If it weren’t for taxpayers, the Hilton Omaha hotel attached to downtown’s convention center and arena might not have gotten built. Private developers didn’t want to take a risk on the venture, so the city stepped in.
Now, with the CenturyLink Center drawing big-name acts and a solid slate of conventions, the city says it can take steps to get out of the hotel business and eventually get taxpayers off the hook for about $140 million in debt attached to the hotel.
The city announced Thursday that it had reached a deal with Freestone Capital Management for the firm to take over the Hilton Omaha. The city isn’t selling the hotel outright — it’s entering into a 30-year lease-purchase agreement with Freestone, which is based in Seattle.
“I’ve never really felt like the city should be in the business of owning and operating a hotel,” Mayor Jean Stothert said during a press conference Thursday afternoon.
City leaders have looked to get the Hilton Omaha off their hands for a number of years. Initially, they wanted to sell it in one fell swoop. But such a sale wasn’t in the cards, largely because the hotel is only valued at $105 million but the city owes about $140 million in debt tied to it, Stothert said.
Steve Curtiss, the city’s finance director, said, “It became clearer and clearer that the price we wanted for a full sale was beyond what we could get.”
In the lease-purchase agreement, which still needs City Council approval, the city expects to be able to pay off a $37 million bond issue with an initial payment from Freestone. That debt was issued for an expansion of the hotel that was completed in 2013.
The asset management firm would then take over payments on $95 million in additional debt tied to the hotel. That debt was issued for the original construction of the hotel. Freestone could buy the hotel at any time during the 30-year agreement.
“One of the greatest benefits of this deal is it will reduce the city’s debt obligation to the Hilton Omaha,” Stothert said in a statement.
The management company is expected to maintain the hotel’s current standards and update it when needed. Should Freestone default on any bond payments or fail to maintain the standards outlined in the agreement, the city would take back management of the hotel. That means that the city still ultimately assumes the risk associated with the hotel.
“It’s still connected to our convention center, so we have a lot of incentive to make sure it’s run the way we want it to run,” Curtiss said of the city-owned CenturyLink Center.
If the city should need to take back the hotel from Freestone, the firm will have already paid off the $37 million bond. “So the debt we’d owe would be much less than it is today,” Stothert said.
According to the bond payment schedule, the city is taking steps to offload the hotel just as payments on the $95 million bond jump from about $1.6 million annually in principal and interest to $4.4 million annually. By 2047, the bond payments will reach $10.7 million annually.
Jason Fisher, a real estate executive and investor in another future downtown hotel, said the sale of the Hilton to a private company seemed a good deal for taxpayers and a “natural progression” for the property.
“Cities develop something amazing to spur development and attract conventions — and then they privatize it,” he said. “Civic development stuff should always be privatized at some point — that’s a sign the market is healthy.”
The city’s deal comes at a time when numerous hotel developers are joining the Omaha market, attracted by steady business growth and executive travel as well as national annual events such as the College World Series.
A national report on the hotel industry shows that the number of Douglas County hotel rooms has leaped about 56 percent since right before the downtown Hilton opened in 2004.
The travel research firm STR Inc. shows about 6,225 rooms then and about 9,740 rooms available today, said Keith Backsen, executive director of the area’s Convention and Visitors Bureau, which also is known as Visit Omaha and is the agency that markets the city and Douglas County.
That’s not counting the more than 1,000 rooms that currently are in some stage of planning or construction today, he said. (In the larger Omaha metropolitan area, covering three counties, there are more than 15,000 hotel rooms.)
“Our market is attractive to developers, which is why we see a lot of hotel development occur,” Backsen said.
He cited job and research expansion at places including the University of Nebraska Medical Center, growing commercial districts such as Blackstone and Aksarben Village, and downtown activity related to events at CenturyLink Center and TD Ameritrade Park.
The 450-room Hilton opened at 10th and Cass Streets in early 2004, not long after the debut of the CenturyLink Center Omaha, then called the Qwest Center. After some lackluster early years, the city launched a major update to the hotel in 2011, adding 150 rooms, a new ballroom and more parking. The $37 million expansion was completed in 2013.
