New Orleans Convention Center’s major $560M hotel project is in doubt; here’s why

By Anthony McAuley

Source: The Times-Picayune | The New Orleans Advocate

October 8, 2020

The financial backer of the 1,200-room hotel at the upriver end of the Ernest N. Morial Convention Center has pulled out of the project, putting the future of the development in doubt as the coronavirus continues to wreak havoc on the city’s hospitality sector.

A hotel has long been a key part of the Convention Center’s plans to convert more than 47 undeveloped upriver acres it owns into a vast “entertainment district”, which would also include a mix of housing, new cultural and entertainment venues and outdoor spaces along the riverfront.

But on Thursday, the facility’s president and general manager, Michael Sawaya, told his oversight board that the project to build an Omni hotel with a development consortium comprising Dallas-based Matthews Southwest and local hotelier Darryl Berger will now not go ahead in the proposed form. He said it is not clear if an alternative will be found.

Sawaya said that the financing partner for the hotel, which was budgeted to cost around $560 million, had decided to pull out because of the uncertain outlook for the convention and tourism sector.

“The developer’s finance partner, Preston Hollow Capital, moved on,” Sawaya said. “Therefore, it is incumbent on the developer to offer an alternative proposition for us to consider.”

He said the board might consider a smaller hotel, or a hotel built in phases, or other ideas. “But at this point in time, it is up to them to come back with new ideas for how it would look,” Sawaya said.

The Berger Company, Darryl Berger’s development company, did not respond to a request for comment.

The Convention Center has been depleting cash at a rapid rate since the end of March, when it had to cease any large gatherings and convert to a temporary “step-down” medical facility for COVID-19 patients.

All of its major events have been canceled since the coronavirus forced shutdowns across the U.S. Cancellations for the rest of 2020 and into 2021 have also piled up, suggesting that a business that brings tens of thousands of conventioneers to New Orleans is far from recovering.

In August, it was commandeered as a facility to dispense medicine and other essentials to people who had been displaced by Hurricane Laura.

The hotel has been controversial since it was first conceived nearly a decade ago. The most recent proposal was criticized in April by the Bureau of Governmental Research, a public policy watchdog, as a poor use of taxpayers’ money at a time when the coronavirus pandemic was draining public finances.

The Convention Center has been spending between $3 million and $4 million a month, mostly to keep its employees on full salary and benefits, and drawing on its large cash reserves while it was seeing no income from events and only about one-third of the hotel tax revenue it had expected this year.

Still, the board heard on Thursday that the Convention Center’s leaders will push ahead with plans to pick a “master developer” for the remaining upriver acres from the three development groups that were short-listed in April.

The center’s leadership has argued that the investment, which would include a mixture of public and private funds, is needed in order to keep the Convention Center and the city competitive in an increasingly cutthroat conventions and tourism market.

At the annual strategy meeting on Thursday, the board heard presentations from management and outside consultants arguing that the planned investments to upgrade the existing facility, which are budgeted at $557 million — as well as the grander vision for the upriver property — will be even more necessary when the convention business eventually rebounds after the pandemic.

While the hotel had opponents and supporters, there is broad backing from the board for the upriver development, which is expected to include a component of affordable housing and opportunities for employment. It has also been touted as a way to connect an otherwise isolated tract of land to other cultural hubs, like the French Quarter, the Julia Street corridor, the Garden District and Uptown.

The three developers competing for the entertainment district project were asked to include in their plans a new civil rights museum, as well as other cultural amenities and public spaces.

The board plans to hold a public meeting on November 16 to see presentations from the three finalists.

The finalists are: The Domain Companies, run by Matthew Schwartz and Chris Papamichael, whose projects include the South Market District; The Woodward, Levanthal and Carpenter & Co. consortium, which includes partners who are building the Four Seasons New Orleans, which is expected to be completed next year; and, the Lauricella Land, Cypress Equities, JCH Properties consortium.

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