Midwest cities plan convention center renovations

Chicago’s Metropolitan Pier and Exposition Authority, which runs the city’s 2.6 million square foot convention center, McCormick Place, expects to sell up to $231 million of McCormick Place Expansion Project refunding bonds next month while exploring options for upgrades to the facility’s Lakeside Center building and plans to renovate the Hyatt Regency McCormick’s guest rooms. 

The MPEA approved the sale of up to $55 million Series 2024A and up to $176 million Series 2024B bonds at its June board meeting and announced the potential issuance on EMMA last week. 

The bonds are expected to price the week of July 22. The Series 2024B bonds will be used to fund the purchase via tender of certain outstanding bonds.

The expansion project’s 2023A refunding bonds were rated A with a stable outlook by S&P Global Ratings, BBB-plus with a stable outlook by Fitch Ratings and AA-minus with a stable outlook by KBRA. They were secured by a pledge of MPEA tax revenues and a share of state sales tax revenues, according to the official statement.

The MPEA collected $154.4 million in taxes in 2020.  In 2021, restrained by the pandemic, it collected only $47.58 million. But collections bounced back to $117.22 million in 2022, and in fiscal year 2023, the MPEA collected $168.42 million (with $162.12 million used to pay debt service).

McCormick Place has seen “a strong recovery from the pandemic,” MPEA CEO Larita Clark said. “In FY23, we … had $336.9 million in operating revenue, $60 million over budget, and more importantly delivered $2.01 billion in economic impact for the city and state.”

The authority recently wrapped up renovations at the Hyatt Regency, on its ballroom, corridors and conference center, financed through the MPEA’s capital budget, Clark said.

Not every Midwestern convention center has recovered from the pandemic so smoothly. The America’s Center convention center in downtown St. Louis is also expanding, but its efforts have been beset by delays and cost overruns. 

Earlier this year, Explore St. Louis, the public tourism agency that operates America’s Center, asked the city for another $20 million for the project, bringing the total estimated cost to nearly $260 million.

The agency suggested the extra $20 million could come from interest on American Rescue Plan Act funds given to the city and interest on the city’s settlement from the departure of the National Football League’s Rams, according to the St. Louis Business Journal. 

A spokesperson for Explore St. Louis did not respond to requests for comment by press time.

The delays and a reported decline in convention bookings have impacted surrounding hotels, the St. Louis Post-Dispatch reported. Explore St. Louis is searching for a successor to its longtime president Kitty Ratcliffe, whose contract ends next June.

The city-owned convention center expansion was also held up by political wrangling between the St. Louis County executive and the county council, according to the St. Louis American. 

In 2019, the county council passed an ordinance that funded half of the then-$210 million project, with the city expected to pay the other half. But the council wanted to sign off on any bond documents. 

Roughly a year later, the council and the city entered an intergovernmental agreement. The city issued bonds in October 2020. In July 2021, the county executive sought final approval from the council for the county’s bond issuance, but bonds weren’t issued until April 2022, by which time costs had escalated. 

Separately, Duke Energy Convention Center in Cincinnati is embarking on a $400 million hotel and convention center renovation, $317.5 million of which will be financed by tax-exempt revenue bonds. 

The three series of revenue and refunding bonds, issued by the Port of Greater Cincinnati Development Authority, draw on transient occupancy tax revenues from the city and the county. 

The $57.25 million of senior development revenue and refunding bonds, Series 2024A, are rated Aa3 by Moody’s Ratings and AA by S&P. The outlook is stable.

The $216.4 million of first subordinate development revenue and refunding bonds, Series 2024B, are partially insured by Assured Guaranty. Moody’s assigned the insured maturities a rating of A1 and the uninsured maturities a rating of A2. S&P assigned the insured maturities a AA rating and the uninsured maturities an A-minus rating. The outlook is stable.

The $43.85 million of second subordinate development revenue bonds, Series 2024C, are insured by Assured Guaranty. Moody’s assigned an insured rating of A1 and an underlying rating of A3, and S&P assigned an insured rating of AA and underlying rating of BBB, both with a stable outlook.

The convention center renovations have been in the works since 2019, according to Caitlin Felvus, legal director for the Cincinnati Center City Development Corp., the nonprofit real estate group serving as developer for the convention center renovations. Once COVID-19 hit, it changed some calculations.

“Over the last two years in particular, we’ve really been trying to manage interest rate risk and escalation risk,” Felvus said. “We managed those by looking at the scope of the project … and then really pushing on our investment banking team and our underwriters as well as our construction manager to make sure that we could do the full scope of the project.”

They closed on financing at the end of May, and construction is slated to begin the week of July 1. 

“The Cincinnati convention center is very important to the city as well as to Hamilton County; it’s really a regional resource,” Felvus said. “There’s a number of other competitor cities that have been working on their convention centers and renovating them … and to be able to open up the number of conventions, the size of conventions, we believe will bring people from outside of Cincinnati here. We think this will be transformative for the region.”