Omaha City Attorney Paul Kratz acknowledged that building the hotel was a gamble for the city at the time, but he said it’s worked out.
“We weren’t sure about the convention center — how that’d perform,” Kratz said. “We weren’t sure about the hotel, either ... the risk has paid off.”
The deal will go before the City Council on Tuesday. Councilman Ben Gray, who represents the hotel’s district, didn’t immediately return calls seeking comment.
Mike Moylan, developer of the downtown Capitol District, which includes the new Marriott Hotel next door to the Hilton, said that while he was not privy to all city details, he sees the move to sell the Hilton as a benefit to taxpayers.
He called the city’s investment in the hotel business back in 2004 a “smart” and “commonplace” thing to do. “They (city officials) could not get it built privately under the economic times and conditions of the time.”
Those times have changed, he and others said, and developers are attracted to downtown Omaha’s hotel industry.
“Now, if the city has a chance to sell and get their money out, it’s very appropriate on behalf of taxpayers.”
World-Herald staff writer Dan Golden contributed to this report.
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It was about 15 years ago that seeds were planted for an iconic western gateway to Omaha. City officials at the time were preparing a master plan for developing suburbia. Now the seeds have sprouted. Between the Avenue One project and the office parks planned by R&R Realty, an area about four times the size of Aksarben Village is to be transformed at 192nd Street and West Dodge Road. Read more
A former one-story furniture store that has been vacant for several years is to stretch up and out as J. Development plans to integrate a new five-story apartment building into the existing property. When done, the $17.8 million project at 119 N. 72nd St. will contain indoor parking, community and fitness rooms and 158 market-rate apartments ranging in rent from $800 to $1,100. Read more
The long-awaited Dundee Flats (shown above) at 49th and Dodge Streets is finished, and its development team, Sage Capital, is now planning its next apartment project in another “emerging” pocket of the city. That future apartment property in the Benson area is to be called the Mill, a nod to its past as a grain mill, and would become home to 95 market-rate units. Read more
The Centerline apartment complex, a J. Development project on the 72nd Street corridor north of Spring Street, is open for business. Nearly 80 of the 162 units, at 7007 Oak St., are ready and other floors are opening in phases through November. Read more
A batch of 12 newly constructed single-family homes — selling for upward of $300,000 and featuring rooftop decks and garages — is poised to open along the corridor next spring. Milestone Development’s $3.6 million Courtyard on Park Townhomes project stands out on that re-energized stretch between about Harney Street and Woolworth Avenue in that it’s new construction targeting homeowners rather than renters. Read more
In June, John Schmidt unveiled a $5.5 million makeover of the Florentine, a historic stone apartment building west of downtown Omaha at 907 S. 25th St. It's a project 30 years in the making. Read more
Armed with a fresh CEO and more innovations in the pipeline, Valmont Industries is moving its headquarters to a 6-acre piece of the Heartwood redevelopment. Some people foresee the redevelopment, near 150th Street and West Dodge Road, as the new downtown of west Omaha. Read more
It's out with the old — that is, a 1970s-era storage structure at 14th and Howard — and in with a newly constructed bar and restaurant topped with an outdoor deck. Next door, at 1410 Howard St., a separate brick building erected in 1905 is to be restored and turned into retail and office space. Read more
There was plan after plan to renovate the Logan Hotel, a historic building at 18th and Dodge Streets. A local architectural firm worked 15 years to see the structure survive.
