The Tax Increment Financing Commission of Kansas City on Wednesday approved a development agreement for a proposed downtown convention hotel, a step that backers described as a sign of progress toward realizing the long-sought project.
If all goes as planned, the developers of the $311 million, 800-room Hyatt think they could cut the ribbon on the city’s first convention hotel since 1985 around September 2019.
Not everything has gone according to script since the hotel was first announced in May 2015. The project is about a year behind the original schedule, owing to a number of factors.
Still, KC Hotel Developers LLC remain confident that the hotel will break ground next spring.
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“This is a winner for the city,” said Steven Rattner, a financier from New York who is one of the lead private equity investors for the project.
The TIF Commission on Wednesday hashed out mostly arcane details about the development agreement before passing it in a 9-2 vote. Representatives from Kansas City Public Schools and the Jackson County Community Mental Health Fund voted against it because the incentives awarded to the hotel made no provision for payments in lieu of taxes to taxing jurisdictions.
Wednesday’s vote sends the development agreement to the Land Clearance for Redevelopment Authority, another agency that grants tax breaks for development projects, for its ratification Monday.
If the LCRA, which will own the hotel property and lease it back to the developers to exempt the project from certain taxes, affirms the agreement, Rattner and his team can pursue a construction loan.
Rattner said he’s heard from banks, both local and national, that have interest in the project. A breakdown of estimated funding sources lists a first mortgage at $95 million.
KC Hotel Developers said the project has $51.7 million in private equity lined up. That includes $6.5 million from Hyatt; the rest, the developers said, comes from investments from high-net-worth individuals. Rattner and Tim O’Byrne, CEO of suburban Denver-based Inland Pacific Companies, are the lead investors.
The developers plan to sell $42.2 million in TIF bonds, coupled with $82.3 million in taxable bonds. Those bonds, which will go to the market without a credit rating or any city guarantee of the debt, would be repaid by taxes generated by the hotel.
Kansas City has committed $35 million to the project, paid from its convention and tourism tax revenue for 25 years, as well as land that it valued at $4.5 million.
Beyond financing, it’s a waiting game for the hotel development group.
They await resolution to an encumbrance on city-owned property at Truman Road and Baltimore Avenue. That property had been pledged as collateral for financing Bartle Hall’s expansion. The city continues to work with a bond insurer to swap out other city-owned property as the collateral.
The developers also await a guaranteed maximum price by JE Dunn, the hotel project’s general contractor.
Kansas City Mayor Sly James, a proponent of the project, lauded Wednesday’s development.
“This development agreement is another big step towards the 800-room downtown hotel needed to move us back into the forefront of convention cities,” James said in a statement. “The development team understands my framework for the project that prohibits any city guarantees of debt. The TIF Commission action gets us closer to the groundbreaking of this asset.”