SEATTLE – Don’t worry about this bailout.
The Washington State Convention Center expansion project, which has seen its finances hammered by the pandemic and subsequent devastation to the travel and tourism industries, has secured funding to complete the project, the developers announced last week.
For months, the project’s developers had warned that they were running out of money to complete the $ 1.9 billion project and if a government-guaranteed loan was unsecured, construction would halt this year, leaving an unnecessary steel and concrete skeleton in the heart of downtown. Seattle.
King County had pledged to find a way to lend the project $ 100 million. Seattle and Washington state have both said they are looking for ways to lend, or somehow, an additional $ 200 million to fill the project’s funding gap.
But now, with more than 100 million Americans at least partially vaccinated against COVID-19, millions more are getting vaccinated every day and an economy that appears poised to rebound, the convention center has secured private funding for complete the project which has always been the pre-pandemic plan.
“The fact that private financial institutions have been willing to invest in Convention Center debt this week indicates that investors believe our regional economy is improving rapidly and that tourism and conventions will quickly return to pre-pandemic levels.” King County Director Dow Constantine said. in a prepared statement. “When things looked risky for the Convention Center, we were ready to step in and help save 1,000 construction jobs and keep the momentum of this economic development project going.”
On Wednesday, the Convention Center sold $ 342 million worth of bonds, which developers say should be enough to complete the project, with a ribbon cut slated for summer 2022.
This funding and the past for the expansion project are supported by future King County accommodation tax revenues. Essentially, it’s a bet that a larger convention center will attract more hotel guests who, in turn, will pay more hotel tax, which will then be used to reimburse the costs of building the larger convention center. Congress.
But when the pandemic hit, people stopped traveling. Revenues at downtown Seattle hotels fell more than 90% from the previous year, according to the Downtown Seattle Association. Suddenly, betting on future hotel tax revenues did not seem such a sure thing for investors and a bailout was looming.
Almost a year ago, project managers started warning they were running out of money.
“Here’s what has changed,” said Matt Griffin, managing partner of project developer, Pine Street Group. “Six months ago we didn’t have a vaccine and we didn’t have these big stimulus packages either, and what really happened in the bond market was people realized that the recovery was coming.
“People are going to have to start traveling again; we can take risks, ”he said.
Griffin said he was approached about six weeks ago by their bankers with JP Morgan, who said private finance was looking, once again, that could be an option.
“They said the world is changing, we can go back, maybe be able to go back, to the old plan,” Griffin said.
Griffin said the convention center still plans to ask Washington state about $ 55 million in federal stimulus to cover increased construction costs related to the pandemic.
There were more than $ 3 billion in orders for the $ 342 million in bonds, which sold at an interest rate of 2.8%, the convention center said, “a testimonial from the bond market belief in the long-term strength of Seattle and the Region. “
A project linked to an Atlanta convention center had a worse deal last month, selling $ 440 million in bonds at a 4.2% interest rate.
State Treasurer Mike Pellicciotti had to approve the bond offer.
The sale, said Pellicciotti, shows that “the private market has confidence in the future.
growing tourism in our state, while freeing up public funds so state and local governments can now spend on Washington’s other critical recovery and investment needs.
It’s still unclear how convention activity will rebound after a year in which business travel essentially came to a halt and conferences drifted away. Houston says he did it for the second half of this year as it did for the same months in 2019.
In Seattle, forecasts vary. The president of the Downtown Seattle Association plans the return of conventions and business travel in early 2022, while the CEO of Visit Seattle said earlier this year he doesn’t see downtown tourism recovering. completely before 2024.
The bond offering, developed by the convention center, foresees 22 convention center events in the second half of 2021. There were 212 events in 2019.
A total of 71 groups have canceled convention center events due to the pandemic. Of those, 14 have been rescheduled for the coming years, 26 are considering rescheduling and the rest will not be rescheduled, according to the convention center.
The convention center has reserved 30 events, so far, for 2022 and 27 for 2023.
When the expansion opens, it will double the capacity of the center and allow multiple events simultaneously.
“Although future bookings are down from the normal rate due to 18 months of disruption caused by the COVID-19 pandemic,” the convention center wrote in its bond offer, they are “contacted by associations , business planners and mainstream show managers asking for future dates, expressing willingness to hold meetings in 2022, and seeking information for planning purposes. “