Dallas Council Picks Underwriters for Convention Hotel

DALLAS - The Dallas City Council on Wednesday approved a team of six underwriters for the city's plans to issue debt for the purchase of a downtown parking lot as the site for a $300 million convention center hotel.

Dallas chief financial officer David Cook said if the council decides to move forward, the underwriters will be involved in the sale of approximately $40 million of certificates of obligation to finance the purchase price of the land. The underwriters would also assist the city in the development of a financing plan for the hotel and with bond issues needed to finance the public portion of the project.

"We're on a path to be able to sell, if the council wants to move ahead, the certificates for the site purchase by the fourth weekend of April," Cook said. "We look for the council to direct us to close on the property and sell the certificates of obligation by the end of April."

Citi is the book-running manager and co-senior manager. Other co-seniors are UBS Securities LLC and Siebert Brandford Shank & Co. Co-managers include Jackson Securities LLC, RBC Capital Markets, and Southwest Securities Inc.

The city will allocate 30% of the debt to Citi, with each of the other senior co-managers receiving 20%. The three co-managers will each receive 10% of the debt.

The current schedule calls for the City Council's economic development committee to be briefed on plans of the proposed hotel developers on April 8, with a report on project financing scenarios set for April 21. A recommendation for a developer is scheduled for presentation to the committee on May 19, with action by the full council on June 4.

Six developers have submitted qualified proposals for building a hotel with approximately 1,000 rooms.

Just because the process is under way, Cook said, does not guarantee the City Council will opt to participate in a convention center hotel.

"There is no assurance there will be a deal," he said. "There may not be deal that is acceptable to eight members."

The level of public financing will not be determined until after a developer is selected, according to Cook. The city is currently using an estimate of a 30% public participation, or about $100 million, but the CFO said that was just a working number at this point in the process.

The council in February voted 12 to 2 to approve a $500,000 option that will expire at the end of September to purchase the 8.3-acre site. If the city agrees to purchase the lot by the end of May, the full option cost will be credited to the purchase price. If the sale is consummated after that date, half the option goes toward the purchase price and the remainder is forfeited to the seller.

The potential hotel site is listed on the rolls of the Dallas County Central Appraisal District at $7.4 million, but Cook said the city has received two independent appraisals showing the land is actually worth more than $40 million.

The Dallas Convention and Visitors Bureau said of the top 20 competitive convention markets nationwide, Dallas is the only city without a convention center hotel planned, under construction, or recently completed.

In Texas, the bureau said, Houston, San Antonio, Austin, and Fort Worth have built or are in the process of building convention center hotels.

A survey by the convention bureau found that more than 80 groups will not bring future meetings to Dallas due to the lack of a convention center hotel and inadequate meeting space in the convention center.

Dallas's general obligation bonds are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's.

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