That was the earth shaking as downtown’s fortunes changed with a 40-minute announcement Thursday afternoon by Mayor Greg Fischer.
That said, there’s a lot that has to happen, including a little matter of Metro Louisville placing about $120 million in municipal debt. But Fischer has revealed a deal with Cordish Cos., the Baltimore developer that created Fourth Street Live, to put a Four-Star Omni Hotel on what’s now an abandoned block of Third Street.
It will be the Dallas-based Omni Hotels & Resort’s first Kentucky property.
Ah, but there’s so much more … 200 luxury apartments downtown, along with a 30,000-square-foot grocery in two buildings, restaurants, pools, cafes and retail.
Fischer stood on the stage in the Mayor’s Gallery of Metro Hall with Gov. Steve Beshear and Metro Council President Jim King and other city officials, as well as Omni and Cordish executives, talking about all the collaboration necessary to get the private investment, state tax incentives and a tax increment financing (TIF) district to finance the deal.
But it was Fischer’s moment.
After acknowledging all the players, King turned to Fischer and said to applause, “ … and I want to make sure everybody understands this was his baby, and he brought it home for us.”
Which may turn out to be a mixed blessing as legacies go considering the financial woes of KFC Yum! Center, which got more than one mention during the presentation.
But for the moment, the proposed $261 million, 200-room luxury hotel and all that goes with it holds the promise of transforming a town that was once heavily suburban-centric.
Nick Benjamin, Cordish’s director of development, referred to Fourth Street Live as the catalyst leading downtown growth on the way to this second Cordish project — project that could make Louisville a 21st century city:
We’re in the beginning stages of fundamental demographic shift occurring in downtowns all across the country. Where a significant portion of the population once preferred a suburban lifestyle, the preferred option for many is a livable, walkable urban setting, easily accessible restaurants, shopping, leisure and night life. Residents of this new development, and of downtown as a whole, will have access to an amenity experience no suburban setting could offer. And very few downtowns could offer. We fully believe this project will be a harbinger for tremendous residential growth downtown over the next 10 years.
In his opening remarks, Fischer seemed most pleased with the announcement of a supermarket: “We’re finally going to get that downtown grocery we’ve been waiting for so long!”
Fischer and Cordish officials have been in negotiations since last summer. The results announced today include:
• a 600-room hotel proposed by Omni Hotels and Resorts on the former Water Company block of Third Street bordered by Liberty to the north and Muhammad Ali Boulevard to the south. The hotel will have 70,000 square feet of meeting space, a spa, a fitness center, two full-service restaurants, a rooftop poolside cafe, street-level retail, and a lobby lounge.
Omni executives will work with local architects for a final design. The hotel is likely to be 20-to-25 stories tall.
• 200 luxury apartments developed by Cordish.
• 44,000 square feet of retail, including a “high quality” grocery, though no names were released.
• an 850-space parking garage built by the Parking Authority of River City.
A lot has to happen for all this to get built. According to a release at the announcement, Omni is putting up $105 million and Cordish $30 million, for a total of 51 percent. The city is contributing $35 million, including $17 million for the value of the land, or 14 percent of the financing.
The state is contributing $90.5 million in the form of tax rebates, but of course that’s not capital per se, but essentially retained earnings by Omni and Cordish.
Steve Rowland, Metro Louisville CFO, said the city will issue about $104 million in debt, with 90.5 million in construction funds.
PARC will issue $17 million in bonds to build the parking garage.
The city will “capitalize the interest” – that is, carry the initial, pre-revenue interest into the final debt – until the projects begin to cash flow, Rowland said, accounting for the spread.
The debt won’t be placed until the first quarter of 2015, when construction is scheduled to start.
Hilliard-Lyons is the financial advisor under a contract, Rowland said, and the bond placement will be open to bid. Jim Allen, Hilliard-Lyons chairman, president and CEO, confirmed his Louisville-based financial services firm can place that much debt: “We just had a $200 million placement.”
Before debt can be placed, a bond “official statement” must be issued with projected revenue rates – including the TIF district revenue – that would go to servicing the debt. In addition, the official statement would include a feasibility study with details such as lease agreements, projected bond yields and the debt servicing schedule over the life of the bonds, which are typically 30 years plus the initial construction period.
The land, which the city bought years ago after the Louisville Water Company moved a block south to a new headquarters, will be turned over to Omni at the time the project becomes operational, Rowland said.
The city will guarantee the debt should revenue from the debt prove insufficient to service the debt, he said. “But we believe the TIF revenue … will be more than supported by the revenue coming into this project. It will be backed by state property taxes, state sales taxes as well as withholding taxes, and we believe those revenues will be more than sufficient.”
Several reporters asked Fischer if Louisville can fill another 600 hotel rooms — in addition to hundreds more already planned — and the mayor said, “Absolutely.” Fischer said Louisville is beginning to attract “a whole new type of tourist coming to town,” including people coming to visit the Bourbon Trail, which had 600,000 visitors for 2013.
Mike Garcia, CFO and senior vice president of development, said Omni executives have entered markets questioning whether there was sufficient demand “and whether you look at Nashville, Fort Worth or Dallas … the market has actually risen. Sixty-nine percent or 70 percent occupancy before we got there … they’re elevated above those levels today.”
Karen Williams, president and CEO of the Greater Louisville Convention and Visitors Bureau, said the Cordish project and the Omni hotel would boost the city’s chances getting the funding needed to expand the Kentucky International Convention Center. That expansion would, in turn, open up new opportunities in the convention and travel world.
“We’re in Frankfort now, working for the expansion of our convention center,” Williams said. “Which allows us to go for 85 percent more business. Having that Omni here … it’s perfect. They’re going down a parallel path.” More rooms would allow Louisville to retain conventions that have outgrown the downtown hotel portfolio, she said.
“We’d be able to go after 25 percent of conventions we’ve never been able to go after. That’s new association business. Corporate business. All the market segments.”
“You want a diversified portfolio of conventions that come to town,” said Cleo Battle, CVB executive vice president. “If the economy goes up and down, it is the conventions in diverse markets that keep us close.”
With an Omni, the CVB would be able to go after higher-rated business they’d previously not been able to pursue, both Battle and Williams said.
Right now, there are 2,300 rooms connected to the convention center via a skywalk, Williams said. The Omni would boost that to almost 3,000 rooms. “We’ll have almost 4,300 rooms downtown with all the other projects that are planned,” including an Embassy Suites, Aloft and Hilton Garden Inn.
“We’ll soon be near 5,000 rooms downtown,” Williams said. “That’s a true game changer for the city of Louisville.”