An executive with Hyatt says that earlier this year the developers of a convention hotel in Kansas City came asking for help raising money. Then the developers, he said, “surprised” Hyatt by abruptly dropping it from the project in favor of Loews Hotels & Co.
“They were not transparent with us,” said David Tarr, senior vice president of real estate and development. “We were very surprised by learning that, after several years of using our name to promote the project, we were not going to be part of the project. That sort of thing doesn’t happen.”
Tarr said he learned that Hyatt was no longer the brand of the 800-room hotel by email on June 21. That was the same day that KC Hotel Developers LLC announced that Loews would take Hyatt’s place.
KC Hotel Developers, represented by Kansas City development attorney Mike Burke, did not discuss Tarr’s comments directly.
“We do not comment on confidential business negotiations between parties. Both Hyatt and Loews have stellar reputations as hotel operators. When Loews approached KC Hotel Developers to be an equity partner and operator, we were very excited to have such quality equity and brand partner,” KC Hotel Developers said in a statement to The Star.
“While the decision was a difficult one, Loews is an excellent choice for Kansas City and we look forward to adding a first class convention center hotel to our city.”
The long-awaited convention hotel — the first in Kansas City since 1985 — has been delayed by a number of problems since it was announced in 2015.
Those delays — caused by activist lawsuits, petition initiatives and property title issues — have led to construction price increases.
Hyatt had been the brand for the $311 million hotel project since it was first announced publicly in May 2015. Hyatt, which has been out of Kansas City since the Hyatt Regency Crown Center Hotel as rebranded to a Sheraton hotel in 2011, had worked with KC Hotel Developers for years, according to Tarr.
When the hotel project was originally announced, Hyatt was said to contribute up to $8 million in “key money” — a sum traditionally paid in return for operating rights — toward the project’s financing. The key money did not amount to equity in the project. Loews, on the other hand, brought equity to its investment in the hotel development.
The rest of the financing would come from a combination of debt, equity, bonds issued by the Land Clearance for Redevelopment Authority, and contributions from the city’s tourism tax.
Tarr said Hyatt was approached by KC Hotel Developers for additional equity in the project.
“I don’t know what their true gap was,” Tarr said. “They had a group that was helping them raise debt for the project. I know they were simultaneously asking groups for equity as well. I think it was in the neighborhood of $30 million to $40 million. They may have gone to the market seeking that but may have settled for significantly less than that.”
Tarr said he referred KC Hotel Developers to groups that could help them close whatever financing gap existed. He said Hyatt did not directly put money into the project.
“Only the time and resources that were invested in helping advance the project with this development group,” Tarr said. “We didn’t write a check to the project.”