* There are two premises for this Chicago Reader article. The most important…
On March 5 the City Council voted 46-3 to approve Mayor Rahm Emanuel’s proposal to spend $55 million in property taxes on a new Marriott hotel in the South Loop—part of his ambitious development plan that also features a basketball arena for DePaul University.
The vote followed a September decision by the Metropolitan Pier and Exposition Authority, a state-city entity, to award Marriott the coveted contract to run the new hotel. […]
However, what the mayor and his aides didn’t mention—and what has gone unreported until now—is that in the year leading up to the lucrative deal for Marriott, the hedge fund of one of Emanuel’s largest campaign contributors bought millions of shares of stock in the hotel chain.
That hedge fund, Citadel LLC, is run by billionaire Kenneth Griffin, whom Forbes last fall deemed the wealthiest man in Illinois. He is famous in the financial world for making a killing in high-frequency trading. […]
According to SEC filings, the firm began buying major portions of Marriott stock in late 2012. By September 2013, SEC filings showed the hedge fund owned 2.3 million shares of Marriott. As of the last SEC filings at the end of 2013, Citadel owned roughly 1.6 million shares of Marriott stock worth an estimated $89 million.
I dunno. Was this whole thing really greased a year in advance? There was, after all, a bidding battle and Mariott in the end wound up beating Hilton for the project…
The board of the Metropolitan Pier and Exposition Authority approved the 10-year contract for hotel operations. Its net value to Marriott, in today’s dollars, is $13.6 million over the life of the deal, according to a spokeswoman for the authority, the state-city agency known as McPier. […]
Marriott’s proposal beat out one by Hilton Worldwide, the other finalist. That deal would have netted Hilton an estimated $15.8 million, McPier officials said.
* And after ten years, McPier will own the hotel…
The $400 million hotel is part of a larger project that will include a multiuse arena that will host DePaul University basketball and a 500-room boutique hotel.
Ultimately, the authority will own the larger convention hotel, financing its construction with bonds backed by hotel revenues.
* Perhaps these stock purchases were just a good investment by Citadel.
As noted above, Citadel sold quite a bit of its stock, but that’s probably because the price has been skyrocketing since last fall. I doubt that increase has a whole lot to do with the Chicago deal.
And revenues are skyrocketing at the company. Take a look at Marriott’s 2013 annual report…
We added 161 properties (25,420 rooms) and 51 properties (10,299 rooms) exited our system in 2013. These figures do not include residential units. During 2013, we also added five residential properties (301 units) and no residential properties or units exited the system.
Total segment financial results increased by $24 million to $1,197 million in 2013 from $1,173 million in 2012, and total segment revenues increased by $992 million to $12,518 million in 2013, a 9 percent increase from revenues of $11,526 million in 2012
While the 1,200 room hotel will be pretty sweet, it’s less than five percent of the total gross rooms added by the company last year alone.
However, taxpayers will pay to build the hotel, bumping up its margins. And a casino could also be built down the street. That wouldn’t be bad, either. It’s a very good deal for Marriott, without a doubt. Courtesy of taxpayers. Hooray!
* Which brings us to the second premise, which is pretty funny…
In speeches and interviews Griffin has lashed out at business executives who put the needs of their companies over Illinois while accepting tax breaks and public subsidies.
“Government being involved in picking winners and losers invariably leads to a loss of economic freedom and encourages corruption,” he told the Tribune last year.
Yet the taxpayer-financed Marriott project is very much a governmentally engineered deal, siphoning public resources into a tax increment financing scheme that will underwrite a private hotel chain.
Yep. But, then again, he’s a stockholder, not a company executive.
…Adding… From Citadel…
“The Reader story is completely irresponsible. It is comprised of nearly equal parts baseless speculation devoid of any real factual grounding and preposterous conclusions.”