Benjamin Mark Cole is co-editor of Real Estate Media's Debt & Equity Journal. For the full story, please click on Debt & Equity Journal.

CHICAGO-The nation's largest meeting complex, McCormick Place, may soon have to turn to a state rescue to pay off its bonds, according to Moody's Investors Service, the New York City-based ratings agency. But that's not stopping a major expansion from taking place.

The bonds, some $850 million worth issued to fund a planned 600,000-sf expansion, are backed by state sales taxes. It is possible that the Metropolitan Pier and Exposition Authority, which operates the convention center, will refinance the debt. If not, then the state sales tax will have to shoulder the burden. At deadline, MPEA officials had no comment.

Moody's is betting on the sales tax, predicting that soon Illinois state taxpayers will be picking up some of the tab. In a recent report, Moody's said, "Projected authority convention-center taxes fall short of growing debt service. The tapping of state back-up is likely in near future." Nevertheless, Moody's gives the convention center debt an A1 rating, and it expects the state to step into the breach.

Ultimately, the expansion, even in the face of a potential bailout, is considered a win/win. "A convention center expansion, if done right, is a tremendous economic engine," says Bruce Bonjour, partner at the Perkins Coie law firm in Chicago and lead debtor counsel on the McCormick Place bond offerings. "You see it in the hotels, the restaurants, all the way Downtown. It drives the visitor and lodging industries."

The Chicago Visitors and Convention Bureau estimates that 14 million business and meeting travelers venture to Chicago every year, dropping $5.1 billion while in residence, creating $295 million in tax revenue and 77,000 jobs. The $850-million expansion has already allowed McCormick Place to successfully solicit another 14 early-meeting commitments, which, if filled, will generate $230 million in direct spending and $13 million in tax revenue.

Instant Insights /

Chicago Convention Center Might Be Headed for State Bailout

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