As part of the dream team MDHA unveiled recently to fund and build the Music City Center headquarters hotel, the team at New York-based UrbanAmerica has a tricky task ahead of them. Founded in 1998 as a niche investor focused on development in urban areas, UrbanAmerica today controls a real estate portfolio worth $330 million and jointly owns another $1 billion worth of property.
Although mainly involved in office, retail and mixed use, the firm does have experience with hotels, including as the co-owner of the Orlando convention center's International Plaza Resort and Spa. We caught up last week with Richmond McCoy, the firm's president and CEO, about the possibilities and difficulties facing the Nashville project's financing.
Although the details have yet to be worked out, as you survey the landscape, what are some financing options out there for a project like the headquarters hotel?
We're really exploring the various options that are in the marketplace today and really can't move too aggressively with it until the operator is picked, because the operator will have a significant impact on the ability to put together the most appropriate financing package. Many of the operators are in the position to put up some capital as well, and that will be a meaningful component in raising the equity and ultimately syndicating the debt necessary for the project.
We're encouraged by the strength of the future bookings for the convention center, which obviously is going to be able to have a strong line for the hotel rooms being booked out for a meaningful period of time. That's going to tell a story and I think Nashville's got an extraordinary set of circumstances and environment that will allow this hotel to do well.
With the economy struggling, are some options more likely to be worked into the final financing structure?
These days aren't any days that we've seen before. That's really the circumstance. I think one of the reasons the city chose our team was because of the 10-year track record of building and financing projects like this.
Portman and Hensel Phelps did a project in San Diego under similar dire economic times after 9/11 and were still able to get it done. So I think it's going to be a combination of private equity and some level of public support, some level of public financing. We just don't have all those answers today.
Is the Nashville project going to be attractive to private investors?
When you look at the different components - Would a hotel convention center work here? Would a hotel convention center have traction? - the answer is yes. We have access to capital from a number of different sources, and as we're putting together the financial model along with the bookings of the asset and the strength of the team, we think we're certainly going to be successful in getting a package put together.
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