Development

Loews deal with KC convention hotel developers was kept quiet until Wednesday

The Loews hotel name now is affixed to renderings of the proposed Kansas City Convention Center hotel.
The Loews hotel name now is affixed to renderings of the proposed Kansas City Convention Center hotel.

Kansas City Manager Troy Schulte received a brief letter May 24 from KC Hotel Developers, the entity managing development of the planned downtown convention center hotel.

In the letter was a clue that Hyatt might not stay in the role announced two years ago as the expected operator of the hotel.

But the Kansas City Council didn’t know that on June 8 when it voted 11–2 to accelerate the effective approval date for the hotel development plan.

On Wednesday, council members learned along with the public that Hyatt indeed was out. Loews Hotels & Co. and KC Hotel Developers had signed an agreement for Loews to be an equity partner and operate the intended 800-room hotel.

According to attorney Michael Burke, who heads the hotel development team, the Loews agreement — for which financial details aren’t likely to be revealed until August — hadn’t been signed by the council’s June 8 vote. It was signed last week.

“We were still in negotiations,” Burke said. “In fact, during the last year we continued to negotiate with several potential partners. It all came down to who would give us certainty to build the best hotel in Kansas City.”

But that May 24 letter might have tipped off careful readers, including council members, had it been shared.

The letter’s first sentence referred the Amended and Restated Master Financing Agreement between the city and KC Hotel Developers.

That document, signed in September 2015 and last updated in August, contained a sentence authorizing periodic updates of “approved hotel operators” for the convention center project.

Until May 24, the agreement said approved hotel operators include “but are not limited to, Hyatt, Hilton, Marriott, Marriott Marquie, Renaissance, Omni, Westin, or Sheraton.”

The letter to Schulte repeated that list and added Loews at the end.

The addition was legal and fully within the development rights. Loews is a hotelier similar to the other chains on the list and is financially capable of participating in the Kansas City deal.

And the city manager was not required to share the information with the City Council since he already had been designated as the city’s agent to complete the hotel agreement.

City spokesman Chris Hernandez said Thursday that the May 24 letter was to grant the developer the ability to pursue a deal with other operators, but there was no guarantee there would be any change, so it didn’t seem necessary to alert the council at that time.

Several City Council members said Thursday they learned about the switch to Loews at the same time the media did on Wednesday — and they were OK with that. They said they weren’t upset the city manager hadn’t shared the Loews possibility back in May.

“I don’t want to get into the weeds on these things,” said Councilwoman Jolie Justus, adding that she thought Loews’ involvement was generally a good thing for the city.

Councilman Scott Wagner said the council hires the city manager and professional staff to handle these kinds of details, and he was not put off by not knowing ahead of time.

Councilwoman Teresa Loar has raised questions in the past about the hotel’s financing and viability. She reiterated Thursday that the council has been kept in the dark about all details of the private financing, so she still has no assurance that the hotel will succeed.

But she said she hoped having Loews as an equity partner was “a good sign.” If she can finally see something on paper about the financing, and be assured that it’s solid, she said, “I will be very supportive.”

Councilwoman Katheryn Shields said she had heard early this month that the hotel developers were no longer working with Hyatt, so she asked Burke about that at a June 7 hearing on the hotel. She recalled that Burke replied the development team was still working with Hyatt, which was apparently true at the time but changed last week.

“He seemed surprised at my question,” Shields said, surmising that Burke couldn’t reveal at the time that Hyatt might not be the operator. “Perhaps it was a delicate time in the negotiations.”

Shields said she wasn’t as familiar with the Loews hotel group and didn’t have an opinion as to whether Loews or Hyatt would be better.

But council members Dan Fowler and Alissia Canady both said they thought Loews was better for Kansas City. They said Loews hotels have a reputation for being even more exclusive than Hyatt in the convention hotel niche.

“They’re willing to put more skin in the game,” Canady said. “Loews, that’s really what their niche is, is convention hotels. This is what they do.”

Canady said she was also optimistic that Loews will work hard to hire a diverse workforce and provide job and career opportunities, as promised in a community benefit agreement with the hotel developers.

Mayor Sly James was traveling Thursday and unavailable for comment. But his press spokesman, James Roberts, said the mayor was fine with the switch to Loews.

Burke and Steve Rattner, another development team member, said they expect to reveal financing details in August when they take bond sales to market.

In past documents, the hotel was targeted to cost about $311 million, receiving about $25.3 million in equity from investors and $8 million in “key” money from Hyatt. Key money is a traditional operator contribution to the cost of a project in return for the operating right.

Burke said Loews’ contribution will be totally in equity and not include key money. He declined to compare the Loews equity amount to earlier figures. He did say that delays have caused the overall cost estimate to rise, but he said that cost estimate also is not yet ready to share.

Diane Stafford: 816-234-4359, @kcstarstafford

Lynn Horsley: 816-226-2058, @LynnHorsley

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