Financing Unclear for Anchor Hotel in Convention Center

BOSTON-Despite recent published reports depicting the possibilities for Starwood Hotels & Resorts Worldwide, Inc. of winning financing for its anchor hotel in South Boston’s convention center as grim, those committed to the project say they are cautiously optimistic.

Richard Friedman, of Carpenter & Co., Starwood’s local partner, says “we’re in the process of getting financing. We are pursuing all avenues of conventional financing.” Friedman says that the company has until the first of December to secure financing.

Capital markets are notoriously difficult for hotel financing and convention center hotels are even harder to finance because the hotel’s success is so dependent on the success of the convention center. The recent tightening in the capital markets has made the prospect of putting together financing for this hotel that much more difficult. Typically, convention center hotels require major public subsidies.

The city has borrowed $157 million to acquire the 60-acre convention hall site, which includes space for the 1,120-room hotel. Edward J. Collins, the city’s chief financial officer, says that his office has had informal discussions with Starwood over the possibility of Starwood winning special treatment of its property tax obligation under Chapter 121A of state law. The statute “gives them predictability of their tax payments,” says Collins, “but it is not going to make or break their financing.” Adds Collins, “our position is there will be no subsidies.”

Friedman pointed out that the discussion is not about public subsidies but about “real estate subsidies. It is an excise tax in lieu of a real estate tax.” Friedman would not comment on Starwood’s request for special treatment under Chapter 121A except to say “it not been presented formally to the city as an option.”

Chapter 121A was enacted to encourage development in rundown areas by permitting the owner to pay reduced taxes on a schedule that does away with the uncertainty of future tax assessments.