Hotel elevator floor indicator
Patrick Tuohey

A piece in The Kansas City Business Journal suggests that the efforts  of Mike Burke and his development partners to raise the private money needed to build a convention hotel might be cause for concern. It is difficult to tell, however, because the developers have hardly been forthcoming about the project. Given the public involvement and assistance with this project—and our history with big, subsidized projects negotiated in secret—shouldn’t taxpayer investors know more? 

The piece in question is about how Hyatt learned only recently that they would not be the hotel operator and includes the following:

[Hyatt senior vice president of development, David] Tarr said he also had been surprised to learn a few months earlier [than June 21] that KC Hotel Developers was coming up $30 million to $40 million short on equity.

“When we partner with a development group, we like to know that they have the most meaningful portion of the equity (in a new hotel project),” Tarr said. “That’s our preference in most situations, and in this particular situation, we came to the table with this group because we felt that they had the wherewithal to assemble the capital to do the project and that our equity was not required.

Tarr was wrong. According to The Kansas City Star, “Tarr said Hyatt was approached by KC Hotel Developers for additional equity in the project.” Hyatt declined, and on June 21 found out that after years of work that they had been cut out of the deal. Tarr suspects the developers may have gone to the market looking for additional equity, “but may have settled for significantly less than that.”

Just over a month ago I wrote that, despite their claims to the contrary, the developers didn’t have the financing in place. Now we learn from Hyatt that the developers had a $30 to $40 million gap. Was Loews, the company chosen to operate the hotel, offering to make up the difference? A June 21 Star piece suggests this was the case:

Burke said Hyatt is a terrific operator “but at the end of the day, our obligation was to get a convention hotel financed, built and operating. We believe that partnering with Loews gives us certainty,” he said. “That’s most important. This deal has been kicked around for six years.”

Unfortunately, we can’t be sure. According to the Star, “Burke and [Lowes CEO Jonathan] Tisch declined to provide details of how much money Loews is investing in the project, which has had a total estimated cost of $311 million.”

It’s worth asking whether Loews—a smaller company than Hyatt and which does not appear to operate any other convention hotels—is in a position to put up the $36 to $48 million that Hyatt elected not to contribute. Until City Hall starts demanding transparency from the developers, taxpayers won’t have any way of knowing the risks involved. Even if only investors lose on a venture, another failed convention hotel would be a blight on the KC skyline.

About the Author

Patrick Tuohey
Patrick Tuohey
Senior Fellow of Municipal Policy

Patrick Tuohey works with taxpayers, media, and policymakers to foster understanding of the conse