Monday, December 19, 2011

"Ultra-luxury" Georgetown Hotel Secures Financing

The long-simmering Georgetown luxury hotel project has secured financing and is finally moving forward, with an eye towards a December 2012 completion, just in time for the 2013 presidential inauguration.
The Capella Georgetown will be an “ultra luxury” hotel at 1050 31st Street NW, the former American Trial Lawyers Association building. The five-story building, which overlooks the C&O Canal, will feature just 49 rooms and interiors designed by German firm Peter Silling & Associates. The design also calls for a public restaurant and bar overlooking the canal, but details aren't in place just yet. The project, spearheaded by Capella Hotels and Resorts, ICG Properties, and D.C.-based Castleton Holdings Inc., recently brought in Point Ford Management Ltd., an investment firm based in Indonesia, to complete financing for the project, which is estimated in the $45 million range.

"The [financing] process was challenging because of the market," says Nick Demas, Partner at Castleton Holdings LLC. "But in challenging markets there is also great opportunity. We worked through the market fluctuations and successfully secured all the funds needed to complete the project this past July. Our lender, PNC Bank, has been really supportive of the project and our partnership. And we are very excited about our relationship with our new equity partners, Point Ford Management Limited. They are terrific partners and are committed to our program of assembling an ultra-luxury hotel portfolio. As a developer, you really can’t ask for anything more."

The Capella Georgetown will cater to foreign dignitaries, captains of industry, and other international clientele (discussion at an October meeting of the Georgetown advisory neighborhood commission touched on possible entourage-related traffic jams), and the hotel will be accordingly discreet. While the interior has been gutted, the drab office building will receive only minor cosmetic changes to the exterior – new window frames and a slightly larger canopy - in deference not only to future guests' desire to keep a low profile, but also to neighborhood preferences for aesthetic continuity. By restricting the heavy redesign to the interior of the site, the developers have sidestepped the community backlash that often follows these sorts of projects. Demas says of the locals: "We are thrilled that our plan was so well received by our neighbors, the ANC and the Old Georgetown Board." And ANC2E Commissioner Tom Birch was quoted recently as praising the developers for "turning a sow's ear into a silk purse." The contrast between this hugfest and, say, the ongoing drama of the Friedman/Schrager Adams Morgan hotel could scarcely be greater.

Still, despite Demas' demurrals, this project was never realistically going to have problem attracting financing. Hotels, especially luxury ones, have proven to be safe money through the recession, and the District hotel market has historically been one of the strongest in the nation. Local occupancy rates have held steady in the low seventies, and while average luxury rates softened in the past few years, they’ve recovered to nearly the level of their 2008 peak.

This will be Atlanta-based Capella’s second hotel in the United States (its other property is in New York), and the company plans to expand into several other U.S. cities in the near future.


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