The financial crisis has postponed, if not canceled altogether, many corporate deals, securities offerings and real estate development projects, economists and attorneys have said.
But a $134 million hotel development near the Georgia International Convention Center and Hartsfield-Jackson Atlanta International Airport was just ahead of the storm. The project broke ground on Sept. 12. Bank of America announced it was buying Merrill Lynch on Sept. 15 and Lehman Brothers filed for bankruptcy on the same day.
More than two years in the making, the project, led by Atlanta developer Grove Street Partners LLC, will add two Marriott-branded hotels to a 25-acre site. The hotels will anchor a 1 million-square-foot mixed-use development to be called Gateway Center. It will be the only stop on a new automated people mover between the airport’s baggage claim area and its new rental car facility.
Although the financing closed before the Wall Street maelstrom occurred, Sheley & Hall partner Raymond Sheley [right], lead counsel to Grove Street, said the transaction probably would have proceeded even if it had closed later—thanks to how the deal was structured.
He said financing will come from a combination of equity, bond revenue and debt. The group of debt lenders, led by U.S. Bancorp, won’t be required to fulfill its obligations until Grove Street spends all $51 million of the equity and bond proceeds—about nine months from now.
“The debt lenders said that the national economic turmoil would shake out before they will have to put in their own dollars,” Sheley said. “That lag will be our saving grace.”
The first of the two hotels, a 147-room Spring Hill Suites, is expected to open in February 2010. The second, a 403-room Marriott, should open by August 2010.
U.S. Bancorp never considered pulling out of the deal because of national economic conditions, said U.S. Bancorp’s lead counsel, Seyfarth Shaw partner Mark Block.
“U.S. Bancorp is a very conservative lender, and I think that, between the project developers and the other people backing it, they always felt very comfortable” with this deal, Block said.
One of the development’s financing elements will be proceeds from bonds backed by payments in lieu of taxes, also known as PILOT bonds. Since the site is owned by the city of College Park, and therefore exempt from tax, Grove Partners will make scheduled payments to the city instead of paying taxes.
The Grove Street project will be only the third in the state of Georgia to use PILOT bonds, Sheley said.
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