Unlocking projects
City loans boost 3 plans for hotels expected to aid Hub convention prospects
The city yesterday awarded $40 million in loans to three Boston hotel developers in an effort to jump-start construction by next summer and create more than 1,000 new lodging rooms.
The Westin Convention Center Hotel in South Boston, the Mandarin Oriental Hotel on Boylston Street in the Back Bay, and the Regent Boston Hotel on Battery Wharf in the North End won the funding, designed to generate jobs and tax revenue quickly.
Executives on the winning teams, which had had trouble getting all of their financing from conventional sources, said the city loan program, offered at an interest rate of 12 percent, would allow them to proceed almost immediately with construction.
The city has been anxious to see more hotel rooms built because having enough lodging is viewed as important to the future of the Boston Convention & Exhibition Center, scheduled to open next summer. Many of the larger projects have been stalled because the tourism industry has been in a slump since the 2001 terrorist attacks.
"We're thrilled this is in place, and it really gets us over the top," said Richard L. Martini, development director for the new convention center hotel, which is being built by the Fallon Co., New England Development, and Starwood Hotels & Resorts Worldwide Inc.
All three hotels must be underway in the spring, said Boston Redevelopment Authority spokeswoman Susan Elsbree, or they will lose the money.
Robin Brown, a partner in CWB Boylston LLC, said the $15 million loan his 150-room, $230 million Mandarin Oriental Hotel will receive "absolutely" makes the difference between a continuing financial struggle and getting underway.
"Hotel financing has been a bit of a bear since 9/11," Brown said. "Quite frankly, this amount of money on a project like we're building comes at a perfect time. We should be in the ground by April," he said, referring to the start of construction.
Richard Friedman, developer of the planned hotel at the old Charles Street Jail on Cambridge Street, applied for the money and was one of four projects that didn't get any.
"Obviously we're disappointed. We have a financial gap in our project, and it would have closed the gap," said Friedman, who owns the Charles Hotel in Harvard Square. But, he added, "I applaud the city's creativity."His 300-room, $80 million project is about $8 million short. He hopes to continue to work with the city to make up the missing amount.
Elsbree, of the BRA, said a similar loan program may be repeated next year.
The funding comes from the Department of Housing and Urban Development. The city, which can use the money to generate economic development, loaned $15 million of the $40 million pot for the 790-room convention center hotel, at D and Summer streets next to the new Boston Convention & Exhibition Center.
City officials estimate the three hotels will create more than 1,200 jobs and yield more than $10 million in annual tax revenue.
Developer Harold Theran's long-delayed Battery Wharf project, a Regent Boston Hotel, will move forward with the $10 million loan that it received yesterday, he said.
RBW LLC, the development company, has a construction loan of $135 million and is negotiating for about $45 million more in financing for the project, which like the other two, has permits to go forward.
Working with the city, Theran increased the number of condominium units planned at Battery Wharf from 79 to 103 and reduced the number of hotel rooms from 183 to 144.
The city has been pushing developers to build more housing, and in the current real estate market residences are easier to finance than hotels.
"We've been waiting for the tide to turn," Theran said, and the city loans will make construction possible in the spring.
Three hotel developers that took out applications in the end did not apply for loans.
The four projects that applied but did not receive any money are One Court Square, near Government Center; the Grand Hyatt at Fan Pier; a new hotel at Columbus Center over the Massachusetts Turnpike in the South End; and Friedman's jail hotel.
Exact terms of the financing deals are to be negotiated, city officials said.
Thomas C. Palmer Jr. can be reached at tpalmer@globe.com.