People familiar with downtown real estate trends expect retailers — including specialty clothing, novelty shops, service retailers and even a grocery store — to increasingly fill north downtown gaps as more apartment dwellers come to the area and daytime workforces multiply. At the moment, vintage home décor store Prairies in Bloom is rather lonely at 17th and Cuming Streets. READ MORE
A 500-acre tract touted as a future mecca of office, housing and entertainment for west Omaha has a new name — and is gearing up to play a big role for a Berkshire Hathaway affiliate. READ MORE
Newcomers are changing the face of 13th Street as Donut Stop closes and a new, hip joint moves in. READ MORE
A midtown Omaha hotel property that in recent years can’t seem to stick with an identity now has a new owner and is poised to become a Four Points by Sheraton. READ MORE
A South Omaha industrial site is poised to see new and big activity as the future headquarters of Elliott Equipment Co. READ MORE.
A $300 million redevelopment project named Millwork Commons is expected to bring new life and business back to an old industrial tract of north downtown Omaha. READ MORE
A hotel-condo project, a retail center and an apartment complex are among developments helping to fill gaps along or just off of Omaha's busy West Dodge thoroughfare. READ MORE.
A downtown building constructed in 1923 that once housed a cigar shop is to be restored in a $2.38 million project. READ MORE
A local development team has been quietly assembling property to make way for a new retail and housing district on a sleepy southwest fringe of downtown Omaha. But the build-out of that proposed mixed-use Flatiron District is “on pause” given uncertainty over what might rise on a nearby block that Douglas County has targeted for a youth detention facility. READ MORE.
Former Creighton University-turned-NBA baller Anthony Tolliver is bouncing back into town with a planned 150-unit apartment complex near Elkhorn. READ MORE.
A tavern in the form of a tiny house is preparing to open on 13th Street south of downtown Omaha. Called the Tiny House, the bar at 1411 S. 13th St. is being launched by a group including the real estate duo leading the broader effort to revive that section of Little Bohemia. READ MORE.
A hotel, a sports bar and bunches of other retailers soon will start filling out a corner of the Antler View mixed-use development near 192nd Street and West Maple Road. READ MORE
A trendy row house project is to sprout south of downtown Omaha where a family’s flower shop and greenhouse operation once stood. READ MORE
Picking up a development plan that was in place when Security National Bank started building its headquarters in 1999, SNB leaders are planning a new building at One Pacific Place. READ MORE
A $22.2 million housing development called the Bos is going up in the Morton Meadows neighborhood. 158 dwellings are planned for the 2.6-acre site near Saddle Creek Road and Pacific Street. READ MORE
The number of hotel rooms in the Omaha area has jumped about 16 percent in the past five years — higher than the 7 percent increase for the United States over the same period. READ MORE
As once happened for Florence, Benson, Irvington and a handful of other small towns, the buffer between Omaha and Bennington is disappearing. Families are flocking to the outskirts of town, building homes in brand new neighborhoods with brand new schools in the Bennington school district. READ MORE
Loft apartments and rehabbed commercial bays are poised to pop up along Omaha’s historic Auto Row — a stretch once bustling with showrooms of Studebakers, Hudsons and other classic cars. READ MORE
The midtown Omaha campus of the Atlas stands out not only for sheer size, but also its $108 million conversion from a sterile hospital. A mix of retail and residential residents have already started moving in. READ MORE
Sweeping change in Omaha's Little Italy area has neighbors banding together to make sure they have a say in future development. READ MORE.
After Eppley Airfield recorded its busiest month ever in May, airport officials are beginning the next stage of planning for future renovations and expansion. READ MORE
The century-old Blackstone Hotel, most recently used as an office building in midtown Omaha, is poised to be resurrected to its original use under a nearly $75 million plan by two Omaha developers. READ MORE
The Douglas County Board will consider using eminent domain to acquire a property near 18th and Howard Streets for its proposed $120 million juvenile justice center. Read more
The 130-year-old St. Agnes Catholic Church and related buildings appear headed for the same fate as a few other Omaha parishes in the past few years: The campus at 23rd and Q Streets has been sold to a developer who expects to replace it with rental housing. READ MORE.
A familiar Old Market warehouse — the 133-year-old Woolworth building — is now 44 residences. The homes were carved out of the top three floors of the five-story structure on the northeast corner of 12th and Howard Streets. READ MORE.
