Developer selected for Cincinnati’s $482 million convention center hotel

View 3CDC’s presentation, which includes details on the financing strategy, here.

CINCINNATI (WXIX) - 3CDC has recommended Atlanta-based Portman Holdings as the developer of the proposed convention center hotel in Downtown Cincinnati.

The City of Cincinnati and Hamilton County vetted four development proposals for the hotel last December, and ultimately Portman Holdings rose to the top.

The hotel is expected to contain 800 rooms, up to 80,000 sq.ft. of flex meeting space and junior and senior ballrooms as well as ground-floor retail. Portman’s initial design (above) shows a building around 26 stories tall.

The Atlanta developer is currently finishing work on a 700-room, 26-story convention center hotel under the Hyatt Regency brand in Salt Lake City. [More]

All four developers indicated their involvement in the convention center hotel depends on a commitment to renovate the Duke Energy Convention Center.

The hotel is expected to cost $482 million. There is a current financing gap of $163 million, or 34 percent, which is standard for convention center hotel projects across the country, according to Hamilton County Administrator Jeff Aluotto.

3CDC is currently working with Portman on a memorandum of understanding to establish firm delivery dates and close the financing gap as much as possible.

Key to the gap staying put is the city and county’s joint acquisition of the Whex Garage on Elm Street south of the Convention Place Mall. The garage will offere structured parking for the new convention center hotel, alleviating the need to build new parking into the hotel and diminishing the overall expense as well as the financing gap. The closing date for the garage is the end of March.

The commissioners must eventually approve any proposed financing plan, both for the hotel and for the Duke Energy Convention Center renovation. The Whex garage ties the two together, as city and county money will be required to finance a state loan for the acquisition.

3CDC is mulling how to close the hotel’s financing gap. Options include abating the lodging tax for the future hotel, abating the real estate itself and state tax credit programs (possibly including the TMUD program).

The hotel is expected to go on the 5th Street surface parking lot directly south of the DECC. The lot is currently owned by the Port Authority. The Port does not pay property taxes on the land it owns or sales taxes on construction materials. It’s unclear whether those beneficial tax arrangements are factored into the financing gap.

The $200 million DECC renovation proposal aims to use the transient occupancy tax, or the lodging tax, as its primary source of funding. A resolution to free up and refinance the County’s debt obligations on the Millennium Hotel acquisition/demolition goes before the commissioners Thursday.

The county currently collects 3.5 percent on room rentals for DECC debt service and repayment of the Millennium Hotel bonds. The Cincinnati Visitors Bureau collects an additional three percent.

The tax “crashed” during the pandemic, but first-quarter 2023 returns show it’s back to pre-pandemic levels, according to Hamilton County Administrator Jeff Aluotto.

A one percent increase of the lodging tax to fund capital costs related to the project is under consideration, bringing Hamilton County’s lodging tax to 7.5 percent. It would require approval from the Ohio General Assembly and the commissioners.

“This has been something 3CDC has been working on, trying to find ways to crunch the numbers to avoid that if at all possible,” Aluotto said. “I know we’ve found, looking at it, it would be very difficult to avoid given the capacity of the project it adds.”

Aluotto said the one percent increase would increase the county’s borrowing capacity by around $40 million.

Up-front capital costs would total $10 million for the county and $30 million for the city, of which the city has already paid $7 million in predevelopment costs drawing from what Leeper described as “old urban renewal TIF funds” that have been building up since the ‘80s and can only be used for large projects in the central business district. The CVB would be asked to allocate $3 million from its lodging tax revenue.

The county and city would each make a one-time appropriation of $650,000 that would act as an annual distribution. The county’s share would come from the lodging tax or the general fund.

The county and city would also be on the hook for annual appropriations of $275,000 each, lasting for seven years, to finance the Whex Garage purchase. The city is proposing to use TIF dollars.

3CDC’s financing estimates are based on conservative projections, Leeper said. The city, county and CVG would see residual funds cresting at more than $5 million in 2030. The residual funds are yet to be allocated.

3CDC also proposes refinancing the county’s outstanding debt obligations (to the DECC, Millennium Hotel and TQL Stadium) to free up money for capital costs.

The DECC renovation project will replace the 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.

Leeper noted the renovation will proceed in phases with some improvements happening sooner than others, reasoning some sections of the DECC have been upgraded more recently than others, and some remain as they were when the DECC was originally constructed.

“We’re going to try to get as much work as we can done now,” Leeper said.

The renovation will 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. Leeper offered it might be able to hold the NFL Draft or events of that nature.

The new hotel’s meeting and ballroom space would mitigate the need for similar new spaces in the convention center.

A future eastward expansion of the convention center’s exhibition space could enclose the park. But Leeper and Aluotto on Tuesday noted a westward expansion is possible due to land freed up by the Brent Spence Bridge project.

“What we’ve done with the acquisition of the Millennium, with the acquisition of the lot [for which the hotel is proposed], gaining control Whex Garage, getting control of Convention Place Mall—all of these things have given us flexibility,” Leeper said. “A lot of cities would be jealous of having this much property under control—)and having this much property under control that is two blocks from the center of the city. As challenging as things are now, we’ve put ourselves in a good place.”

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