Wednesday, November 30, 2005

BET's Bob Johnson and Developers Agree on Hilton Deal in Norfolk

By HARRY MINIUM
The Virginian-Pilot
November 23, 2005

NORFOLK –– City officials will announce an agreement today with one of the nation’s richest hotel entrepreneurs to build a 20- to 25-story luxury hotel and condominium project next to a new conference center and parking garage downtown.

The city and private developers will spend more than $100 million on the project, to be built at the corner of Main and Granby streets just south of the Trader Publishing office tower now under construction, city officials said Tuesday.

The city will spend $61 million, with $33 million earmarked for the conference center, $18.5 million for a parking garage and $9.3 million for land acquisition.

RLJ Development of Bethesda, Md., is the primary developer. It’s headed by Robert L. Johnson, a billionaire who founded Black Entertainment Television and owns the Charlotte Bobcats professional basketball team.

RLJ will work with Fulco Development of Norfolk, headed by William Fuller, a former professional football player. Fulco will hold a minority interest in the project, Fuller said.

The developers will spend at least $28 million to build the hotel, which is expected to be a Hilton, and at least $15 million on 50 to 60 condominiums that would rise on the top five or six floors of the building.

The developers will build the conference center and parking deck and run the conference center for the city.

“It’s very difficult to get full-service, four-star quality hotels financed and constructed in today’s market,” Mayor Paul D. Fraim said. “This deal accomplishes that and brings to the table an association with one of the great American entrepreneurs.”

The hotel is to include an upscale first-floor restaurant, such as a Morton’s Steakhouse. It will receive a performance grant – a rebate of a portion of taxes it generates – from the city that could be worth $750,000 over 10 years.

The hotel will have at least 240 rooms, but city officials said they are hopeful it will have 300 or more. It will generate more than $1.8 million in direct taxes in its first year, city officials said.

The agreement could mark the successful end of the city’s five-year effort to attract a black developer downtown.

An effort by former University of North Carolina football player Donnell Thompson to build a hotel next to Waterside nearly five years ago derailed over site issues. Fuller was a part of Thompson’s investment group.

“I always hoped that a member of the African-American community would be able to enjoy this robust economy we’re enjoying right now in downtown Norfolk,” said Councilman Paul R. Riddick

Norfolk will be building a conference center at a time when there is a glut of convention centers and competition is ramping up in three communities less than 100 miles away.

Richmond, Hampton and Virginia Beach have built or are building large convention centers and competition between all three already is fierce.

Fraim noted that Norfolk’s center would have 73,000 square feet, about one-seventh the size of Virginia Beach’s new facility.

“We really think our niche is the small association group that brings hundreds of conferees as opposed to the thousands that will come to the larger convention centers in our sister cities,” Fraim said. “We hope to attract a crowd that is willing to spend a higher amount for a better quality of service.”

The City Council will be asked to approve a memorandum of understanding between the city and developers on Tuesday. A final deal isn’t expected for six months and the hotel and conference center likely will not open until late 2008.

Both the city and developers have agreed to spend $250,000 each over the next six months as the deal is finalized.

An announcement on the project has been anticipated for more than a year, but negotiations took longer than expected.

“You’ve got tough, methodical negotiators on both sides,” said City Manager Regina V.K. Williams, who handled negotiations for the city along with Roderick S. Woolard, the city’s director of economic development.

“People have been wondering, is it going to happen?” City Councilman Anthony L. Burfoot said. “I’m just glad to see it coming to a close.”

Vice Mayor Daun S. Hester praised Fuller, whose company recently opened a Farm Fresh supermarket in Berkley, for bringing Johnson to the table.

“This will send a message across the country” that Norfolk is a good place to do business, she said.

Unanimous City Council approval seems all but certain.

The project is modest and has more council support than others Johnson has proposed. After a heated debate, the Baltimore City Council two months ago approved a 752-room downtown Hilton Hotel on a 9-5 vote. The city will spend $305 million on that project.

Norfolk’s conference center will be paid for with hotel and meals taxes increases enacted several years ago by the City Council.

Williams said the taxes generate nearly $5 million per year, nearly twice what it will take to service debt on the conference center.

The taxes were increased with the intention of funding a new conference center or basketball arena. Some of those funds have been spent on upgrades to Scope, the city’s aging arena, and to groups helping to promote tourism.

The parking deck, which would have at least 500 spaces and up to 800, will be paid for with parking revenue .

The city spent $9.3 million over the last year from general tax revenues to acquire land for the project, including three buildings – the Ikon Building, a building formerly owned by lawyer Peter G. Decker Jr. and an art deco building that once housed a men’s clothing store – that the Norfolk Preservation Alliance says are historic.

Williams said it isn’t yet known if a portion of those buildings can be saved, though the memo of understanding asks the developers to do all they can to save them. Decker said he was told the facade of his building likely will be saved.

Williams said that the city probably would have spent the $60 million regardless of whether it cut a deal with Johnson. She said the council decided in 2000 that it needed to build a conference center, and the parking deck is needed in part to provide parking for the nearby Trader Publishing building.

Having a Hilton attached to the conference center and at least 240 additional hotel rooms downtown should help ensure the convention center will be a success, she said.

Anthony J. DiFilippo, president and chief executive of the Norfolk Convention and Visitors Bureau, said both the conference center and hotel rooms are sorely needed.

He said the city’s current meeting space, at the Waterside Convention Center, can host groups of up to 1,000. The new conference center would have a banquet room of 23,000 square feet that could host groups of more than 2,000.

“The biggest piece of the pie available is groups in the 1,500 to 2,000 range,” DiFilippo said.

“We’re losing business because we just can’t fit them in.”

Moreover, he said, downtown’s 1,600 rooms aren’t enough to meet current demand.

“It’s going to fill a real void downtown,” Burfoot said.

Reach Harry Minium at (757) 446-2371 or harry.minium@pilotonline.com

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