is the first sign that ballooning interest rates and tight money are cooling off Washington's booming commercial development market, and that large-scale developers are beginning to suffer along with small-scale home builders and buyers.
In a telephone interview from Florida, Golding said that initially he will seek a six-month delay that would push the start of construction back to the fall of 1981, a $5 million subsidy once contemplated for the project by Congress and additional delays if money market conditions do not improve.
"If I go now, I can probably go broke," Golding said.
However, the federal agency that awarded Golding the development rights will meet Wednesday to hear his case and consider whether to take away the $70 million project and give it to another developer.
"There comes a time when it is a 'fish-or-cut-bait' situation," said W. Anderson Barnes, the staff director of the agency, the Pennsylvania Avenue Development Corporation (PADC). The agency was set up to supervise redevelopment of the ceremonial route between the White House and the Capitol.
The Willard restoration has become a cornerstone of Washington's redevelopment -- not only along the ceremonial avenue but of the old downtown east of 15th Street NW.This street had become a social and economic barrier of sorts since the riots of 1968, the year the Willard closed its doors.
Golding, who is a partner in the venture with the San Francisco-based Fairmont Hotels Corp., said his lenders will accompany him to the Wednesday morning meeting with the PADC board. His lenders are Connecticut General Life Insurance Co. and a lending subsidiary of Lazard Freres & Co.
"I want them [the lenders] to say [to the board] that this is the real world," Golding said. "The [Carter] administration is saying, 'slow down.' I think we've got to wait and see what an extra six months will do."
But the PADC staff, which recently completed long negotiations with Golding over a complex lease for the property, apparently doesn't have much sympathy for him.
"I'm not aware that the administration's policy is to discourage redevelopment," said Peter Meszoly, the PADC lawyer who represented the agency in lease negotiations with Golding. "I would think the [PADC] board would be ill-advised to let Golding-Fairmont keep it on the hook for 18 months in hopes that the financial picture would improve to their satisfaction and with no guarantee that after the 18 months is up, he [Golding] would not cop out."
But Golding maintains that financial conditions make the costly renovation "just too tough. It's too tough for anybody. I've got a million dollars and two years' efforts in this, [but] I don't know how I can go fishing with 18 to 20 percent construction interest rates."
Competition for the Willard development rights was fierce, attracting nine major builders and architectural teams from across the country. Golding's teams defeated two other finalists with a true-to-the-original design by the New York architectural firm of Hardy, Holzman & Pfeiffer.
For Golding to now risk his hard-fought victory is an indication of the depth of his concern over the state of the economy.
Even after he won the award, others developers have been waiting patiently in the wings for him to make a misstep. A major rival, Washington developer Oliver T. Carr Jr., initially refused to give up property he had purchased next to the hotel in partnership with Kermit Roosevelt and others. Carr sued the PADC when it proposed to take the land through condemnation proceedings. The suit was settled earlier this year, but Carr has continued to express an interest in taking over the project if Golding should falter.
However, Golding made it clear yesterday that he would not allow his project to be taken away without a "couple of years of litigation."
"We're not stepping aside, we're just not sticking our neck out to have ti chopped off," Golding said.
Construction loans for large development projects typically float at one or two percentage points above the prime rate. The carrying costs of these loans thus rise and fall with the prime rate. A developer who is not financially equipped to weather a storm of sustained high rates can founder before a project is completed.
Under the terms of the just-completed lease, the PADC would turn over the land to Golding within six months. At that time, he would have to begin paying $800,000 in annual rent for the site and, within another six months, would have to begin construction.If Golding gets his six-month delay, it would push the start of construction back to 18 months from now, or the fall of 1981.
Golding said that with inflation alone, the cost estimates of the two construction firms he is dealing with -- George Hyman Construction Co. and an affiliate of J. A. Jones -- have escalated between 30 and 50 percent over the last year.
The Willard, completed in 1901, was designed by the same architect, H. G. Hardenburg, who created the elegant facades of The Plaza and The Waldorf in New York. In its heyday, the hotel's parlors and ballrooms were peopled by presidents, diplomats and royalty.
Under Golding's plan, the hotel would be expanded from 408 rooms to 600, and a shopping mall, connected to the Hotel Washington, would be built on the lot next door.