Oct. 28–Metro officials in June threatened to end talks with the developer of a proposed convention center hotel, citing concerns over what might happen to the hotel if it were foreclosed upon.
The regional government never did get the protection it was seeking, according to emails made public during a court review of the deal. Its council unanimously approved an agreement with the developer a few weeks after the email exchange, including a hefty subsidy for the hotel.
In exchange for the subsidy, the hotel will reserve a block of rooms that will be available for events at the Oregon Convention Center. But if the hotel were to default on its mortgage and go into foreclosure, that agreement would be wiped away.
Publicly, Metro has said — and still says — the deep pockets and reputation of Hyatt Corp., which would own and operate the hotel, are protection against the hotel’s failure.
But negotiators for Metro wanted the room-block agreement to have priority over the hotels’ mortgage to ensure the agreement would survive any foreclosure proceedings, according to the emails. In one message leading up to a public hearing on the agreement, Metro threatened to call off the talks.
“In an nutshell, there are not 4 votes,” Metro project manager Hillary Wilton wrote in a June 3 email, referring to a majority on the Metro Council. “I need a decision from Hyatt that they are prepared to accept the non-subordinate position by noon tomorrow … or we will cancel hearings and declare an impasse.”
Hyatt Corp. replied the same day, saying that arrangement was a non-starter “given the increasingly thin economics of this opportunity.” Kimo Bertram, a vice president for real estate at the hotel company, wrote it would increase financing costs.
Oregon Convention Center executive director Scott Cruickshank said in an email June 11 — the day before a Metro Council hearing — that one unnamed councilor was still concerned about the foreclosure issue. He named three Hyatt-operated hotels that had gone into foreclosure, though none of the three (in Cleveland; Jacksonville, Florida; and Chesapeake, Maryland) were owned by Hyatt.
Speaking to The Oregonian last week, he downplayed those concerns.
“Negotiations are about posturing sometimes,” Cruikshank said.
Eventually, the two sides settled on a deed restriction on the land for the hotel, which would require it to be used for an “upper-upscale” hotel for 30 years. That won’t protect the room-block agreement the way Metro had requested, but it will prevent the hotel from being converted to condos or a hotel of lesser quality.
Cruickshank said the hotel and the convention center will be interdependent, and that a new hotel operator taking over after a foreclosure would likely respect the room-block agreement to keep the convention business coming. And, he said, Hyatt gave private assurances that the way it structures debt would protect Metro’s investment.
Email exchanges between Metro and Hyatt negotiators were made public in court filings by opponents of the project.
Their attorney, John DiLorenzo, said the filings show Metro councilors and negotiators had concerns not aired publicly.
“It appears that this was a major issue for the Metro councilors,” DiLorenzo said. “Hyatt won out on that, and Metro lost out.”
The backstory isn’t strictly relevant to the court proceedings in which it came up.
Metro has asked for a judicial review of its plan to head off legal challenges from the project opponents, a group of competing hoteliers which includes Provenance Hotels and the owners of the downtown Hilton.
Multnomah County Circuit Court Judge Eric Bloch heard arguments earlier this month, and he’s expected to make a decision in the coming weeks. He might make a decision on whether Metro’s plan passes muster, or he could decide additional hearings are needed.
Another case filed by the project opponents is pending in Clackamas Circuit Court. Metro hopes a judicial review would help ease concerns that litigation could later upend the project — which would, in turn, allow the revenue bond issuance to go ahead.
The project opponents argued that Metro is required under state law to get voter approval before building a new facility, such as a hotel.
Metro contends it’s not “building” the hotel, which would be privately developed, owned and, despite the subsidy, mostly privately financed. And, it argues, Metro’s voter-approved charter gives it additional powers beyond those described in state law.
— Elliot Njus
