Sites 2 & 3, Omni CC Hotel + Tower

[paytonc]

@Jake

a gigantic restaurant, an unnecessary cafe (Sir Walter just opened across the street lol) and a sports bar?

It’s a convention hotel, so those are standard-issue fare.

[Vatnos]

MSN

The project initially called for a 560-room hotel to open in 2027 with the city approving $75 million in bonds for the hotel. Now, the plan calls for an approximate 600 key hotel

So… is the hotel getting bigger?

[Jake]

Doubt 40 more rooms changes anything to the massing - they’ll probably just remove some of the office space in exchange for more hotel.

[OakCityDylan]

Or somebody is just rounding up for the sake of the article.

[JKK]

Any news if this will be starting this year?

[Jake]

I was under the impression it would start in the fall! Someone correct me if I’m off

[Deekay93]

From the articles I’m seeing, they all say 2026 start. With an excepted completion in the 2nd half of 2028.

[keita]

Nope, it’actually is getting bigger!

The City Council meeting this past Tuesday included this presentation that asked for permission for staff to change the terms of negotiations with the Omni.

@City Council presentation

	Original Terms	Proposed Changes
Hotel room count	~550 rooms	~600 rooms
Land terms	99-year ground lease	Fee simple sale
Project completion guaranty	No	Yes
Room block agreement	40 years	50 years
Developer financing	Tax-exempt financing	Equity
City investment	$75M interlocal funds + cost of environmental remediation (~$5.5M)	$75M interlocal funds + credits against land proceeds to cover public infrastructure and cost of remediation (with not exceed the land proceeds)
City up-front revenue	None	Fair market value of land proceeds, less applicable credits

Advantages

• Additional hotel rooms provides increased convention center booking
• Extended room block agreement ensures longer period of access to hotel rooms
• Guaranty allows for legally bound completion of hotel
• Equity investment by developer reduces risk associated with plan of finance for hotel
• Future property tax proceeds from the land sale
• Sales tax collections from the construction of hotel
• City’s remediation costs are offset by land proceeds

[raleighdeveloper]

@City Council presentation

75M interlocal funds + credits against land proceeds to cover public infrastructure and cost of remediation (with not exceed the land proceeds)

Going from ground lease to fee simple is positive!

[aqdillman71]

Curious about this. Can you please explain the difference between “ground lease” and “fee simple”. Thanks!

[StreetviewRDU]

@City Council presentation

Equity investment by developer reduces risk associated with plan of finance for hotel

I think I learned how to quote now. Not as hard as I thought lol. You have to figure it out for yourself here bc there is no tutorial or help

Anyway, what “risk” are they talking about with the financing? Remember how we were positively assured by council that the financing was a done deal? This definitely makes me pause.

[kjhburg]

with the additional 50 rooms does this mean the Omni will grow taller by a few floors?
Buildings with ground leases are tougher to finance fee simple just means they will now own the land underneath which is always preferrable.

[StreetviewRDU]

Team, we should be questioning why the financing is back to being center of discussion. We were shut up really quickly last year when council said financing was no concern and already locked in for this project. If that’s now no longer the case, we shouldn’t be ok with that. Can anyone elaborate?

[Spero]

Ground lease = a lease. Developer pays rent (even if it’s just $1) but after 99 yrs they leave and the land belongs to the city.

Fee simple = owned outright. The city doesn’t have anymore direct interest in the land.

[Kanatenah]

Sounds like

@City Council presentation

75M interlocal funds + credits against land proceeds to cover public infrastructure and cost of remediation (with not exceed the land proceeds)

Sounds like funding for public infrastructure and remediation.

Probably different from financing of the building itself.

[OakCityDylan]

I wonder if these proposed changes introduce any risk or delay in the project happening?

[keita]

@StreetviewRDU

@City Council presentation

Equity investment by developer reduces risk associated with plan of finance for hotel

what “risk” are they talking about with the financing?

“Risk”, in the sense that it’s harder for Omni to convince investors to give them money if they don’t legally own the land they’re building on. This article from a real estate private equity firm explains it pretty clearly:

@First National Realty Partners article

In a ground lease structure, the major risk is getting financing. In almost all commercial real estate transactions, a senior lender needs to secure their loan with a first position lien on the property. But, the borrower in a ground lease transaction is not the land owner so they aren’t able to provide this to a lender. Instead, they need to get the land owner to “subordinate” their interest to the lender. While necessary, this comes with risks. In an absolute worst case scenario, the land owner could lose the leased property to a lender without any compensation for it.

In the extreme situation where Omni goes bankrupt and the city repossesses the hotel, we, the citizens, might not notice anything overly drastic. But in the eyes of lenders who’d want their investment back from Omni like they were promised, this would be a disaster.

@StreetviewRDU

we should be questioning why the financing is back to being center of discussion. [Last year,] council said financing was no concern and already locked in for this project. If that’s now no longer the case […] can anyone elaborate?

…therefore, it’s now a different situation. If anything, the fee simple arrangement would make it easier to get financing (especially since the City of Raleigh no longer needs to be directly involved in that whole negotiation process).

To get back to @OakCityDylan’s question, though: has anyone watched the full presentation/discussion or otherwise know about any possible timeline changes?

[StreetviewRDU]

Thank you for this. So they are renegotiating and the financing is absolutely not solidified like we were told. Yikes…

I’m sure the project will still happen, it’s too important, and the new terms should make it easier to secure financing now (because, again, the financing was apparently NOT secured like council told us it was directly last year). I save receipts too and won’t forget this one.

[trueurbanist]

For them to request the addition of rooms in the same month would suggest there seems to be no issue in sight with finding potential investors.

The council has changed and there have been multiple municipal budget changes. The financing for the hotel was mentioned in one or two of the previous iterations of their annual budget.

[mike]

@kjhburg

with the additional 50 rooms does this mean the Omni will grow taller by a few floors?

The floor plans showed 26 rooms per floor, so I assume this means 2 extra floors.