September 4, 2012  1:00 PM

Advisory committee says Hyatt proposal should move forward, provided union issues are resolved

A consortium including the hotel chain Hyatt appears to be the big winner in the search for a company to develop a hotel near the Oregon Convention Center, with an advisory committee recommending the group proceed to negotiations with regional leaders.

OCC Hotel A

A rendering of one of four proposals by Mortenson Development. This proposal calls for two hotels to be built north of the Oregon Convention Center.

OCC Hotel B

A rendering of one of four proposals by Mortenson Development. This proposal calls for one large hotel to be built north of the Oregon Convention Center.

The group, led by Mortenson Development, proposes building two Hyatt-branded hotels on land owned by the Schlesinger Companies just north of the Oregon Convention Center on NE Holladay Street. The group also offered an alternative plan for building the hotels on the Oregon Convention Center Plaza, east of the center.

The Hyatt proposal isn't an instant winner – the committee merely recommended that regional leaders proceed to negotiating a final proposal with Mortenson Development, with the goal of opening the hotel by late 2015.

In its proposal, the Mortenson team says it has private financing available to build its project, and asks for two subsidies: A one-time, $10.3 million payment from taxpayers and a waiver of local hotel room occupancy taxes.

In return, the development group would guarantee that there would be rooms available at the hotel for large conventions seeking to hold a show in Portland. The request from taxpayers could rise to $36.1 million if the hotel is sited east of the center, instead of north.

Read Metro's staff report on the selection process (PDF)

An advisory team, assembled by Metro and consisting of tourism industry officials, unanimously recommended the Mortenson proposal move forward. The Metro Council would have to sign off on any deal before it becomes official.

Teri Dresler, director of Metro's visitor venues, was on the advisory committee. She said the committee coalesced around Hyatt after its last meeting, when the group reviewed answers from developers to a round of follow-up questions.

"It wasn't until we got into that meeting where people really gave Mortenson and Hyatt the thumbs-up," she said. "They really set themselves apart by doing a lot of work up front. It gave the team a lot of confidence that we could meet our goals. They agreed to meet all of the public goals, and I think the stability of their financing was a real solid aspect."

The labor peace piece

The selection of the Hyatt-flagged group is a little surprising given the company's history with labor unions and Portland politicians' reluctance to cross organized labor. UNITE HERE, a nationwide union of 265,000 members that includes hotel workers, has called for a worldwide boycott of Hyatt hotels, calling the chain "the worst hotel employer in America."

Metro leaders think they can avoid that controversy with a labor peace agreement, which a staff report says would be signed before any formal negotiations took place.

Because of the sensitivity of negotiations, representatives from Metro and UNITE HERE were reluctant to speak on the record about the organized labor aspect of the proposal. They did, however, provide information on background. Representatives from Hyatt did not respond to requests for comment.

Metro staffers describe a labor peace agreement as a way to simplify the process of determining whether a shop will be union. Instead of going through an often-contentious procedure dictated by federal protocols, the process essentially is streamlined after a card-check and generally favors union organizers – if they can get a majority of employees to agree to be represented.

A UNITE HERE representative said that union represents Hyatt workers in 14 cities in North America, with workers in three of those cities working without a contract. The Hyatt hotels with union-represented workers are exempt from the global boycott, the representative said.

The UNITE HERE representative said non-union housekeepers are responsible for cleaning as many as 30 rooms a day, double the workload of union workers. She also pointed to a class action suit filed on behalf of Hyatt workers in Indianapolis, alleging wage and hour violations at 10 Indiana hotels, including Hyatt-branded hotels.

Roy Jay, one of the committee members, said the region would benefit in convention recruitment if the facility is union-operated.

"It's real clear to me we would have to have a union-operated facility, not just during construction," he said. 

Proposal details

Hyatt's primary proposal calls for the construction of a 420-room Hyatt Regency hotel and an adjacent 181-room Hyatt Place hotel on the lots north of the Oregon Convention Center along Holladay Street. Mortenson would build the hotel; Hyatt would buy it from Mortenson upon completion in late 2015.

Another option proposed by Mortenson was for one 600-room Hyatt Regency hotel instead of two hotels.

The publicly financed portion of the project – in exchange for Hyatt keeping 500 rooms available for booking by large conventions – would likely come from a combination of cash from the Portland Development Commission and from Metro. About $8 million of the $10 million requested has been identified so far; the publicly-financed amount could change as a result of negotiations.

Specific sources of funding have not yet been identified, but Portland's Oregon Convention Center Urban Renewal District is likely to be tapped for part of the money.

According to a Metro staff report, the Hyatt project would cost between $157 million and $200 million, depending on the site chosen for the project.

One other group, led by Lloyd District developer Langley Investment Properties working with Sheraton hotels, pitched a proposal to Metro.

While the Langley proposal called for less public financing – an $8 million loan with a 4 percent interest rate, plus a 60-year land lease with $200,000 annual rent payments – committee members had questions about Langley's ability to finance the project in a timely manner.

"It was very speculative," Dresler said, "and Mortenson was very solid."

Langley's proposal called for construction of a hotel at the Martin Luther King, Jr. Plaza on the northeast corner of the Oregon Convention Center.

Why we're here

Metro has been trying for years to attract a developer to build a hotel adjacent to the Oregon Convention Center, with the hopes that the availability of a large block of hotel rooms would encourage more national conventions to book the center.

But previous efforts have faltered, in part because of widespread opposition to the amount of public investment proposed for the private development – some proposals called for more than $80 million of public money to be put towards construction of a convention center hotel.

The Metro Council is scheduled to discuss the hotel proposals at a work session this afternoon; the Portland Development Commission is set to vote on selecting a favored developer to negotiate with on Sept. 12, with the Metro Council set to vote on the same topic the next day.

"This is only Round 1 of 15 rounds," Jay said. "This is a heavyweight championship, and everybody's got to win. They (the developers) have to win, we have to win and I'm sure there's going to be some negotiations that make sure that the people of this region are going to win."

Metro News editor Nick Christensen can be reached at nick.christensen@oregonmetro.gov or 503-813-7583. Follow Metro on Twitter @oregonmetro.

Clarification: An earlier version of this story omitted a mention to Mortenson's option for one 600 room hotel. This version has been updated.

See also:

Finalists for convention center hotel proposal could be announced next month (July 12, 2012)
Metro Council will hear proposals for privately funding convention center hotel (April 26, 2012)
Hughes: Time to restart convention center hotel discussion (Feb. 23, 2011)
Convention center hotel discussion shifts to private sector, smaller incentives (Jan. 18, 2012) 

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