Nov. 20–Well that nightmare is almost over.
Thirteen years after it opened its doomed hotel in Pittsburgh, the Dauphin County General Authority is expected to close on the sale of the building Thursday, according to Jay Wenger, the authority’s financial advisor.
A Rhode Island-based hotel operator has agreed to buy the Hyatt Regency at the Pittsburgh International Airport for $44.5 million. The bondholders have agreed to accept $8 million less than the principal still owed to them through 2029. The bondholders are also walking away from $35.6 million in theoretical interest payments they understood the unprofitable hotel would not be generating.
“Bondholders were actively encouraging us to sell at this price,” Wenger said.
The authority can walk away without having to spend any more money on the hotel, Wenger said.
Originally, the hotel was an investment, and cash it brought it was going to pay for projects in Dauphin County. That never happened.
The debt service was too high, and after U.S. Airways stopped using the connecting airport as a hub, occupancy rates never recovered to meet earlier projections. Within years of opening, the hotel served as nothing but a drag on the authority half a state’s drive away.
An audit earlier this year said the hotel is well operated. But the auditors said it would be very difficult for the hotel to generate the amount of money needed to satisfy the debt.
The project’s failure didn’t just hurt the authority’s bottom line. The school district and county were all promised hefty payments in lieu of property taxes. They never received a dollar. They all agreed to the sale, Wenger said.
The sale should be a small relief to Dauphin County taxpayers. While the county never pledged to back the hotel investment with tax dollars — as it did for some other authority investments — this removes a linger question from the mind of any outside investor looking to buy bonds on a future authority project.
The authority has been trying to offload the hotel for more than a year. In 2012 alone, the authority paid Wenger $26,835 in fees solely for hotel-related matters, according to authority records.
