Developers submit designs for $500 million convention center hotel

CINCINNATI (WXIX) - The puzzle pieces are falling into place for a development proposal spanning Downtown Cincinnati’s convention center district, including preliminary designs for a new name-brand convention center hotel.

3CDC Executive Director Steve Leeper gave an update on the convention center district to the Hamilton County Board of Commissioners Tuesday.

The hotel is expected to go on the 5th Street surface parking lot directly south of the Duke Energy Convention Center. The lot is currently owned by the Port Authority.

MORE | 3CDC unveils ‘bold’ vision for $200 million convention center redevelopment

3CDC, appointed to lead the joint city-county convention center district project, received proposals from four national hotel developers on Nov. 24. It is currently reviewing the proposals.

Leeper described the hotel and the convention center redevelopment as being intertwined.

“Although some people may think the hotel is a priority, [other] people may think the convention center is a priority, they really need each other,” he said. “It’s been clear in our discussions with our potential hotel developers, an investment in a convention center upgrade is critical to them and critical to their consideration of building what would be nearly a [$500 million] hotel at the site.”

(See all four proposals beginning on page 11 in the document embedded below, or find the document here.)

The hotel would feature 800 rooms, up to 80,000 sq.ft. of flex meeting space and junior and senior ballrooms.

The submitted designs, which are subject to change, show a building of 26-32 stories tall.

3CDC plans to host the four developers for 90-minute interviews with officials from the City of Cincinnati, Hamilton County, the Cincinnati USA Convention and Visitors Bureau, the Port Authority, the Cincinnati USA Regional Chamber of Commerce, the Cincinnati African American Chamber and the Cincinnati Business Committee.

Those interviews will take place in November. 3CDC will make a recommendation to the City and County, and the public bodies will then vote on whether to authorize 3CDC to enter into negotiations with that or another developer.

A final developer agreement with a financing plan could go before public officials by the first quarter of 2023.

Leeper suggested the hotel would be privately financed, at least in part.

Because the hotel would be constructed on Port Authority land, it could benefit from some unique taxing arrangements.

The Port Authority, as a public entity, does not pay property taxes on the land it owns or sales taxes on construction materials. The Port Authority could also issue bonds to fund the project backed by increment financing or lease payments.

Too bold, or not bold enough?

Leeper since last month has described the convention center district project as an inevitable compromise between big aspirations and financial realities.

He said Tuesday he asked the hotel developers to “dream big.” It’s the same phrase he used in October referencing the convention center’s lead architect, Columbus-based Moody Nolan.

“We asked them to really dream, and our goal is to match their dream with a budget we can afford,” he said.

Rising interest rates and construction costs complicate the situation, Leeper acknowledged. “I don’t know where this is going to go. We can always dream big and then always retreat if we don’t think it’s matching up to our budget.”

But the overall financial picture is improving faster than expected post-pandemic.

The $200 million convention center redevelopment proposal aims to use the transient occupancy tax, or the lodging tax, as its primary source of funding. The early financing framework would see several of the city-county debt obligations pooled, refinanced and reorganized.

When 3CDC first came to the table earlier this year, the expectation was the lodging tax would not recover to pre-pandemic levels until 2024. Now, according to Leeper, it’s possible lodging tax revenue in 2022 will beat 2019, the previous highest year on record. “That is very, very good news,” he said.

“We have a lot going for us,” Leeper continued. “I think the glass is half full here. I think the market is improving. I wish interest rates and costs were a little different, but we’ll see how that goes next year. I’m confident things are going to get better.”

Still, the project is expected to proceed in phases out of necessity, and an expansion of the convention center isn’t part of it.

The project would replace the DECC’s exterior skin, improve its entrances and circulation, create a large rooftop deck, upgrade the meeting rooms and ballrooms and make it net zero with regard to greenhouse gas emissions.

It would also close Elm Street and stretch the exhibition space out of the convention center eastward into the former Millennium Hotel site, referenced in renderings as “Elm Street Park.” The park could be used for community events as well as exhibitions.

A future expansion of the convention center’s exhibition space would enclose the park. The new hotel’s meeting and ballroom space would mitigate the need for similar new spaces in the convention center, and Leeper noted it’s exhibition space after all that determines a convention’s viability in a certain venue.

Public officials are at least mindful of the possibility of an eventual expansion, but it’s far from a sure thing.

Commissioner Alicia Reece isn’t happy about that, though it was unclear Tuesday whether she wanted 3CDC to do more or less.

Reece initially objected to the park remaining unproductive after the county spent $39 million on the Millennium Hotel demolition. “We need to be making money off that, not just a green space,” she said.

Reece then voiced concern that the convention center hotel isn’t taking priority over the convention center itself. A hotel built first, she reasoned, would attract conventions and hotel guests “right now.” She continued: “If we had that, we could start making money, and then go into phase two.”

Leeper reiterated that a new hotel is entirely dependent on a redeveloped convention center. He also noted the Millennium Hotel depressed the city’s market for rooms and that its demolition has led to a higher average daily rate in 2022 than in 2019.

“Our overall supply and the quality of our overall supply is much better,” he said.

Commissioner Denise Driehaus joined Leeper in defending the outdoor exhibition space as an attraction to convention scouts. She also defended the phased approach criticized by Reece.

“We know that an expanded exhibit space is part of the equation. We just can’t afford to do it right now,” Driehaus said. “So we’re doing what we can do, pieces we know need to be in place in order to make this all work.”

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