Development

KC to announce 800-room Hyatt convention hotel downtown

The proposed Hyatt would add 800 rooms downtown.
The proposed Hyatt would add 800 rooms downtown. Hyatt

Kansas City leaders and development officials on Monday will announce a project discussed since the 1990s: a downtown convention center hotel. The plan calls for a $300 million, 800-room Hyatt.

The proposed hotel tower and parking garage would occupy the block bordered by Wyandotte Street, Baltimore Avenue, 16th Street and Truman Road, just south of the downtown freeway loop.

The site is directly across Wyandotte from the Kansas City Convention Center’s Grand Ballroom, which is at the southern end of Bartle Hall, and northeast across 16th Street from the Kauffman Center for the Performing Arts.

The city would help finance the hotel but has worked out a deal to cap its obligation at roughly $2 million a year for 25 years. City officials said they worked to avoid any plan that would require the city to kick in more money if the hotel didn’t meet financial projections. The hotel also would get other city and county tax incentives.

“We worked to come up with a cash model with no risk based on performance and without putting the city further in debt,” said Kansas City City Manager Troy Schulte.

Mike Burke, Burke Swerdling & Associates and KC Hospitality Investors, LLC, city of Kansas City, JE Dunn Construction and HNTB Architects, are all key players in bringing a new 800-room convention center hotel to downtown Kansas City. (May 8, 2015

The city now owns three-fourths of the land for the site, which is being used for surface parking. Developers are negotiating with the American Hereford Association, which occupies the only office building on the property, to raze it to make way for the hotel.

“We’ve literally bled conventions because of a lack of close-in, top-quality hotels,” said co-developer Michael Burke. “We finally came up with funding solutions that met the city’s and the developers’ needs.”

The hotel development team is led by Burke, a former city councilman and lawyer who has been active for years in city development projects and agencies. He has teamed on the project with Bob Swerdling, a Denver-based expert in financing and developing convention hotels, and formed Burke, Swerdling & Associates.

Developers hope to begin construction in early 2016 and open the hotel in 2018.

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Based on recent market surveys and feasibility studies, the size of the hotel was scaled down to 800 rooms instead of the 1,000 rooms previously said to be needed to meet large convention needs, planners said. Recent industry standards are in the 750-room range, and 1,000 rooms would have been too costly, they said.

“This opens up whole new markets to us,” said Ronnie Burt, president and chief executive of Visit KC, the area’s convention and visitors marketing agency. “It’s a game changer for our hospitality industry.”

Burt estimated that Kansas City has missed out on $3 billion worth of economic impact over the last 10 years because of convention business lost because of insufficient lodging.

JE Dunn will be the general contractor, and HNTB the architect. Representatives of those companies, Hyatt, and out-of-town equity investors in the project were not available for comment before the official announcement.

Planners said Hyatt, which previously operated one of the two Crown Center hotels before it became a Sheraton, is pleased to return to Kansas City.

Complex financing

The city, burdened with its bond guarantees from construction of the Power & Light District, demanded that its help in funding the hotel remain fixed rather than agreeing to a financing package that could incur further public obligation. A public financing component figures in almost every convention hotel deal around the country.

The solution, which requires further action from the Tax Increment Financing Commission and the City Council, involves committing $35 million by rolling over existing debt service on Kemper Arena that is due to retire this year. Those public funds come from the existing Convention and Tourism Tax and aren’t available for other uses such as public safety.

“It’s actually an annual cost to the city of about $2 million,” said Schulte, in reference to principal-plus-interest costs over the 25-year period set to pay off the hotel bonds.

The balance of public participation, as proposed, would capture 100 percent of site-generated city and county taxes for 23 years under a standard TIF arrangement and 100 percent of city taxes for 30 years under a Super TIF deal. The block also would become a Community Improvement District and impose a 1-cent sales tax paid out of Hyatt operating funds.

Majority financing for the $300 million project is to come from KC Hospitality Investors LLC, which Burke described as a group of equity investors from the East and West coasts. Their identities won’t be revealed before the official announcement Monday.

Project details

Burke said the proposal represents a three-year effort. The project team has spent about $1 million in private funds on research and planning.

Architectural and financial planning will continue over the next two months to firm up project costs for the investors.

The hotel tower is likely to be 22 or 23 stories with its main entrance on Baltimore. Its meeting and banquet space is expected to total 75,000 square feet, including a large and a small ballroom and conference rooms. It is to include a recreational facility, restaurant, bar, lounge and other retail space. The parking garage would be 450 to 500 spaces.

Planners estimate that construction will require 1,500 workers over time, with an average of 400 workers on site any given day. When finished, the hotel is likely to employ 350 full-time-equivalent workers.

A website devoted to the project, HereToStayKC.com, is set to go live Monday.

Developers acknowedged that they’ve received pushback from some local hotel operators and caterers in respect to one aspect of the proposed deal — an agreement to let Hyatt be the sole caterer for 15 years for events held across from the hotel in the convention center’s Grand Ballroom. Currently, eight caterers do business at events in that ballroom.

Market conditions

Planners said Kansas City ranked poorly among cities it considered its convention industry peers based on hotel rooms available within a half mile of its downtown convention facilities. They said every “key convention competitor” city has built a major downtown hotel in the last 10 years.

Convention officials said Kansas City knows of 665 groups representing 5.5 million room nights that it lost from 2005 to 2015 because close-in lodging was considered inadequate.

Meanwhile, hotel renovations and new lodging announcements, some with historic tax credits or other incentives, have been dotting downtown.

One notable project that’s privately funded is a combination Marriott Courtyard and Residence Inn now under construction between Main Street and Baltimore on 16th Street, just east across the street from the proposed Hyatt. The project, which will provide a combined 257 rooms, is by Chartwell Hospitality.

Other downtown hotel additions, improvements or announcements include the 213-room President, which gained a Hilton banner; the 193-room Aladdin, renovated and reopened; the 43-room Ambassador, reopened as a luxury boutique hotel; the 550-room Marriott, which for years has been the main convention center hotel, extensively upgraded; the 217-room Hotel Phillips, also remodeled; and the historic Savoy, to be renovated into a 120-room luxury hotel.

Planners said the Hyatt, assisted by a national sales team, will be marketed as soon as all approvals are received, possibly by the end of July. The project has a 120-day exclusive to be presented to the TIF commission and City Council, meaning that no competing hotel offers will be entertained during that time.

The development team said the hotel’s location also will be a significant boon to “cultural tourism,” given its proximity to the performing arts center and the Crossroads Arts District.

Burt, with Visit KC, said the city now offers 14,000 rooms in the downtown, Crown Center and Country Club Plaza corridor. One recent convention used 17 hotels to fill its needs.

He said rooms added by the Hyatt could be expected to be quickly absorbed by the market, based on the experience of other cities that have completed convention hotels and gained more convention business.

The Star’s Lynn Horsley contributed to this report.

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