Wilmington asked for $1 million loan guarantee

[longnecker]

Backers of a proposed $36 million hotel on Wilmington's Christina River waterfront are seeking to put city taxpayers on the hook for $1 million should developers fail to make loan payments on a proposed Westin Hotel on the Riverfront.
Altogether, the developers need to obtain a total of $6 million in loan guarantees if they are to secure financing, said those familiar with the deal.
Michael Purzycki, executivedirector of taxpayer-supported Riverfront Development Corp., confirmed his agency and the hotel's private real estate developer, BPG Hotel Partners XXI LLC, are asking the city to provide $1 million of the proposed loan guarantees.
Owners of BPG Hotel Partners are Robert Buccini of Chadds Ford, Pa., David Pollin of Washington, D.C., and Christopher Buccini of Greenville.
According to Purzycki, the mortgage lender on the hotel wants third-party guarantees in the form of a letter of credit, a document that would obligate payment in the event the developer defaults. The development corporation, on behalf of the developers, is actively looking to secure loan guarantees from both private and public sources, Purzycki said. He declined to reveal the dollar amount the lender is requiring in loan guarantees.
"Lenders are looking to limit their exposure," he said. "As everyone who is financing real estate understands, this is a very difficult banking environment and it takes creativity to put transactions like this one together."
Under the proposed arrangement with the city, the primary lender for the Westin Wilmington Riverfront would have the ability draw on the $1 million in funds if the hotel developer could not make its debt payments, William S. Montgomery, chief of staff for Mayor James M. Baker, said in a statement. Read more
http://www.delawareonline.com/articl...news|text|Home

[EpicWin]

I think I speak for all of those that pay into the local taxes for the city of Kilmington.

[Curly]

"Lenders are looking to limit their exposure," he said. "As everyone who is financing real estate understands, this is a very difficult banking environment and it takes creativity to put transactions like this one together."

Don't build the hotel then. Instead you'll just force the city taxpayers to co-sign.

[longnecker]

Hotel money projections questioned
Hotel operators and industry experts are questioning the financial projections prepared by the developers of the proposed Westin Hotel on the Wilmington Riverfront, saying the numbers are wildly optimistic.
Based on forecast data supplied by the Riverfront Development Corp. and BPG Hotel Partners XXI in a December application for state money, performance measures for the Westin Wilmington Riverfront in 2015 would outstrip the 2011 performance of most of the top 25 hotel markets in the nation, including Chicago, Washington, D.C., and Boston.
"It's hard to believe," said George Fiorile, chairman of the Delaware Hotel & Lodging Association. "They're very aggressive."
In October, a report in The News Journal showed the RDC had been working quietly for months with BPG, a private real estate developer, to build a 10-story hotel on land owned by the RDC. The hotel, which would be connected by a vestibule to the Center on the Riverfront, would boost business at the mini-convention center, said Michael Purzycki, executive director of the RDC.
Late last year, RDC and BPG applied for a $2 million grant from the newly created New Jobs Infrastructure Fund. Without the money, "the $36 million project would not go forward," the application said.
But soon after filing, the application was pulled when questions were raised about whether some of the work was within the scope of the infrastructure fund. Purzycki said Thursday they have not made a decision on whether to reapply.
Still under consideration is a request from Purzycki to the city of Wilmington for a $1 million loan guarantee. John Rago, communications director for Mayor James M. Baker, said Friday that no decision has been reached.
According to the state application, the Westin would be a star performer soon after opening.
Within three years, or 2015, the Westin would have an occupancy rate of 72 percent, according to the application. By comparison, the average hotel occupancy rate in Delaware during 2011 was 53.8 percent. Among the top 25 markets last year, only Miami, New York City, San Francisco and Oahu Island, Hawaii had an average occupancy rate above 72 percent, according to a hotel review by STR, a hotel performance data company. Read more
http://www.delawareonline.com/articl...news|text|Home

[longnecker]

​UPDATE
The Markell administration, which has been working behind the scenes for at least a year to bring a new hotel to the Christina River waterfront, said Friday it has ruled out providing any direct financing from state funding sources.
"We didn't want the state to take that on," said Secretary of State Jeffrey Bullock, who serves on the board of the Riverfront Development Corp. as the Markell administration's representative.
Last September, Bullock pursued a $6 million state-backed letter of credit to help the BPG developers finance a proposed $36 million Westin Hotel that would be attached to the Center on the Riverfront, according to documents obtained by The News Journal through the Freedom of Information Act. That plan was abandoned as not an appropriate role for the state, said Bullock, who spoke in depth for the first time about the hotel project.
"The request for a letter of credit issued by the state is still a pledging of our assets," Alan Levin, director of the Delaware Economic Development Office, said Friday. "It's a pledge that requires the full faith and credit of the state. This is not something that this administration does, nor has done, for this type of venture, nor would we."
The Riverfront Development Corp., the state-supported organization charged with redeveloping the Wilmington waterfront, has provided few specifics about its role in helping finance the hotel. On Friday, the RDC explained it had also taken off the table its bid for a $2 million state loan guarantee to support the hotel. Instead, it is stepping up efforts to find more private backing for the BPG venture. Read more
http://www.delawareonline.com/articl...nclick_check=1