All Makes Office Equipment witnesses a revival of Omaha's Farnam Street corridor. READ MORE.
A $13 million headquarters for OCI is set to rise northeast of 204th Street and West Maple Road. READ MORE.
A growing Omaha-based Baxter Auto Group is revving up with a new corporate headquarters to be built northwest of 168th Street and West Dodge Road, near three dealership structures the company currently has under construction. READ MORE.
Several projects in the works could bring bustle back to Omaha's 16th Street corridor. READ MORE.
A company that builds senior living communities has staked out an 8-acre spot on Omaha’s sprawling West Farm development. The Avamere Family of Companies, based in the Portland, Oregon, area plans an $84 million project featuring a pair of upscale residential structures with independent senior living, assisted living and memory care units spanning 325,000 square feet. READ MORE.
The former Creighton University Medical Center is becoming the state's largest single structure of market-rate apartments, near 30th and Cuming. READ MORE.
Officials continue to move closer to developing Lot B, an 8-acre piece of downtown real estate near the CenturyLink Center. Plans calls for a $125 million mixed-use development with restaurants, stores, apartments, open spaces and possibly another hotel. READ MORE.
NuStyle Development is poised to convert another downtown Omaha building into housing — replacing much of the Wells Fargo Bank center at 1919 Douglas St. with about 200 apartments and indoor parking. READ MORE.
The 30 Metro residential and retail complex brings a five-story, $20 million investment to North 30th and Fort Streets. The building includes 110 apartments, 12,000 square feet of commercial bays — and the Icona, a sculpture that stands near the entrance to the 113,000-square-foot complex. READ MORE.
The Ponca Tribe of Nebraska plans to move its health clinic and administrative offices from South Omaha to the vacant former Infogroup headquarters campus near 84th and Q Streets. READ MORE.
Omaha's Intercultural Senior Center is building a 22,000-square-foot facility at 5545 Center St. Construction on the $6.2 million project is expected to be done by 2019. READ MORE.
Alvine Engineering is settling into a new home at 12th and Cass Streets, about four blocks north of the 127-year-old digs it had been in for three decades. The facility marks the first corporate headquarters to be constructed in that downtown area since 2013 when a $44 million, 130,500-square-foot facility at 13th Street and Capitol Avenue was built for grain-trader Gavilon. READ MORE.
Omaha’s movers and shakers, with more than half the funds pledged privately, are forging ahead with a $290 million proposal to breathe new life into the city’s downtown riverfront. A conceptual master plan calls for adding spacious lawns for events, a Farnam Street walking promenade that stretches past Eighth Street to the river, a ribbon-shaped rink for ice skating and rollerblading, a water plaza where kids can play and splash, and a dog park. READ MORE.
The Rohwer family is one of the last farm families on 204th Street, one of the final few trying to straddle the fuzzy line between this area’s rural past and suburban present. "My life is farming," said Alan Rohwer. "My life is this land." READ MORE.
Omaha-based Metonic Real Estate Solutions helped refine a project it thinks will target an unmet demand in the west Omaha area. Ravello 192, as it’s called, is planned as a sprawling 11-building town house development offering private entrances and garages for each of the 118 rental residences. READ MORE.
Rising southeast of 10th Street and Capitol Avenue is a six-story mostly residential structure with ground-floor commercial bays. Capitol Place, as the $27 million project is called, is the dream of two former city officials who are shedding a suburban lifestyle to help build Omaha’s downtown central business district. READ MORE.
Two heavy-hitter youth athletic organizations are teaming up to help build a $10 million Elkhorn facility set to sprawl across 135,000 square feet and host up to 400,000 visitors a year. READ MORE.
The century-old farm at 162nd and Fort Streets, which has evolved into mostly rental space for a landscaper, car fanciers and storage-seekers, is at risk. Omaha officials want the operations shut down, citing concerns with permits, zoning, life safety. READ MORE.
Urban Village Development is set to build 167 apartments on the site of the former Grace University administration and dorm structure at 1311 S. 9th St. READ MORE.