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Development, Design and Financing Strategies for Urban Revitalization Using Hospitality and the Arts21c Museum Hotel and Downtown Louisville

ULI

26 October 2011

LOUISVILLE:

Museum Hotel

Nineteenth Century

Warehouses

The Architectural Story

1979

1979

1995

08 October 2004

The 21c Financing and Financial Story

The 21c Financing and Financial Story

2001

Laura Lee Brown and Steve Wilson want to help revitalize Downtown Louisville by developing a project that exposes people more regularly and conveniently to contemporary art.

2001 – 2006

Most of Louisville thinks Steve and Laura Lee are crazy for trying to build a boutique hotel in Louisville focused on contemporary art.

2004

Banks wholeheartedly agree with this sentiment, but we still create a public / private financing partnership that permits 21c to become a reality.

2006

21c opens

Significant Occupancy Growth

Market Leading Rates (by a huge margin)

Expanding Lead Over Competition

Notes:1. RevPAR = Revenue Per Available Room2. RevPAR Index of 150 means that 21c’s RevPAR is 50% higher than that of its Competitive Set of local hotels. Or, in other words, 21c is generating 50% more money per room, per night than its competition.

2011 YTD Through September

Smith Travel Research, Inc.

2010 Survey Dataguest satisfaction

21c Museum Hotel 2011 YTD: 95.35

awards

cincinnati

- construction started May 2011- opens October 2012- 156 rooms- $50 million (significant local, state & federal incentives)

bentonville

- site work has started- opens January 2013- 103 rooms- $30 million

The financing challenges of the early 2000s are very similar

to the challenges today

Challenges of Financing Projects Today

Bank loans for new construction are extremely difficult to find - Personal guarantees and other collateral are almost a given - Many banks won’t even consider a hotel loan for ambiguous regulatory or industry reasons

City and state governments want to help, but have tight budgets

Federal Government programs: - Are at constant risk of extinction - Have enormous transaction closing costs - Are less valuable today

These challenges will likely remain for the foreseeable future (the ‘new normal’)

Category of Incentive 21c Louisville (closed December 2004)

21c Cincinnati (closed October 2011)

City Grant for Museum $1,700,000 $2,500,000

City Property Tax TIF $3,800,000

State Sales Tax Refund $3,000,000

Federal Historic and New Markets Tax Credits $6,800,000 $11,600,000

State Historic Tax Credits $1,000,000 $6,000,000

Bank Loan(s) $11,000,000 $20,000,000

Subordinated Loan $6,000,000

Owner Equity

Overview of Financing Structure

Cincinnati Financing

Opportunities Today

Favorable construction pricing - New construction vs. rehabilitation

Hotel market is picking back up

Very few other new projects

Competition may have neglected upkeep

Public sector looking to help jump start construction projects - Full-service hotels create many new jobs

Public sector likes unique and new - Unfortunately, financiers like ‘the familiar’ - Line up public incentives first

At the end of the day, it’s all about people…Excitement, hard work, creativity, and a solid plan are the foundations for success

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